Most large corporations have some debt as a standard financing practice. Depending on the economic situation, debt financing can be far cheaper than investor financing. But for many small businesses, having to service debt each month can mean the difference between taking home a paycheck or not, hiring one more employee or working extra hours, or paying your bills on time. Cash is oxygen to small businesses, so you can, and should, pay down your debt. Here are several ways in addition to sacrificing income, new hires, and personal time.
The US Small Business Administration (SBA) Debt Relief
From the SBA website: “The SBA will pay 6 months of principal, interest, and any associated fees that borrowers owe for all current 7(a), 504, and Microloans in regular servicing status as well as new 7(a), 504, and Microloans disbursed prior to September 27, 2020.”
If you have one of these loans, you do not need to apply for this assistance. According to the SBA, assistance will be automatically provided as follows:
- Loans not on deferment, SBA will begin making payments with the next payment due on the loan and will make six monthly payments.
- For loans currently on deferment, SBA will begin making payments with the next payment due after the deferment period has ended, and will make six monthly payments.
- For loans made after March 27, 2020, and fully disbursed prior to September 27, 2020, SBA will begin making payments with the first payment due on the loan and will make six monthly payments.
SBA borrowers should contact their lender for answers to specific questions about this payment relief plan.
SBA Economic Injury Disaster Loans (EIDL)
On June 15, the SBA announced that the EIDL program is open again. Small business owners in the US, including Washington D.C. and territories, can apply for an Economic Injury Disaster Loan advance of up to $10,000. This loan advance will not have to be repaid. Recipients do not have to be approved for a loan in order to receive the advance. The amount of the loan advance deducts from the total SBA loan eligibility.
That’s right: corporate America is helping out America’s small businesses. Here are just a few examples of US enterprises lending a helping hand to small businesses. While such help is generous, keep in mind that it is in these corporations’ best interests to help out the small businesses that put money in their bank accounts. For example, Morgan Stanley’s Brian Nowak estimates small businesses comprise 30% to 40% of Facebook’s overall advertising base.
- Facebook is offering U.S. small businesses $40 million in grants to help them navigate the coronavirus crisis. Go to facebook.com/grantsforbusiness to determine if your business is eligible. They also rolled out additional features to help small business owners. Facebook now lets business owners to start a Facebook personal fundraiser for their own business. So they can ask their most loyal customers for help with operating costs during the crisis. In addition, they made it easier for businesses to communicate temporary service changes — like changes in open days and hours — to their customers.
- Lowe’s has put up more than $50 million in various types of relief funds for small businesses since the COVID19 pandemic hit the US. In this latest round of funding, the company will “offer small business grants through some of the company’s key partners. Including its supplier diversity network. The funds will also expand support to small business home improvement professionals.”
- Vistaprint, Facebook, Verizon, and others offer grants that can help keep your small business afloat during the coronavirus crisis. Companies can qualify for these grants if they have 3 – 20 employees. Located in an economically vulnerable community, and have been impacted by the COVID-19 crisis.
- Finally, here’s a guide of all the companies (as of this writing) offering small business assistance in many different ways to help America’s small businesses weather this storm.
Regardless of how you do it, whether you listen to Clark Howard or Dave Ramsey, what you need is a plan. Now that you have a few more tools in your belt, you can make that plan to pay off that debt and free up that cash.