🔒As coronavirus swamps Maine businesses, financial lifeboats are launched

It was March 12, and the state had just announced Maine’s first COVID-19 case.

As the business community began to focus on what impact the coronavirus pandemic could have, Auburn Mayor Jason Levesque felt his city had to make a move. An immediate one.

Like many cities in Maine, Auburn was gaining traction downtown, something the pandemic could halt.

“That weekend I was looking at what we could do as a city,” he says.

Six days later, Auburn City Council approved his plan for no-interest bridge loans to businesses to help them stay afloat until state and federal relief is available.

The money comes from the city’s Community Development Block Grant fund, and the loans are $2,500 a pop for payroll, rent or mortgage. In just four days, nine loans had been issued to local businesses.

Across Maine, as Congress worked to pass the $2.2 trillion stimulus bill, those behind the Maine programs couldn’t wait. Businesses needed help immediately to hold on until that help came.

Elsewhere, Brunswick Development Corp. had a similar idea. It created an Emergency Loan Fund that provided $100,000 for $5,000 two-year term loans, with payments deferred for 12 months to businesses affected by the virus.

The same week Auburn’s program began, the Legislature approved an emergency package that provides $15 million in loans guaranteed by the Finance Authority of Maine.

Levesque says in Auburn the aim was to get money immediately to businesses, particularly the city’s 33 restaurants.

“These are businesses that had to meet the next payroll,” he says. “It’s to keep the money flowing. These businesses are the heartbeat of the city.”

FAME triple shot

FAME is busy administering three programs that provide fast money to businesses:

• Small Business Administration loans that provide interim funding up to $100,000 for businesses that are applying for SBA disaster loans.
• Relief Loan Insurance for Lenders, which offers instant approval to lenders submitting loans for businesses affected by COVID-19.
• Relief Business Direct Loan Program for borrowers, offering up to $50,000 with discounts on interest rates and fees.

Bruce Wagner, CEO of FAME, says the first step for businesses seeking one of the loans is to talk to their lender.

As with Auburn and Brunswick’s programs, the goal is to provide quick relief.

With the SBA interim loan, a business that gets SBA approval documents it to FAME, which advances up to $100,000 while the SBA loan is processed.

The other two programs are a guarantee to lenders, and a direct loan program for those who aren’t approved.

Lenders know their customers

The loan insurance for lenders is set up to happen fast — they can call the online approval system and get an instant decision. If it’s not approved at the 75% guarantee, it drops to the 50% level.

FAME figures lenders are close enough to their commercial customers to know whether the loans are worth the risk. “We’re somewhat assuming they’ve had a relationship with the borrower and they’re in a position to judge the likelihood and ability to repay,” Wagner says.

The third program is for those who don’t qualify for loans with their lender.

The $15 million funding the programs is a good part of the organization’s reserve, Wagner says.

Despite the uncertainty of what will happen to businesses and the amount of money involved, there’s no question the programs had to happen — and happen fast, he says.

“Our practice day-to-day is to loan money, and it’s really on the most risky loans out there,” Wagner says. “That’s what FAME should be doing. If we’re not taking risk for public benefit, FAME shouldn’t exist.”

Risk is in FAME’s DNA

Putting together all three programs was quick, but wasn’t completely from the ground up, Wagner says.

“FAME’s loans are generally to companies that are in some kind of distressed state,” Wagner says. “The vast bulk of what we do already is for companies that need help. The nature of what we do is take on risk that the lender doesn’t want to take on. It is already in our DNA.”

But FAME had to come up with a system to get the money out faster and more favorably to businesses affected by the disruption.

In the past, FAME has responded to smaller disasters, like a snowless winter that was tough on snowmobile companies and the hospitality industry. But nothing like what’s happening now.

“We are extraordinarily busy and working like mad to keep up,” he says. In a normal month, FAME might do one or two loans. The day Wagner talked to Mainebiz, there were 12.

The time is now

Those lending the money are focused on immediate impact, not what might happen down the road.

“One of things we’ve done laying out so many reserves, is trying to be a bulwark in the early stages,” Wagner says. As the economic climate evolves, they may have to be “more surgical” about lending.

Levesque, too, says Auburn is focused on the present. The loans will keep being approved on a weekly basis until the $50,000 is gone.

“The city has been through a lot in the past,” he says. “We’ll do this and come out of it better than before.”