North Dakota small businesses will soon be able to access relief from the state-owned Bank of North Dakota. The announcement came late Friday afternoon on April 24th. State-provided aid has proven necessary as federal relief for small businesses has been riddled with issues. North Dakota, through the BND, is in a unique position to help its residents.
Federal Aid Falls Short
Through the CARES Act, the Paycheck Protection Program (PPP) approved $348 billion in low-interest loans. The program was intended for small businesses with fewer than 500 employees that could no longer finance themselves. There have been multiple issues with the PPP. First, it was underfunded. The money ran out in a matter of days. Was it because Congress didn’t fully understand the scope of the financial burden small businesses are facing? Or was there something more?
Part of the rush came from businesses that were not intended to benefit from PPP. Reports show more than 200 publicly traded companies received money. After public frustration, some of those businesses have returned the money. Others have not. Those companies prevented “mom and pop shops” on North Dakota’s main streets from receiving the necessary aid.
After a political back-and-forth in Congress, an additional $310 billion has been approved for PPP last week. Yet confusion remains, strings are attached, and time may not be on the side of small businesses. There is still debate on whether or not the additional money will be enough to meet demand. Business experts say this funding could be spent more quickly than the first round.
Bank of North Dakota
On March 19th, NDx called for the Industrial Commission to utilize the BND for small businesses through low-interest loans in partnership with community banks. The only state-owned bank in the nation has recorded record profit year-after-year. It was time to activate that unique resource. Last Friday, April 24th the Industrial Commission made the announcement BND will be used in the state’s covid-19 response through two programs, SELF, and CRPR. Below is the description provided of those programs.
Small Employer Loan Fund (SELF)
“The Small Employer Loan Fund (SELF) will provide a loan of up to $50,000 to small businesses with a full-time employee equivalent (FTE) of 10 employees or less. These loans may be used for working capital, recurring expenses and replenishing inventory. Business owners will work with their local lender to access the program. The loan has a maximum term of 10 years and a fixed interest rate of 1%, with deferral of loan payments for up to six months.”
COVID-19 PACE Recovery Program (CPRP)
“The COVID-19 PACE Recovery Program (CPRP) will provide a loan of up to $5 million for businesses of less than 500 employees and a loan of up to $10 million for businesses with more than 500 employees. Loan payments may be deferred for up to six months, at which time the loan will term out with up to a 10-year amortization. The interest rate on the loan will be bought down by BND to 1% for a period of time, with a maximum buy down of $500,000. Business owners will access the program through their local lender. Unlike other PACE program offerings from BND, there is no community match required.”
Over the last month and a half, employees and employers alike have struggled to access the relief promised in this unique time. Stimulus checks have not been deposited. Unemployment benefits have not been received. Federally-funded small business bridge funding was denied. Though the BND could have been utilized sooner in my opinion, I’m glad the step was finally taken by the Industrial Commission.
North Dakota is fast approaching the April 30th closure deadline for bars, restaurants, gyms, theaters, and other public gathering areas. Guidelines have been established for reopening and there is debate whether we are meeting those guidelines. Regardless, the push for a May 1st transition seems evident. Even with the lit-up open sign and the doors unlocked, demand and traffic will likely lag. This relief is necessary to mitigate an even more dire financial situation for North Dakota small businesses.
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