Paragon Financial Group is funding during the COVID-19 crisis.

Resources for Bankers and Asset-based Lenders to Say Yes Amid Government Programs for COVID-19 Economic Disaster Relief

A Timely Call-to-action for Lenders

Now, more than ever, lenders want to be able to say, “Yes,” even when a bank customer cannot qualify for a business loan with the lending institution. Asset-based loan lenders, banks, and credit unions can refer loan turndown customers with confidence citing Paragon Financial Group’s 26-years of experience, risk-minimized and debt-free accounts receivable funding solutions, and credibility backed by a loss history of less than 1/2 of 1%.

Particularly as businesses and the economy are impacted by the novel Coronavirus (COVID-19) outbreak the success and wellbeing of our colleagues and clients is everyones highest priority. We will do our best to keep you updated and supported while together we face the uncertainties and rapid changes coming our way. Moreover, the funding industry believes that challenging times are a call-to-action, indeed to partner with each other to forge new relationships that can make a difference now, and ideally long-term as well. Lenders who may also provide depository and other banking services to their customers can benefit from referring clients to Paragon by:

  • Giving branch personnel and rainmakers more products to cross-sell
  • Increasing a bank’s customer retention and capture rate—ensuring ongoing customer loyalty to the bank (Paragon requires a client to keep their existing depository relationship with their bank of record.)
  • Increasing a loyal customer’s deposit growth
  • Providing same-day funding supports better management of a customer overdrafts
  • Providing a non-recourse invoice factoring solution that shoulders the risk with a portfolio insured against bankruptcy/insolvency in regards to the bank’s customer’s clients (the account debtors)—ensuring the ongoing success of the customer’s relationship with the bank
  • Giving banks and credit unions a borrower opportunity when their customer fits the lending criteria in 6 to 24 months
  • Offering an intercreditor agreement to “carve out” and advance against and manage some or all of a borrower’s Accounts Receivable (including, SBA 7A loans)
  • Offering branding of Paragon’s products under the bank’s own banner while outsourcing all credit, verification, collection, risk and back office functions to Paragon leveraging Paragon’s 26 years of experience
  • Allowing bankers an opportunity to participate with Paragon at no-risk or take a referral fee

Paragon is now also prepared to expedite service to industries and companies that may never have before considered the benefits and value of fast access to cash flow and outsourced accounts receivable functions provided by a factoring services firm such as Paragon Financial.

Government Intervention Programs Mean Customers Need Our Guidance and Support

Congress has passed an $8.3 billion supplemental funding bill to address the impact of the COVID-19 response efforts. The legislation also categorizes COVID-19 as a disaster under the Small Business Administration (SBA) to address the economic consequences. These efforts should allow small business owners to access up to $7 billion in low-interest loans.

As U.S. federal government agencies announce new and pending programs in response to the Coronavirus outbreak to bolster the national economy and to facilitate state and regional economic development, many state and local government agencies do not yet have detailed program specifications, newly-defined policies, or resources in place to address the demand for business operating cash flow. Some states are still waiting to be approved as designated beneficiaries of program rollouts.

Lenders Can Support Customers with SBA Interventions

In the case of the U.S. Small Business Administration, the SBA recently announced low-interest disaster recovery loans to be offered to support small businesses and has since launched the SBA’s Coronavirus (COVID-19): Small Business Guidance & Loan Resources webpage. Noteworthy, the SBA has taken note of the various common issues small businesses may encounter within the purview of the SBA:

  • Limited access to capital
  • Workforce capacity challenges
  • Inventory and supply chain Shortfalls
  • Facility remediation/clean-up costs
  • Insurance coverage issues
  • Notable shifts in market demand
  • Marketing and communications for transparency and safety
  • Preparedness planning

The SBA Economic Injury Disaster Loan program as it relates to the Coronavirus Preparedness and Response Supplemental Appropriations Act has several potentially daunting caveats for small business applicants:

  • Businesses “with credit available elsewhere are not eligible”
  • You must undergo a credit review before an inspection to verify your losses will be conducted
  • Funding amounts will be capped at predetermined award amounts
  • Every state’s or territory’s Governor first needs to submit a request for Economic Injury Disaster Loan assistance and then await declarations for specifically-designated areas within a state
  • The SBA’s “goal is to arrive at a decision on your application within two to three weeks”

Recent information made available by the SBA, which may be of use by and especially notable to lenders and bankers in the interest of being well-informed and in service to their customers, includes guidance and policy for states, regions, and the facets of loan terms:

  • Upon a request received from a state’s or territory’s Governor, SBA will issue an Economic Injury Disaster Loan (EIDL) declaration. Any such declaration makes loans available statewide to small businesses and private, non-profit organizations to help alleviate economic injury caused by the novel Coronavirus (COVID-19).
  • SBA’s Office of Disaster Assistance will coordinate with the state’s or territory’s Governor to submit the request for Economic Injury Disaster Loan assistance. Once a declaration is made, the information on the application process for Economic Injury Disaster Loan assistance will be made available to affected small businesses within the state.
  • These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%. SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
  • The SBA continues to provide Lender Match, the SBA’s free online referral tool, that connects small businesses with participating SBA-approved lenders.

Also posted at the SBA’s Coronavirus (COVID-19): Small Business Guidance & Loan Resources webpage, the SBA continues to offer as usual its standard portfolio of loan programs:

  • The SBA’s 7(a) program offers loan amounts up to $5,000,000, an all-inclusive loan program deployed by lending partners for eligible small businesses; uses of proceeds including working capital, expansion/renovation, new construction, purchase of land or buildings, purchase of equipment or fixtures, lease-hold improvements, refinancing debt for compelling reasons, seasonal line of credit, inventory, or starting a business.
  • The SBA’s Express loan program provides loans up to $350,000 for no more than 7 years with an option to revolve. With the goal of a turnaround time of 36 hours for approval or denial of a completed application, the uses of proceeds for the Express loan are the same as the standard 7(a) loan.
  • SBA’s Community Advantage loan pilot program allows mission-based lenders to assist small businesses in underserved markets with a maximum loan size of $250,000 with the uses of proceeds being the same as the standard 7(a) loan.
  • The SBA’s 504 loan program fosters economic development and job creation and/or retention. Eligible use of proceeds is limited to acquisition or eligible refinance of fixed assets.
  • The SBA’s Microloan program makes loans through nonprofit lending organizations to underserved markets. Authorized use of Microloan program proceeds includes working capital, supplies, machinery & equipment, and fixtures (does not include real estate); with a maximum loan amount of $50,000 (and an average loan size of $14,000).
  • The SBA continues to provide export loans to help small businesses achieve sales through exports. As well, the SBA can help these businesses respond to opportunities and challenges associated with trade, such as COVID-19.
  • Regarding government contracting, the SBA serves to help level the playing field for small businesses owned by socially and economically disadvantaged people or entities; and so the government limits competition for certain contracts to businesses that participate in the SBA’s 8(a) Business Development program.

Federal Deposit Insurance Corporation Emphasizes the Responsibility of Lenders

The FDIC has now also offered timely guidance to bankers and lenders “encouraging banks to use their resources to support households and businesses” and noting “a technical change to phase in, as intended, the automatic distribution restrictions gradually if a firm’s capital levels decline.” Particularly notable guidance from the FDIC to banks, regarding lending, includes:

  • The FDIC has made their point-of-view clear: “Since the global financial crisis of 2007-2008, U.S. banking organizations have built up substantial levels of capital and liquidity in excess of regulatory minimums and buffers… These capital and liquidity buffers were designed to provide banking organizations with the means to support the economy in adverse situations and allow banking organizations to continue to serve households and businesses.”
  • The issuing of an interim final rule revises the definition of eligible retained income for all depository institutions, bank holding companies, and savings and loan holding companies subject to the agencies’ capital rule (together, a banking organization or banking organizations), such that, the revised definition of eligible retained income will make any automatic limitations on capital distributions that could apply under the agencies’ capital rules more gradual.
  • This interim final rule is intended to strengthen the incentives for a banking organization to use its capital buffers as intended in adverse conditions and serve as a financial intermediary and source of credit to the economy. This revision would reduce the likelihood that a banking organization is suddenly subject to abrupt and restrictive distribution limitations in a scenario of lower than expected capital levels.

Lender Partnerships Make a Difference

While some businesses are experiencing a drop in revenue, others are ramping up suddenly to meet a surge in demand. Companies contacting Paragon are reporting needs to meet payroll for a short-term increase in staffing, while others are positioning themselves to service a surging market for production and delivery of products now in high demand. No matter the company’s circumstances, businesses that have predictable accounts receivables with long-standing, credit-worthy customers operating within the U.S.A. or Canada are best-positioned to leverage fast and affordable funding.

Features of Paragon Financial funding solutions that are highly beneficial to businesses impacted by the Coronavirus outbreak include the following:

  • Immediately meet payroll requirements
  • Easily scale-up and scale-down operations and funding as demand for products and services ebb and flow
  • Paragon funding solutions are debt-free and risk-minimized access to cash flow
  • The credit-worthiness of a business is typically not a roadblock to work with Paragon; the credit-worthiness of a company’s customers can qualify the business for Paragon’s funding options
  • Paragon’s non-recourse invoice factoring is guaranteed to minimize a client’s risk when faced with a customer insolvency or bankruptcy
  • Paragon offers assistance to clients who want to combine a SBA loan with Paragon’s funding to maximize the business’ available cash position

Tough Times Can Bring Us Together and Make Us Stronger

When times are tough all over, it’s an opportunity to get aligned with each other and forge partnerships that can make a difference for others. We can best be of service to you and care for our employees and community right now by proactively slowing transmission of the novel Coronavirus (COVID-19), keeping each other informed of business-critical operational changes, and staying in communication as necessary about matters pertaining to day-to-day account management. In the spirit of ‘a rising tide lifts all boats,’ Paragon invites lenders to partner with Paragon to ensure that businesses in our communities can weather the economic challenges we are facing now and tomorrow.

Call 877-472-9954 or contact us via email for more information about Paragon Financial’s programs to combat business disruptions due to the U.S. COVID-19 outbreak.

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