CMSC Webinar

Marlon Samuels from Pursuit Lending provided the following information which is based on how Pursuit underwrites their CT Small Business Boost Loans. The program’s other participating lenders may have different underwriting criteria. 

• The amount ultimately loaned to a business is based on several factors such as the business’s revenue, years in business, and size.
  • Businesses under 1 year old have loans  capped at $100,000
  • Businesses over 1 year old can have loans as high as $500,000
  • Loans over $100,000 have a 6 year-repayment term, while loans under $100,000 have a 5-year repayment term
• With regard to underwriting the loans, the program is more focused on cash flow analysis
  • Debt service coverage ratio is 1.15%
  • Usually based off previous tax year
  • For businesses that hadn’t recovered yet in 2021 (perhaps due to a shut down), they will also look at 2022 interim financials. 
• A minimum credit score of 640 is required, however, the program allows some flexibility to the lender to make decisions about waiving this requirement. For Pursuit, it’s less about the score itself than what’s driving it.
  • For example, one loan applicant had a score in the 500s, but it was great (in the high 700s) until Covid. That’s because she was late on her bills rather than layoff any of her employees. Because of her prior good credit and actions during Covid, Pursuit was able to still provide her with a loan.
  • Pursuit also allows borrowers to have an guarantor to offset their credit score. They’ll average the applicant’s credit score with the guarantor’s. The guarantor doesn’t have to be a person with ownership interest in the business or someone in your household. But they do have to have income, good credit score and be willing to take on the risk.

• This program is great for small businesses that don’t fit traditional financing, especially since this is a much better rate than they’d get elsewhere, or even at prime rate. A lot of underserved businesses get stuck in a cycle of borrowing to cover debt but this program can help small businesses take on debt that’ll help them grow.
• CT Small Business Boost Fund loans are ideal for businesses seeking financing for:
  • Working capital & inventory
  • Equipment purchases
  • Leasehold improvements
  • Debt refinance
  • Payroll
  • Utilities
  • Rent

How to Streamline the Application Process

Marlon Samuels recommends small business applicants take the following steps to streamline the application process.

• Pre-Application
  • Gather the needed documents before applying. You can work with a technical assistance provider like the CT Small Business Development Center (SBDC) for free. 
• Post-Approval Most of the obstacles Pursuit is seeing are happening in this phase.
  • After you’re approved, you’ll receive a commitment letter from the lender, telling you the amount you’ve been approved for, along with a DOL release forms. It’s important to sign and return the documents as this starts the closing process.
    • Your commitment letter may be less than you requested, or it may be more than you want. For instance, you may have asked for $200,000 but only been approved for a $100,000 loan. Or you may have been approved for a $100,000 loan, but you only need $50,000 right now. You can accept up to the approved $100,000 loan amount. 
  • The small business owner needs to get a tax status letter. This has been a challenge for a lot of people, because some are getting letters saying they owe taxes. It’s important to note that at the beginning of the program, it was required the applicant completely pay off the taxes. Now it may be that they just need to show proof of a payment plan or have made 3 consecutive payments.
  • There will be a site visit conducted by a third party to verify the business operations.
  • A Confirmation of Good Standing Letter is needed from the Department of Labor
  • Business owners will have to present a Valid Operating License, depending on the type of business (i.e. a restaurant or daycare).
  • A Certificate of Legal Existence is also required. Business owners can request this from the CT Secretary of State as soon as they begin the application process. It’s good for 90 days.

Approval to Funding Timeline

The time is takes from approval to funding depends on each case, and usually depends on 2 factors:

• Responsiveness of the applicant
• Whether there any challenges getting the documents needed.

From the lender’s perspective, it takes about 1 week to make a decision on an application.

• Within the first 24 hours they do a quality check – are all the needed documents there?
• Then it’s another 9-10 days to close, however it can take weeks, usually due to the same 2 factors: how quickly applicants respond and getting the necessary documents.
• Some common barriers to closing include:
  • Businesses owing taxes 
  • The Department of Labor not providing verification. This could be because a business isn’t registered with DOL, or because the business owes employment-related taxes. 
  • Language and/or technical barriers, for instance, having trouble with the all-electronic application process.
  • Delay in identifying and submitting currenting licenses or tax status letters
  • Delay in signing documents

A closing representative can help with these issues and answer questions the applicant may have.

Carl Rosa, Connecticut Main Street Center Field Services Director describes how downtown businesses can use program funds.

• Common uses for the CT Small Business Boost funds for businesses on Main Street:
  • Façade improvement – if your program requires a match, this program could provide the match for things such as lighting, window displays, etc.
  • Signage
  • Awning installation
  • Exterior lighting
• Restaurant uses for the funds can include:
  • New kitchen or equipment/upgrades. 
    • During the pandemic, restaurants that could offered outside eating. These funds could help maintain and expand these outside eating features, for instance modular outdoor dining set ups.
  • Payroll support through slow seasons
• Retail examples include:
  • Acquiring seasonal inventory or new products/services
  • Marketing and advertising, including a new website
  • Window displays – funds can be used to hire a professional to design a window display or improve lighting
  • Upgrade security equipment
• Services-Based or Non-profits uses include:
  • Leasehold renovation and office set up
  • Onboarding a new software system
  • New website
• It’s best to talk with your Main Street businesses to see what they need, suggest possible uses and discuss whether the Small Business Boost Fund is a good fit for them.

• What does the portal matching process look like?
  • Each lender can have their own underwriting criteria, for instance different credit scores. There’s a series of questions when you go in the portal, and depending on how you answer, you’ll be matched with one or more lender.
  • If you’re matched with more than one you can choose who you want to work with. There’ll be a write up and timeframe to closing provided for each lender.
  • If you don’t match any lenders, you’ll only see technical assistance providers listed. It’s their job to help the business owner understand why they weren’t matched, as it could be as simple as not filling out the form properly.
• The CT Small Business Boost Fund is not like the PPP fund – the Boost funds are not running out, so businesses can and should take the time to connect with the technical assistance professional to make sure your paperwork is complete.