There is no doubt that the extreme safety measures required by the COVID-19 pandemic have had a significant impact on most small businesses in the country. Many business owners struggle with the notion of how to Fund My Small Business. Has the COVID-19 pandemic adversely affected your business? If yes, you are certainly not alone. It is worth noting that millions of small businesses across various sectors of the economy are now fighting hard for their survival in a tough race against the clock.
Because of the pandemic, banks and other financial institutions are very hesitant and slow to give out loans. This is because the likelihood that businesses will repay them significantly decreases. It is no secret that many small businesses have been forced to shut down or are dealing with a considerable decline in revenue.
You probably know that small businesses in the country are struggling to find relief during the coronavirus pandemic. Forbes revealed that about thirty million small businesses across the US are in trouble. Also, note that half of these businesses are blaming this health pandemic for the revenue decline.
If your small business or startup has suffered during this health crisis, here are some ways to fund your small business during the pandemic.
This is a growing category of lenders for small businesses due to an overall retraction in lending by big banks to small business over the last several years, and compounded by COVID. With less traditional loan dollars going to small businesses, alternative lenders are filling the void with a variety of funding tool such as
The lending requirements on alternative products are typically more lenient than big bank loans and as such the cost of funds is higher but the benefit is higher approvals and quick turnaround of cash.
Assistance from the Federal Government
The good news is that the government is providing special loans for small business owners in order to help combat the significant financial fallout from the coronavirus.
Did you know that the US Small Business Administration has created a viable plan to help small business owners affected by coronavirus via affordable loan options?
Economic Injury Disaster Loan
You should know that an Economic Injury Disaster Loan (also known as EIDL) can provide your small business with up to $2 million if the coronavirus has impacted your small business. The best thing is that you can defer the interest payments and principal on the EIDL for the first year. Did you know that the deadline to apply for this loan is Dec31, 2020?
SBA Disaster Assistance
If your small business has been severely affected by COVID-19, the US SBA is directly working with state governors in order to offer disaster assistance loans to help small businesses recover. Some of the features of these disaster loans are a fixed interest rate of 3.75% and maximum term of thirty years. Also, you will be glad to know that the SBA has relaxed the collateral requirement because of the emergency nature of these loans. This means that you will not need to put up your equipment or real estate to qualify for this loan.
It is worth noting that loans offered to qualifying small businesses can be used to pay payroll, fixed debts, accounts payable, and several other small business bills. Note that you can apply for a disaster assistance loan by visiting the SBA site.
Express Loan Program
Did you know that the Express Loan Program is a special type of 7(a) loan? Keep in mind that these business loans are for up to $350,000. The SBA guarantees them at 50%.
However, it is worth noting that the final decision to make these loans is up to the lender instead of the SBA. While EIDL and disaster loans may make more sense for your small business if you are dealing with the financial fallout from the coronavirus crisis, these express loans are also a great option. Local lenders provide these loans.
This is another funding source for your small business. You should know that 504 loans are meant to foster job creation and economic development. However, note that you can only use these loans for acquiring or refinancing fixed assets. Keep in mind that these business loans are usually capped at $5 million. You can apply for a 504 loan here.
Other Funding Options
Leniency from Credit Card Providers
You will be happy to know that many credit card providers have released formal statements announcing that they will give COVID-19 relief for small businesses. Did you know that they are doing this by waiving standard service fees for up to thirty days?
Similarly, other companies are also offering other types of disaster assistance for small business owners. Citibank, for example, announced that the company would waive service fees (monthly) as well as fees on early CD withdrawal.
It is important to check with your credit card company or bank to find out if they are providing any special services or business resources during the COVID-19 pandemic. It is worth noting that during times of economic crisis, many credit card companies and banks are also willing to negotiate on repayment timelines and fees.
Extension for Tax Payment
Note that to help organizations affected by the coronavirus pandemic, the Internal Revenue Service (IRS) is also providing small business relief. You will be glad to know that the IRS announced that it was offering both businesses and individuals a ninety-day extension to pay tax fees. As a result, your small business can delay making payments to the IRS up to $10 million.
Tips for Small Businesses in Need of Funds
Keep Your Lender or Bank in the Loop
Do you have existing financing and are finding it hard to make payments? You should maintain open lines of communication with your lender. While you might not be able to stroll down the street in order to have a chat with your banker, many banks and financial institutions have considerably extended their menu of helpful online options. Did you know that some have hotlines and special portals for small business owners who need to ask for relief or deferrals?
Go Through Your Contract for Helpful Provisions
You should read your financing documents once again. You may find that there are certain provisions for requesting lower payments on the basis of decreased sales. Does the current economic situation allow your business to stop making payments on the loan, at least temporarily?
An example of this is a government order in your locale mandating businesses to temporarily suspend operations. Determine the steps you have to take in this situation. Your provider or bank is dealing with many small businesses in the same straits. You should contact the company or bank to talk it through.