Food Venture Financing News - Weekly Issue No. 5
In This Issue:
- SBA Funding
- Consumer Demand
- Supply Chain Management
- Equity Investments
- Business Interruption Insurance
- Links and Webinars
- Disaster Relief Efforts in Our Industry
- On April 16, the Small Business Administration announced that $10 billion in PPP and COVID-19-related Economic Injury Disaster Loans (EIDL) had been disbursed. The Senate is expected to approve a bill today that would add another $60 billion to EIDL funding. Of that $60 billion, $50 billion would be disbursed in loans and $10 billion would be allocated as grants.
- While additional funding is awaited for the PPP and/or EIDL programs, the Small Business Administration is still offering traditional financial assistance under its "7(a)" loan program. Here is information regarding financing for loans under this program: https://www.sba.gov/partners/lenders/7a-loan-program/types-7a-loans
- The Federal Reserve announced its "Main Street Lending Program" on April 9, which will facilitate up to $600 billion in loans through the NBA to small- and medium-sized businesses. The Fed solicited public comments on the program from lenders, borrowers, and other stakeholders through April 16. We anticipate further details on the program in the next few days, with a rollout of the program in one to two weeks. See our Weekly Newsletter Issue No. 4 for additional information on this program.
According to a survey by Shopkick, approximately 69 percent of consumers have been purchasing new brands when their preferred brands are not available. In the current climate, consumers prefer product availability over established brands. Smaller brands can take advantage of this opportunity to acquire new customers, both in retail and ecommerce platforms.
Supply Chain Management
- Many co-packers are prioritizing production based on contract size.
- Domestic ingredient supplies will be in high demand until the pandemic subsides.
- Convertible promissory note or SAFE rounds will likely be the easiest path to outside investment during the pandemic. Companies should negotiate creative terms - such as higher and tiered discounts, warrant coverage, and reasonable valuations - to incentivize investors.
- Due to the current economic uncertainty, investors may seek valuations that are favorable to companies. Under these circumstances, companies should focus only on raising sufficient funds to provide a solid runway through 2020 or Q1 2021.
Business Interruption Insurance
- Many insurers have taken the position that business interruption claims related to COVID-19 are not covered, either because there has been no physical damage to property or because the policy expressly excluded coverage for viral contamination.
- However, some members of Congress and state legislators have asked insurers to cover COVID-19 losses under business interruption policies. It is possible that federal and/or state legislation on this issue may follow.
- All businesses should consider submitting interruption claims to their insurers quickly. Some policies require policy holders to submit claims "promptly," and failure to do so provides a basis for denial of a claim.
Links and Webinars
- Notice: Lapse in Appropriations (https://www.sba.gov/disaster-assistance/coronavirus-covid-19/)
- SBA runs out of COVID-19 relief money; lawmakers fight over refunding
- The Effects of COVID-19 Will Ripple through Food Systems
- Crop Enhancement Raises $8M Series B to Help Growers Protect Crops With Safe Coatings
- Plant-based Rebellyous Foods raises $6M
- Koia Lands Potential "Last Money" With CircleUp Investment
- The State & Future of Natural & Organic - Data & Insights to Help You Navigate a Changing Landscape (New Hope Network)
Date/Time: Tuesday, April 21st at 11 a.m. MT (recording will be available online)
Disaster Relief Efforts in Our Industry
Visit the links below to learn more about organizations that are working on COVID-19 relief efforts:
At Davis Wright Tremaine LLP (DWT), we are proud to have one of the largest Food & Beverage legal practices in the country, with over 40 attorneys representing food innovators, entrepreneurs, and investors at every level of the food chain, from Farm to Label.
Please contact our Food and Beverage team if we can assist you in any way in these unprecedented times.
The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.
DWT will continue to provide up-to-date insights and virtual events regarding COVID-19 concerns. Our most recent insights, as well as information about recorded and upcoming virtual events, are available at www.dwt.com/COVID-19.