By: Joseph M. Pastore III

The State of Connecticut will immediately roll out a no-interest loan program, “The Connecticut Recovery Bridge Loan Program,” with assistance of up to $75,000 over an 18-month period for small businesses effected by the COVID-19virus (Coronavirus) crisis. “This plan is a meaningful and flexible plan, stated by David Lehman, Gov. Ned Lamont’s economics chief. Funding for the plan will be derived from the banking system, primarily because it is faster and would infuse cash into the economy rapidly for businesses. “The banks have the network, the relationships, and the ability to deploy the money efficiently,” stated Mr. Lehman. The program will be broken down into rounds of financing, the first of which will infuse a total of $20 – $25 million to small businesses, enough to finance about 600 businesses with a quick cash infusion in the range of $40,000 per business. The CT Recovery Bridge Loan Program is similar to those launched around the United States in the wake of the COVID-19 crisis. Similarly, Massachusetts has launched a program that is comparable in size (Dollar amount) and targeting small businesses. As per a Department of Economic and Community Development survey, approximately 90% of CT businesses have taken a hit to revenue. However, 50% are still working near full capacity.

This Statewide plan will be implemented in addition to the existing Loan Forbearance program, which 800 existing borrowers in the Small Businesses Expense Program received a 3-month reprieves for payments (a benefit worth approximately $5 million). In addition, the plan will fall under the legislative authorization Small Business Express Program and financed with paybacks from prior loans, reducing the need for legislation to be passed for the program. The CT program is in addition to the Federal Stimulus and Bailout which includes $50 billion for small businesses administration backed loans, which would infuse an additional $4 billion into the Connecticut economy in direct Federal aid alone. Major concerns for the CT Recovery Bridge Loan Program are related to banks’ lending more money to small businesses with current debt obligations, especially because the COVID-19 crisis has killed vast consumer and business spending. The federal and state stimulus in addition to unlimited Federal Reserve buying of Treasury Securities will have the effect of filling banks’ balance sheets with low or no-cost capital. Known as quantitative easing, or QU this practice could potentially drive down Treasury interest rates, which will provide private investors, businesses, and consumers to look for deals to help revive the economy.

Tags: Banking, Corporate Litigation