Learn about the financing options that are available to help your small business get through the economic fallout from the coronavirus, from SBA Disaster Assistance Loans to online lenders.
The swift economic upheaval caused by the coronavirus pandemic has been nothing short of startling, roiling global financial markets and forcing the temporary shutdown of businesses large and small. As people across America stay home in a bid to minimize the spread of the outbreak. Small businesses in particular, especially restaurants, bars and retailers, are grappling with the immediate economic fallout. And the sobering reality is that businesses are likely to face more challenges in coming months. As many economists are now forecasting that the outbreak will push the U.S. economy into a recession this year.
Firms that have enough cash in the bank or available credit will be in a better position to retain employees, pay their bills and ride out whatever the next few weeks and months bring.
For those with a minimal or nonexistent financial cushion, the Small Business Administration is offering loans that can help you cover expenses like paying your employees should they have to stay home because they (or their family members) are ill.
Here’s what you need to know about the SBA’s disaster assistance loan program and its other financing options, as well as ways that online lenders may also help provide a lifeline to get you through the impact of the outbreak.
SBA Disaster Assistance Loan Program
Part of the Trump administration’s response to the coronavirus includes authorizing the SBA to issue some $50 billion in low-interest loans to provide support for small businesses hurt by the economic fallout of the outbreak.
The SBA’s Economic Injury Disaster Loans (EIDL) offer up to $2 million in financing for small businesses that have lost revenue due to virus-related closures and other disruptions. The loans are available in states or U.S. territories that ask the SBA for an economic injury disaster loan declaration.
Borrowers can use the loans to pay bills, fund payroll and cover other expenses. The loans carry a 3.75% interest rate for small businesses. The interest rate for non-profits is 2.75%. The length of time you’ll get to pay back the loan varies, depending on your ability to repay. The maximum loan term is 30 years. One caveat: This loan program is reserved for businesses that don’t qualify for credit elsewhere. Those that do qualify for credit elsewhere are not eligible.
Apply for SBA Disaster Assistance Online
You can apply for disaster loan assistance from the SBA online. The website will show whether you live in a part of the country that’s been deemed an eligible disaster area. After completing an application, the SBA will review your credit and conduct an inspection to verify your losses. This process is the standard procedure for this type of loan. Which is often made available to businesses, homeowners and renters to cover repair costs from a natural disaster.
In the case of a loan to help mitigate the economic losses from the efforts to contain the coronavirus, it’s likely you will have to show the extent of your losses from the virus outbreak. That could be loss of sales from having to temporarily close your restaurant or coffee shop, for example.
Once a loan officer reviews your application, you can expect a decision from the SBA within 2-3 weeks. Note that the SBA loan will be paid out across several installments, not a lump sum. Still, you can expect $25,000 within the first five days of your loan closing.
Other SBA Loans
The SBA offers other loan programs to help provide businesses with capital. This is something to consider as you weigh your financing options. One program funded by SBA lending partners includes loans of up to $5 million. The funds can be used for a variety of business needs. Including working capital, construction or renovation expenses, new equipment, debt refinancing, and inventory costs.
Another loan program provides up to $350,000 in financing. It will let you know whether you’ve been approved or denied within 36 hours.
Small businesses in underserved markets may also qualify for a loan of up to $250,000. If you need to borrow a bit less than that, so-called “microloans” that max out at $50,000 are available through nonprofit lending organizations.
Small businesses that export goods overseas or sell to customers that export their products can apply for a loan of up to $500,000 through the Export Express program. The Export Working Capital Program aimed at small business exporters offers up to $5 million in financing.
Alternative lending companies have grown over the past decade into a reliable source of fast financing for small businesses. Often extending credit to those who don’t qualify elsewhere.
Unlike traditional financial institutions, these online lenders crunch a variety of data to give them a broader view of a borrower’s creditworthiness. And they often look beyond collateral when determining whether a borrower qualifies for a loan. In addition, their loan application process is often simpler and provides an answer far quicker than brick-and-mortar lenders.
If you’re looking for financing to help your business ride out the turbulence from the coronavirus check out the FINSYNC Lending Network, which matches your application with a lender who has the best option for your small business.
Another way FINSYNC can help shore up your access to capital is through FINSYNC Pay, which lets businesses use their credit cards to pay for goods or services via email even when the payee doesn’t have an existing merchant account set up to process credit card payments.
These are stressful and uncertain times. However, it pays to remember you have many options available to ensure your business can withstand the turbulence ahead.