The current COVID-19 pandemic has significantly affected small businesses across the world. Many curtail their operations, while some closed their doors temporarily without knowing the time to reinstate. This current situation has created upsetting financial burden and businesses are in need of quick financial support to navigate the storm.
A small business loan can help you ride out the storm by serving as an extra lifeline through this challenging time. If you’re a new business owner or want to know how to apply for business loans in coronavirus pandemic, here is a handy guide to help you understand the process of securing business loans during the coronavirus pandemic.
Why You Should Apply for a Business Loan?
You might need to purchase equipment or expand operations, or simply need to increase working capital for your business. Under such situations, getting a business loan can help especially when sales are dried up during a crisis like this. During a crisis, a business loan can help in you many ways including:
- When sales and revenues are low, replace your lost cash flow with cash flow loans. This additional financial support can help you pay bills and act as a cash cushion until you start making money again.
- When a crisis happens, you might need to store and care for your assets (equipment and inventory). With a business loan, you can pay for storing costs, while sustaining the upkeep and repairs.
- Even during such challenging times, you’ve to pay for rent, equipment, payroll and utilities as normal. A business loan can help you with such expenses while retaining your assets and protecting your credit score.
- Because of the pandemic, making direct sales is not possible. However, it does not mean you can’t make sales and reach customers. Getting a business loan is a solution to initiate your online marketing campaigns – creating a new stream of money for your small business.
Coronavirus Business Loan Options
There are many business loan options available for businesses affected by the coronavirus. From SBA loans to alternative lending and traditional loans, there is a variety of coronavirus small business loan programs for small businesses. The Federal government recently passed the CARES Act with the largest economic bill of $350 billion as financial support for small businesses administered via the Small Business Administration (SBA).
Paycheck Protection Program
A forgivable Paycheck Protection Program (PPP) loan is started where applications are being accepted starting from the April 3rd. The loan is based on your situation and can be used for payroll, rent, utilities, and business debt interest. Visit SBA.gov site to read the details about the Paycheck Protection Program. This program funding is on a first-come, first-served basis.
Economic Injury Disaster Loans
The SBA is also offering several loan programs, including Economic Injury Disaster Loans, SBA microloans, and 7(a) loans. Discover the SBA loan options on the SBA.gov website. Many states and local governments are also offering financial assistance to small businesses. There are some restrictions in order to take out a loan that you should read before making a loan application and to ensure your eligibility, such as keeping your employees on payroll in order to get the loan.
You can also secure small business loans from alternative lenders. These online lenders are specialized in providing quick business financing, where you can get approval in 24 hours, cash within days, and at flexible repayment terms and lower rates. A business loan from alternative lenders is a great option for emergency loans.
You can also get funding from traditional sources like banks and credit unions. However, the loan application process is lengthy with extensive paperwork requirements. The approval process can take several weeks and even months to qualify and you might not get approved during a crisis, as they are worried about losses.
Preparing for Business Loans
Here are a few steps you can take to prepare for the business loan application.
- Review your Credit Report– Your credit score is the major deciding factor whether you qualify for a loan or not. Get your credit reports from top credit rating agencies (Dun & Bradstreet, Equifax, and Experian) and review it for any mistakes or errors.
- Gather Financial Documents– While making a loan application, gather your financial documents including tax returns, bank statements, business financial statements, a list of your current business assets and debts along with a plan for how you’d use the loan.
- Offer Collateral– In order to increase your chances of approval for a loan, consider offering collateral, such as a valuable asset, equipment or real estate.
- Review Lender’s Requirements– Different lenders have varied lending requirements. Make sure you read every fine print before you make an application with a lender.
- Ask for Professionals Assistance– While making a loan application, it’s advisable to get assistance from a professional accountant or tax consultant especially for government funding. The details on such loan programs are changing regularly which is why getting help from them can get you to qualify for funding.
The Business Loan Process and Timeline
After you’re ready with your financials, plan and necessary paperwork for a business loan, reach out to your target lender to make the loan application. Small business loans from the government have different processes, where lenders might ask you to apply on their Division of Small Business website. For private lenders, you typically have to fill out an online application, or you can call them to discuss your needs with a loan specialist.
For almost any application, you typically have to provide your basic information and the amount of money you need. The lender will explain his requirements and list of necessary paperwork including your financials, business revenue, business plan, and proof of payroll, and bills that typically required for coronavirus loan application.
The approval depends on the lender. If you’ve applied to alternative lenders, you will typically get approval and funding within days, while government and traditional lenders take time with extensive paperwork requirements.
One quick way is to get small business loans from alternative lenders and, if you qualify for a government loan program, you could use this loan to repay the online loan with an added benefit of no prepayment penalty.
For more information, you can fill out this application and a loan specialist will contact you instantly to start discussing your loan options. The COVID-19 pandemic is a great challenge, and together we can overcome it. By capitalizing on business loan options during the coronavirus outbreak, you can ensure the financial stability and growth of your business once everything gets back to normal.