Small Business Owner’s Guide to Funding Options Without a New PPP

Small Business Owner’s Guide to Funding Options: Although the Paycheck Protection Program (PPP) expired on August 8, 2020 – with a lack of clarity when it could be revived – businesses still needed capital.

According to Small Business Administration (SBA) data, more than 5 million PPP loans have been approved, accounting for $ 525 billion, which is still not enough.

The House Democrats proposed allowing other loans for small businesses, but with some restrictions: they must have fewer than 200 employees and experienced a 25% year-on-year decrease in quarterly revenue due to the epidemic.

Small Business Owner's Guide to Funding Options
Small Business Owner’s Guide to Funding Options

Still, businesses should consider any additional options before waiting for the passage of the stimulus package – and even if it does -.

Six additional money options

1. Equipment financing and leasing

This is not a traditional loan, but if your business needs tools to accommodate sanitation or social removal rules related to the new Kovid – updated equipment – rather than using another’s income. Consider working with a manufacturer or distributor to lease. Loan to buy it.

For example: furniture, a pizza oven, an X-ray machine and construction equipment can all be leased.

Leasing is similar to borrowing, with the manufacturer or distributor owning the property and remitting it back to you for a monthly fee, often with a lower payment than the loan. Most leases come with a fixed interest rate and terms vary.

If the terms of the leasing company do not meet your criteria, you can seek equipment financing from many other sources including banks, credit unions, online lenders and even SBAs, depending on a number of factors including your creditworthiness. Can.

2. Assistance from marketing and IT vendors

Thanks to programs launched earlier this year from large, name-brand providers, entrepreneurs are able to get some relief from the “soft” expenses of running a business – notably marketing and IT.

Some of these services or equipment may have grants, discounts or more attractive terms.

For example: Google is offering $ 340 million in credits for small and medium-sized companies and waiving advertising, product and service fees for Yelp restaurant and nightlife businesses.

Large IT providers have traditionally offered specialized leasing options for businesses. Earlier this year, Dell, HP and other technology providers announced special financing and deferred payments for partners and customers.

Ask your marketing or IT resource if any relief can exist in these areas.

Related: 5 Strategies to Avoid PPP Legal Mistakes

3. Borrow from friends and family

Financing from acquaintances and relatives is one of the primary sources that small businesses use to access capital. Even Jeff Bezos borrowed close to $ 250,000 from his parents in 1995 to start Amazon.

However, as a business owner, you have to decide how to invest. If you intend to make regular periodic payments – and demonstrate commitment on an ongoing basis – then a loan makes sense.

If you do not want to pay, offering an equity stake is an option. Of course, it is difficult to regularly evaluate the business in the event that friends or family members are curious about the current valuation of the business and what their equity stake is.

To avoid awkward situations and misinformation, it is better how you are using that infusion of capital.

Related: 4 things you want to do now that your PPP loan has been repaid

4. Factoring

Factoring is not a loan, but an advance on the accounts receivable of your business.

A factoring company is a third party willing to buy part of you or all of your receivables at a discount. The factor then owns the outstanding invoice and collects from your customers. The factor benefits from the difference between the discounted rate and the discounted rate negotiated to buy the entire amount collected from the customer.

If you are a retail business where customers pay at the point of sale, then factoring will not work for you.

If you are not a retail business, but instead have many, large customers who buy from you with specific terms, and those customers regularly pay their bills, then factoring can work well for you. The factoring company purchases your receivables so that you can receive cash.

5. Non-profit micro lender

Many state, regional and municipal governments, through their economic development initiatives, introduce microglans to support local businesses and their communities.

Eligibility requirements vary and some loans have zero interest. Some programs actually provide grants – a loan that does not have to be repaid.

This type of program benefits a business that can take advantage of relatively small amounts of capital in large opportunities that generate employment and contribute to community development.

In addition, economic development for business promotion and good will can benefit from cooperation with the organization, hopefully leading to even more customers.

6. Alternative, Small Business Lenders

Businesses should consider alternative lenders that have fewer requirements than banks so they can be approved for loans quickly.

Cash can only be available as working capital within a few days, and without documentation, such as the credit reports and tax returns normally required when applying for loans from traditional banks.

Diversify your lending leads

To take advantage of all the loan or financing options available, small businesses need to be creative. Instead of waiting for another round of PPP, they need to have a greater understanding of where they want funding and the lender they choose.

The path is to use a combination of sources to survive in these uncertain times.

Related to read:

4 Importance of business factoring and how it will help you

SBA Easing Forgiveness of Paycheck Protection Program Loans of $50,000 or Less

Ways Businesses Can Obtain Emergency Funding

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