Within two weeks of creating a $ 50 million small business loan program, the state has distributed approximately $ 30 million to a dozen financial institutions to provide loans to companies with fewer than 100 employees struggling through the crisis Coronavirus pandemic.
the Louisiana Loan Portfolio Guarantee Program supports banking and credit unions up to $ 100,000, with interest rates no greater than 3.5% and with no payments for at least 180 days. The loan term can be up to five years.
Financial institutions require allocations to extend the business loans; If funds are still available, they can be reallocated.
“We received over 200 calls and emails,” said Chandra Foster, business services manager for Pelican State Credit Union, which has offices across Louisiana.
Many small businesses are inoperative or have minimal capacity to run their business and retain their employees while adhering to government-issued home stay orders that have closed non-essential business transactions.
The credit union has already started processing loan applications for about 80 business owners, Foster said. There is much higher demand for the federal paycheck protection program, administered by the US Small Business Administration, but there are concerns about the limited amount available, she said.
“As fears of SBA depletion grow, so too have requests for loans (Louisiana Loan Portfolio Guaranty Program),” said Foster.
The credit union has received more than $ 5 million in federal loan applications and approximately $ 2 million has been allocated to the state loan program.
New Orleans-based Liberty Bank had set aside applications for potential small business loans under the program last week but decided to abandon the state program due to the high volume of federal loan applications.
“Because of the overwhelming response from our bank to the SBA-PPP loan program, we have decided to turn our attention and efforts to it,” said Ann Duplessis, senior vice president of Liberty Bank. “Unfortunately, we don’t currently have the capacity to manage both programs.”
The state loan program differs from the federal program in a few ways. Businesses should be prepared for traditional bank underwriting guidelines and gather the same materials they would use for a regular loan.
The state program is modeled after an existing small business program in which the board of directors of Louisiana Economic Development Corp. Review potential loans that banks have taken on for small businesses but the state supports the loans.
The new program’s loans are for businesses that can use them for payroll, rent or mortgage payments, and utilities.
Gambling companies, churches, nonprofits, real estate developers, pawn shops and payday lenders are not eligible for the program. Banks will accept applications by April 30th.
In designing the new program, LED interviewed more than 100 banking professionals across Louisiana. It is designed for business owners to leverage existing relationships with their financial institutions to get money quickly.
“All credit documentation may already be on file with your banker,” said LED Secretary Don Pierson.
LED has also received more than 1,000 phone calls and emails from companies across the state. Some frequently asked questions relate to new tax deadlines, unemployment benefits, applying for SBA loan programs, and other aspects of federal coronavirus aid.
“We want small businesses across our state to weather the current financial crisis,” said Pierson. “Suddenly reducing your income is a big challenge…. The ability of our economy to regain a foothold after that will largely depend on how we look after businesses now. ”
Other financial institutions that have participated in the state loan program so far are Citizens National Bank in Bossier City; Metairie Bank; Rayne Construction and Loan Association; St. Landry Bank & Trust in Opelousas; and St. Landry Homestead Bundessparkasse in Opelousas. Information is at www.ledbizloan.com.
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