COVID-19 has caused unprecedented financial strain.
Back in March 2020, board and staff at HFLA watched closely what was happening in other countries. They began anticipating what would happen to the region if they too were to have a mandated shut down.
They thought about what kind of loan product might help the community and came up with expedited, low-amount loans. Where typically they provide interest-free loans of up to $10,000 for education, standard personal loans or business, these loans are smaller, they’re able to get them out faster, and they do not require a guarantor or co-signer.
“This could be something people could use to stay afloat, to cover a necessary cost when they needed to,” explains Hillary Butler, Development Coordinator, HFLA of Northeast Ohio.
Thank goodness for this foresight.
“When Ohio governor Mike DeWine announced that public schools would be closed, we immediately announced that day that this program was available,” says Butler. “We knew just with schools closing down alone that this was going to be a major financial burden for a lot of working families. They would potentially need to pay for childcare and parents might have to stay home and lose income.”
As the mandated closures of businesses started to happen, many began asking how these loans work. They needed help supplementing the income they had lost.
A Valley-specific loan fund had been seeded with a collaborative grant of $50,000 from the Community Foundation and the Raymond John Wean Foundation. The loans themselves are then disbursed through the HFLA.
The COVID-19 Emergency Loan for Individuals is designed to help residents who have had their income impacted by the pandemic. These expedited loans of up to $1,500 can cover lost wages (including those who are self-employed), childcare costs, or additional medical expenses. The loan can be used for any necessary expenses at the discretion of the loan recipient.
To qualify, applicants must live in Northeast Ohio, be able to prove their financial hardship is due to the COVID-19 pandemic, and also that they can repay the loan under normal financial circumstances.
A similar loan is available for businesses. The COVID-19 Small Business Emergency Loan of up to $5,000 can be used to cover payroll, rent and other expenses while business is slow or paused.
To qualify for this loan, a business needs to have existed a minimum of 12 months. The business owner must meet with an HFLA business loan volunteer to discuss how COVID-19 has affected their business. They need to provide a recovery plan and must check in periodically for support. The business owner will also guarantee the loan. Loans are made to the business or to business owner(s) who own more than 20 per cent.
These loans are not meant to replace Disaster Relief SBA loans or other funds business owners may be eligible for, but rather to offer additional support.
All of HFLA’s interest-free loans are considered on a case-by-case basis, which is very different from how you would go about getting a loan from a bank or credit union. They don’t just look at a 3-digit score; they take into account the person’s situation and level of need, as well as the individual or business’s ability to repay the loan.
That last point is important for two reasons. “One, we don’t want to provide a loan to someone that’s going to put them into more debt. We don’t want to add to any financial burden,” says Butler. “Two, our loans are a revolving fund. That means every time a loan is paid back, we’re able to re-disburse that money back out.”
The idea is that this loan fund can exist in perpetuity for residents of the Mahoning Valley. What individuals and businesses really need to consider when they are applying for this loan is: are they able to repay it?
“They’re not heavy payments, we’re very flexible, but they do need to be able to understand how to take on that financial burden, how they will navigate their finances. Being able to understand your budget, your monthly expenses and your potential future income so that we can help you is very important,” she says.
Businesses will need to provide a clear business plan. “If they are in a crisis, we need to know what their plan is to get out of it.”
HFLA also needs to know what the funds will be used for. It could be to purchase PPE, new software to help the business go contactless, or to use as a bridge to apply for an SBA loan or any other financial aid or grant.
Judging by the response, these loans are indeed sorely needed. HFLA has seen a 400 per cent increase in inquiries alone and is expanding their staff to meet the demand. They have disbursed more COVID loans than any other of their standard loan products; COVID loans represent just under 60 per cent of all the loans they’ve disbursed this year.
So far three individual loans of $1,500 have gone out to Mahoning Valley residents who have seen a loss of income, either from being laid off or through lost hours. Two were single-parent families supporting households. A salon received a small business loan; it had to remain closed for an extended period. With no ability to earn income, the loan allowed the owner to regain stability for when the business is finally able to re-open.
Since only four loans have gone out so far, not much of a dent has been made in that $50,000 pool of funds yet. The goal is to exhaust that amount in the first round, to see all of that money get out into the local economy and then continue to recycle it.
“We would definitely like to be able to reach more people in this area,” says Butler. “We’re really hoping these loans will have a lasting impact on the people who have received them.”
Butler credits some amazing community partners in the Mahoning Valley, including the Trumbull Neighborhood Partnership, Youngstown Neighborhood Development Corporation and the Youngstown Business Incubator—all resources she recommends if anyone is looking for help.
Her last piece of advice? “When individuals or businesses are thinking about this as an option, just make sure that they look at their financial situation realistically,” says Butler. “Think about creating that personal budget, looking at your monthly expenses and your realistic income. These are important practices but will also get you on a really solid footing if you do start the application process.”
HFLA of Northeast Ohio has been making interest-free loans since 1904. Their mission is to help those who lack access to traditional lending sources become economically self-sufficient and financially secure.