Why did Savant Capital Management apply for and accept a multi-million dollar Paycheck Protection Program (P3) loan? Part of the answer lies in the company’s recent merger with Huber Financial Advisors, which was funded primarily by shares.

“As of March 31, forecast revenues were down sharply and we had just completed our largest acquisition in our history with Huber,” said Brent Brodeski (pictured), managing director of the $ 6.8 billion company based in Rockford, Illinois. solidify. “We of course incurred debt and a number of employees had incurred additional debt related to that, so we had to take that into account.”

About 70 Savant Capital employees have equity in RIA, Brodeski explained, and many of them have taken out loans to finance this purchase. The ability of these employees to repay those loans depends on the cash flow Savant generates, which added a layer of urgency to the situation beyond Brodeski’s fear that the market slowdown in March could lead to layoffs.

“It was a bit of a unique nuance to our situation, where we thought it made sense,” said Brodeski.

Savant is one of many RIAs who have chosen to pursue a federally backed coronavirus relief loan. Backed by the Small Business Administration (SBA), the loans are meant to encourage small businesses to keep their employees on their payroll instead of firing or putting them on leave. The size of a PPP loan is at most 2.5 times a company’s monthly payroll or $ 10 million, whichever is smaller.

Savant’s loan was between $ 2 million and $ 5 million, according to data released by the SBA on Monday. The company had not previously disclosed the existence of the loan on the Form ADV it files with the Securities and Exchange Commission; Brodeski said Savant’s legal and compliance teams determined there was no need to disclose the loan.

On the PPP loan application, a business must certify that the funds are “necessary to support ongoing operations”. The loan is potentially repayable as long as the beneficiary spends at least 60% of the funds on employee salaries and spends them within 24 weeks. Brodeski told Citywire that Savant had used the funds he received and had not made a decision on whether he would apply for a pardon.

‘Frankly I think it would be irresponsible and premature to repay the loan that we have labeled [for] without fully understanding how the crisis will unfold and how it could further affect our employees, customers and the company, ”he said.

Critics of RIAs who have chosen to take out PPP loans have argued that companies that accessed funding early in the program’s rollout did so at the expense of small businesses more directly affected by the pandemic, such as restaurants. About $ 130 billion of funds available in the program have not been spent.

Brodeski said Savant’s decision to apply for the loan was influenced by the financial crises of 2007 and 2008, which caused a similar jolt in the markets.

“Any rational businessman who seeks to protect his employees, his customers and his company will use these tools and take advantage of the opportunities available to him,” said Brodeski.


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