Prior to the Coronavirus pandemic, I don’t think any one of us could have imagined the country shutting down for one day, let alone several months. But that’s the reality most of us faced in late March/early April as states began issuing stay at home orders.
Not only did the coronavirus impact our individual lives, it severely hampered small business owner’s ability to pay your bills, pay your employees, and grow your business. In fact, as was the case with most small businesses, your sales and margins may have declined for several months.
The government tried to intervene by passing a stimulus package which included the Paycheck Protection Program (PPP). This program was set up to provide direct incentive for small businesses to keep their workers on payroll by providing 100% federally guaranteed loans. The problem was this program was confusing and difficult for a number of small businesses to actually get.
When small business owners turned to their bank or alternative lender, they were turned down. Not because they didn’t have a successful, profitable business prior to COVID-19. It was because several lenders were focused on helping businesses get the PPP loan. Those that did not service the PPP, were unsure the impact coronavirus would have on businesses. As a result, they were overly cautious to lend to small business owners. Bottom line – many lenders slowed down or simply stopped funding. In fact, some still are not funding.
Now that states have opened up and small businesses are operating again, at least at some capacity, those businesses that lost several months of revenue are still looking for a loan or other funding option to get them through the restart.
The problem is the lending industry has shifted post-coronavirus shut down. While you may have qualified for business funding earlier in the year, those same requirements may not be strong enough for you to be approved today.
So, what can you do to get a business loan after the COVID-19 shut down?
Lender Business Loan Requirements
Many lenders have stopped funding. The ones that are have specific requirements to be considered for a business loan or other funding option. These requirements will vary by lender. Since SmallBusinessFunding.com and our network of lenders are funding small businesses today, we’ve listed a few of those requirements.
Time in Business
A few months ago you could have gotten a working capital advance or possibly equipment financing with as little as 3 months in business. Now lenders want to see that you have been in business at least 6 months but 1 year is preferred.
Just like with the age of your business, the required amount of revenue you generate a month is higher than just a few months ago. $15,000 a month or $180,000 annual revenue is required to be considered for funding. Lenders want to know that you have the cash to pay back the loan or advance.
Consistent Cash Flow
A consistent cash flow has always been important when it comes to a lending decision. Lenders understand that your April and May revenues may not be a true indication of your business. But to get an approval, underwriters are going to want to see a bounce back starting mid-to-late May. And growth, or stability depending on your revenue levels, the months following with at least 30 days consistent revenue.
Having a good credit score has always improved your chances of getting funding. However, business owners with a bad credit score have also historically been able to get funding with an alternative lender. While our minimum credit score requirement remains 500, as mentioned above, you stand a stronger chance of getting an approval with a higher score.
Not only are there less lenders funding small businesses, not only are the requirement a little tighter, but you may get approved for less funding than you requested.
You can research more lenders, but this will take time and does not guarantee you will receive an approval. Another option would be to accept the funding amount and use it to strengthen your business. Then when that loan or advance is close to being paid off, reach out to that same lender you worked with to get additional working capital. If you are able to re-pay during or coming out of the COVID era, that is a great sign in the lenders eyes and that lender will be more willing to increase the funding offers.
Common Reasons Businesses Need Funding coming out of the Shutdown
SmallBusinessFunding.com has worked with several small business owners seeking funding coming out of their recent state’s shutdown and these are the most common reasons they need additional cash.
Coming out of the shutdown businesses need to replenish their shelves, especially those that saw their cash reserves depleted.
This could be the top reason given. Business owners need to build up their cash reserves to ensure they have enough money to pay their expenses.
You may have been shutdown for several months but that did not mean the rent and other utility bills were not due.
Now that you’ve reopen or expanded your business operations after a slow down period, it’s time to spread the word. Advertising is an investment, which if done right, will start paying for itself almost immediately.
Does your business model look different in the “new normal”? Within the new normal of operating your business, there may be some equipment purchases which need to be made.
How SmallBusinessFunding.com can help
Small Business Funding and our network of funding partners have been actively helping small business owners get much needed working capital.
To see if you qualify, you can call one of our Funding Specialists at 800-742-2995 or by completing our online business funding request form.