Hurricane Sally came ashore in Alabama and Florida on the morning of September 16, 2020. As the first hurricane to hit Alabama since 2004, Sally was more than capable of doing significant damage. That it did, prompting the state of Florida to announce an emergency bridge loan program for Panhandle businesses impacted by the storm.

The Sunshine State allocated some $5 million in state money to fund the loan program. The first loan was approved roughly a week after the program was activated on September 23. Businesses established prior to September 14 and employing between 2 and 100 people had through mid-November to apply.

Florida’s emergency bridge loans will undoubtedly help countless businesses impacted by Sally. They are good loans, but not necessarily great. As with anything offered by government on an emergency basis, the bridge loans are enough for some businesses to get by. But there are certain restrictions that make them impractical for other businesses.

Loan Qualification Requirements

Businesses hoping to access Florida’s emergency bridge loan must meet certain requirements. As previously stated, businesses must have been established prior to September 14 and employ between two and 100 people. Beyond that:

  • businesses must be located in one of the three eligible counties
  • any previous emergency funding from the state must be entirely paid off
  • loans are made only to individuals owning at least 51% of an impacted business
  • borrowers and their businesses serve as guarantors.

In addition, there are certain kinds of businesses that are not eligible even if they meet all of the other requirements. A full list of those businesses can be found on the loan program’s website.

 Loans Are Interest-Free

The upside of the Florida program is that emergency bridge loans are being offered interest-free. However, the state is quick to point out that the loans are not grants and the money must be repaid at some point. How long the state is willing to wait is not clear.

If we look at the commercial sector, it is evident that a typical bridge loan is written for six months. Actium Partners, a Salt Lake City private lender, says there are occasions when bridge loans can be written for a year. Actium is one of a small number of private lenders that does not flinch at one-year terms.

As for the state of Florida, they do not want eligible business owners to rely exclusively on emergency bridge funding to keep their business going. This is why the loans are short-term. The expectation is that business owners will apply for traditional bank financing or SBA loans moving forward. Such loans can then be used to repay their emergency bridge loans.

 Sometimes the Best Option

Government loans of any type can be risky, especially when there are strings attached. In the case of the emergency bridge loans in Florida, the strings appear to be few. That could make the loans the best option for some struggling Panhandle businesses. Still, approved businesses will still have to secure more traditional funding to get back on their feet.

A bridge loan from the state could be especially helpful given that approval and funding can be completed in as little as four or five days. This is pretty typical for bridge funding. Even private lenders can approve bridge loans rather quickly. More traditional bank financing tends to take longer.

For example, SBA loans can take 30 days or longer to fund. This would not do for a business hurting from hurricane Sally. So in that regard, a government-backed emergency bridge loan is probably the better option.