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How to fund your small business when PPP funds run out

The PPP (Paycheck Protection Program) is an SBA loan that helps businesses keep their workforce employed during the Coronavirus (COVID-19) crisis. The program was established by section 1102 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the Act). But if PPP Funds run out, this can leave your small business in dire straights.

Many of the companies that received capital through the Paycheck Protection Program loans to help maintain payrolls are now running out of those funds. According to several industry surveys and reports, this is leading some companies to lay off a portion of their staff.

Compounding this issue is the election. Politics are playing a direct role in the delay of additional PPP funds as a result of COVID-19. Small Business owners, who may just be getting back on their feet as the country begins to open up, may need a little extra help to get them through the remainder of the crisis. If PPP funds are completely exhausted, this could be a death blow to many small businesses who are hanging on.

What small business funding options are available to carry you through when PPP Funds Run Out.

There are a variety of financial tools available to small businesses that can help get them through a difficult patch. From loans to lines of credit to business credit cards, the options are varied and can be confusing at times. Below are some of the op options available to most. Which is right for you depends on your unique circumstances. The key things is to work with a reputable vendor who has experience working with small businesses and offers diverse options.

Line Of Credit

Line of Credit for your business provides a very flexible option for controlling when and how much funding you take on. Once approved, you can draw as little or as much as you want up to the maximum approved amount, which ensures that you never have to pay for more money than you need. And with no prepayment penalty you can pay back whenever is feasible, potentially reducing the interest you pay. These can be the most difficult to qualify for so check with your small business loan specialist to see if you qualify. If approved, funding can take place in as little as 24 hours, although not all business owners will have this experience. In some cases, additional documentation will be needed, which can delay funding.

Working Capital Advance

A Working Capital Advance (also known as a Business Cash Advance or Merchant Cash Advance) is not considered a loan. It is an advance of cash on future credit card receivables. For this reason, there is no APR rate and no set repayment terms.  There is only a set pay back amount.  A flat fee will be charged to you for the advance.  The short term business advance will range between 3 and 12 months. This funding option is ideal for a business owner who has had difficulty getting a loan from a traditional bank due to poor personal credit or lack of time in business.  A Working Capital Advance places less emphasis on these factors. However, they are deemed high risk and because of this the cost of capital will be higher.

SBA Working Capital Advances

An SBA Working Capital Loan has been referred to as the “gold standard” of loan options for small business owners. It is a government-backed loan that is partially guaranteed by the Small Business Administration (SBA), an agency of the federal government.

While these loans are harder for small business owners to qualify for due to more stringent requirements as listed below, they are truly one of the best options for those businesses looking to refinance debt, hire employees, purchase equipment, or just looking to expand. Pre-Qualification can happen in minutes. Assuming you pass initial requirements and secure a pre-approval, expect funding to take approximately 4 weeks, and could take longer.

Term Loans

A term loan is similar to a traditional bank loan where you have a fixed Annual Percentage Rate (APR) with monthly payments. The main difference between a term loan from Small Business Funding and a traditional bank loan comes down to the requirements.  A bank will put more emphasize on your personal credit score.  While Small Business Funding does require a minimum credit score of 640 to qualify, it is still lower than what a bank may require.

A bank will also require a business plan, collateral, and a longer history of financial statements and tax returns.  Plus it may take several months to receive the money from a bank, with Small Business Funding you’re looking at 2 – 4 weeks in most cases.

If you are considering any of these options, we recommend engaging with one of our specialists to discuss your needs and see if we can help you get the funding you need.

To start the process, you can fill out a simple application which takes just a few moments.

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