While the COVID-19 crisis is still ongoing, small businesses are facing unprecedented financial challenges. Lockdown is in place causing a lot of businesses to shut down and layoff their employees. The health emergency crisis is agitating the economy, pushing the healthcare industry to their limits, and significantly affecting American lives.
The consumer behavior during the coronavirus outbreak has changed drastically causing businesses to cut their expenses, laying employees off, and using every means necessary to cope with the crisis.
The Congress recently passed the Coronavirus Stimulus package, and Economic Security Act (CARES Act) to help struggling businesses stay afloat. In addition to these relief funds and grants, the CARES Act also created the Paycheck Protection Program (PPP) loans to help eligible businesses with forgivable loans up to $10 million.
For small businesses, these relief programs might not be enough to keep them afloat until the crisis is over. To help small businesses with more financial options, we’ve rounded up a few additional business financing options to help them access capital quickly beyond the SBA relief programs.
Financing Options beyond the Coronavirus Relief Bill
Because of the generic nature of the CARES Act, small businesses can leverage the relief programs along with support from lenders and private creditors.
Many private and nonprofit organizations are providing financial assistance to small businesses to help them afloat during the COVID-19 crisis. If you’re an affected business with inadequate cash to support your business, consider negotiating with your lenders and suppliers while the COVID-19 crisis is still ongoing.
Online lenders like Merchant Advisor is a great option to apply for a business loan during the coronavirus pandemic. You simply fill out a loan application, and we help you with a variety of business financing products based on your unique needs and requirements. Our loan specialist will work with you to help you saves time and get the best loan possible for your business.
Here are some of the most popular loan options beyond those provided by the federal government during the coronavirus crisis.
- Short Term Business Loans
If you’ve successfully started your business with little debt obligations, taking out a loan might not be your first choice. There might be a situation when you encountered business seasonality, have a special growth opportunity or simply need to update your equipment or add more inventory to keep operational. When your small business is struggling with cash flow, short-term business loans can help fill the gap.
Short-term loans are for a shorter period typically from one to three years with loan amounts ranging from $2,500 to $250,000 with an interest rate as low as 8%.
The best thing about short-term business loans is quick approval sometimes in under 24 hours. In addition, you have the flexibility to use the cash for any business purpose. Whereas PPP loans have strict requirements on how a business should use the money and typically takes 10 days to be disbursed after the loan is approved. Therefore, when you need quick funding for expenses that aren’t part of your payroll, a short-term loan makes more sense for your small business.
- Business Lines of Credit
A business line of credit is a great financial option to help you get access to flexible cash when you need capital fast. It works similar to a credit card, where you get access to a credit limit from which you can draw cash as and when required. You don’t have to use the line of credit all at once, leaving you with extra cash when you need it.
The best thing about a business line of credit is that you don’t pay interest on the total credit limit. You’ll only pay interest on the credit amount you use, and after you repay the owed amount, the line of credit goes back up to the original amount.
With business lines of credit, you can get cash up to $100,000 for terms up to 24 months with weekly or monthly payment frequency.
- Equipment Financing
Sometimes you might need to upgrade or replace your business equipment to stay competitive or even just to stay operational.
With equipment financing, you can finance any needed vehicles, furniture, machinery, and much more. The best thing about equipment financing is that the equipment itself serves as collateral for the loan; means when you default on the loan, the lender seizes the equipment and sell it to recoup the loss. This also helps in securing flexible loan terms and lower interest rates.
With equipment financing, you can get cash up to $250,000 at one to five years terms without any down payment requirement.
- Business Credit Cards
Getting a business credit card is another quick flexible solution to help you get access to capital fast. With business credit cards, you can make small purchases to keep your business operational open (like paying for to-go containers for your restaurant).
Qualifying for small business credit cards is easy, even with a bad credit score. All you need is to sign a personal guarantee to open a credit card account. Business credit cards are a great way to finance your small business when you have a good personal credit score with poor business credit.
If you can manage the account well, a secured business credit card can help build your better business credit for the future. When applying for credit cards, make sure to look for those business credit cards that provide low-interest rates or a 0% introductory APR. With such credit cards, you only make minimum monthly payments during the crisis and repay the debt when the business gets to usual.
- Merchant Cash Advance
Merchant cash advances are another quick funding option where your business receives a lump sum of upfront cash in exchange for a fixed percentage of your future credit and debit card sales. It’s not a loan, but an advance on your future receivables. There are no fixed monthly payments and you’ll pay when your business makes money.
This is the most convenient funding option especially for seasonal businesses where payments are tied to your sales. You pay more when you make more sales and vice versa.
With merchant cash advances, you can get cash up to $500,000 with no fixed monthly payments, upfront costs or hidden fees and cash within 24 hours. A merchant cash advance is an expensive funding option and should be considered as a last resort.
The Bottom Line
With the coronavirus crisis in full swing, small businesses should look into the federal grants relief programs, but when you need quick funding and support than you can get from coronavirus relief programs, just know there are financing options available. From short-term loans to business lines of credit and equipment financing, you can have the financial resources to support your business operations, care for employees, and keep you intact through the crisis.