Money lifeboat

Businesses trying to stay afloat during the coronavirus pandemic have options that include a federal aid package and a separate state loan program.

Within two weeks of creating a $50 million small business loan program, the state has allocated about $30 million across a dozen financial institutions to make loans to companies with fewer than 100 employees struggling through the coronavirus pandemic.

The Louisiana Loan Portfolio Guaranty Program is backing bank and credit union loans up to $100,000, with interest rates of no more than 3.5%, and no payments for at least 180 days. The loan term can be up to five years.

Financial institutions request allocations to make the business loans; if there are any remaining funds, those can be reallocated.

"We have received over 200 calls and email requests," said Chandra Foster, a business services manager at Pelican State Credit Union, which has branches around Louisiana.

Many small businesses are not operational or operating at minimal capacity to maintain their business and keep their employees as they adhere to state-imposed stay-at-home orders that have closed nonessential business operations. 

The credit union has already begun processing loan applications for about 80 business owners, Foster said. There is much higher demand for the federal Paycheck Protection Program administered by the U.S. Small Business Administration, but there's concern about the limited amount available, she said. 

"As the fear of depleting funds through the SBA is increasing, so have the requests for the (Louisiana Loan Portfolio Guaranty Program) loans," Foster said. 

The credit union has received more than $5 million in applications for the federal loan program and about $2 million has been dedicated for the state loan program. 

New Orleans-based Liberty Bank had been setting aside applications for potential small business loans through the program last week, but decided to drop out of the state program because of the high volume of requests for the federal loans. 

"Due to the overwhelming response that our bank has for the SBA PPP loan program, we have decided to focus our attention and efforts on that," said Ann Duplessis, senior vice president at Liberty Bank. "Unfortunately, we do not have the capacity at this time to manage both programs."

The state loan program is different from the federal program in some ways. Businesses should be prepared for traditional bank underwriting policies and gather the same materials they would use for a regular loan.

The state program is modeled after an existing program for small businesses in which the Louisiana Economic Development Corp. board of directors reviews potential loans underwritten by banks for small businesses, but the state backs the loans. 

The new program's loans are meant for companies to use for payroll, pay rent or mortgages and utilities.

Gaming businesses, churches, nonprofits, real estate developers, pawnshops and payday lenders are not eligible for the program. Applications will be accepted by banks until April 30.

LED surveyed more than 100 members active in banking across Louisiana when shaping the new program. It is designed for business owners to leverage existing relationships with their financial institutions to get access to money quickly. 

"All of the loan documentation may already be on file with your banker," said LED Secretary Don Pierson. 

LED has also been fielding more than 1,000 phone calls and emails from businesses across the state. Some frequently asked questions are about new tax deadlines, unemployment benefits, how to apply for the SBA loan programs and other aspects of federal coronavirus relief. 

"We want small businesses throughout our state to weather the current financial crisis," Pierson said. "To have their revenues curtailed suddenly is very challenging …. The ability of our economy to regain its footing after this is going to be largely dependent on how we take care of businesses now." 

Other financial institutions participating in the state loan program so far are Citizens National Bank in Bossier City; Metairie Bank; Rayne Building and Loan Association; St. Landry Bank & Trust in Opelousas; and St. Landry Homestead Federal Savings Bank in Opelousas. Information is at www.ledbizloan.com.

Acadiana Business Today: Real estate in COVID-19: Fewer buyers, fewer sellers, but some homes are selling super fast in Acadiana; Lake Charles airport's coronavirus aid more than Shreveport, Baton Rouge, Lafayette; here's why


Email Kristen Mosbrucker at kmosbrucker@theadvocate.com.