In recent months, the US labor department released job reports that showed that over 30 million people (about the population of Texas) lost their jobs because of the coronavirus (COVID19 crisis). Following these reports, the US government set up a Public Paycheck Program (PPP) to help small businesses keep their payrolls instead of firing employees.
PPP was set up under section 1102 of the 2020 US Federal Government Coronavirus Aid, Relief, and Economics Securities (CARES) Act. It is a loan program that falls under the Small Business Administration (SBA).
Since the establishment of the act, many people, including politicians, are pushing the government to increase PPP funds. The state is also slowly opening its economy which could help small businesses get back to normalcy. Despite that, small businesses may require more funds to continue running for the rest of the crisis and grow from the financial constraints caused by the pandemic.
If the PPP funds, valued at $669 billion (about $2,100 per person in the US), get exhausted, many small businesses depending on the loan program to hang on will die.
Are there any other small business funding options aside PPP?
Fortunately, you can still fund your small business through any tough streak, like the COVID19 pandemic, using several financial tools available. These tools range from loans to lines of credit and even business cards.
Depending on the situation you and your business are in, you can opt for any of the most right financial tool for your business. You will need a trusted dealer with experience in funding small businesses. The dealer should offer you a variety of funding options.
Below are the other small business funding options available for you.
Line of Credit.
A line of credit is a loan that is flexible and consists of a specific amount of money. After approval, you can access the loan fund at any time and draw as little or as much as you wish till you reach the maximum approved amount. This guarantees that you will not borrow more money than you need.
When you go for a Line of Credit ford your small business, and you get approved, funding usually takes place in 24 hours. However, funding can delay when additional documents are needed. Once the funding is done, you can choose to pay either at once or pay over a certain period.
Working capital advance.
This funding is not viewed as a loan, but it is an advance of cash given on future credit card receivables financing. Some refer to the funding as Business Cash Advance and others call it Merchandise Cash Advance.
A working capital advance has no Annual Percentage Rate (APR), and you will sign no terms of repayment when you go for it. Nevertheless, you will have a payback amount set for the advance you get, and it will be charged as a flat fee.
If you have trouble in securing a loan from any traditional bank because you have a poor personal credit score or your small business is young, a working capital advance is the best way to fund the business. Despite that, the working capital advance is considered a substantial risk as its eventual cost is high.
SBA working capital advance.
All SBA working capital advance loans are backed by the government and a part of them is guaranteed by the Small Business Administration (SBA).
SBA is an agency of the US federal government created in 1953 to aid small businesses and make them grow. The key function of the agency is to counsel individuals willing to start small businesses.
Qualifying for an SBA working capital advance can be a challenging task as they have more strict requirements. It is among the best funding tools if you a loan for refinancing debt, hiring new employees, buying working tools/ equipment, or expanding a business. You can pre-qualify for this loan in minutes. If you pass all the first conditions for securing a pre-approval for the loan, you can receive the funds after a month or wait a bit longer.
A term loan has similar characteristics to traditional bank loans. They consist of an APR which you must pay each month until you are done paying up the loan.
You can only distinguish between a term loan and a traditional bank loan by checking out the requirements of both. Usually, the limit of a traditional bank loan is high when your credit score is high. On the other hand, you can get a term loan for your small business when your credit score surpasses 640. This minimum requirement is lower than what traditional bank loans demand
With a traditional bank loan, you may also be needed to have a good business plan, a prolonged history of financial statements and tax returns, and still receive the funds after several months. This is very unlikely for term loans. You can receive term loan funds for your small business in two to four weeks.
You now know how you can fund your small business without depending on PPP. Congratulations!!!
Ensure that you find a funding tool that matches the financial needs of your small business.