The economic impact of the Covid-19 pandemic was significant on many small businesses. However, it also birthed the idea of the Paycheck Protection Program (PPP).
The federal government created PPP mainly to help the businesses that had been hit hard and was a strategy to offset the economic impact of Covid-19. Small business owners could access funding for their businesses, but at the same time, many did not qualify.
The program ended in 2021, but business owners can still access several PPP loan alternatives. Below are some legitimate ones.
SBA (7a) Loans and SBA Microloans
Business owners can take advantage of SBA(7a) loans to finance different business needs. These government-based loans come with lower rates, monthly payments, and long terms. They can help start-ups to build credit.
Many people think that the SBA lends the funds directly to a business. That is not the case. The SBA gives a loan guarantee with a promise to reimburse a certain percentage in case of default. Because of the lower risk involved, banks and other lenders can provide business loans.
SBA Microloans are typically small loans the government offers to help small businesses access funding easily. The loans are facilitated by intermediary lenders, but the SBA must approve applications.
Lines of Credit
A business’s line of credit is an SBA ppp loan alternative that can provide access to a maximum amount of capital. It is flexible since it allows borrowers to access the required amounts at any time with interest chargeable exclusively on individual withdrawals. This arrangement makes a line of credit a revolving account.
Unlike traditional term loans that have a preset sum availed in advance, a line of credit allows a business owner to withdraw funds up to the set maximum, pay back, and withdraw again. Lines of credit may be unsecured, especially online, but some lenders like banks may ask for collateral.
Small business grants are always competitive, and there are even more alternatives today. Governments, trusts, foundations, and non-governmental corporations offer grants to support business activities.
Unlike loans, business owners do not have to pay back. Additionally, grants do not risk the loss of equity. Grants often have strict eligibility criteria and may even be offered for specific industries or causes.
Crowdfunding continues to be a valid option for business owners who cannot access PPP loans today. The idea behind crowdfunding is to obtain funding by soliciting donations or contributions from people to boost cash flow needs or for a product launch.
Crowdfunding can be done through equity funding or debt-based funding campaigns. In the former, the backers (investors) get business shares; in the latter, businesses repay the donors/ backers through interest. If it is a reward-based campaign, those who contribute get non-monetary incentives like the products or services being created or tokens for giving.
Business owners who want to run successful crowdfunding campaigns must capture the attention of their crowd and, at the same time, convince them that their project(s) is worth investing in or donating to.
Merchant Cash Advance (MCA)
Businesses that sign with an MCA company get to access funding in exchange for their future daily credit card income percentage. Typically, most providers work with processors who clear and settle the credit card payments from customer credit or debit card purchases until the business meets its obligation. MCAs are given as lump sums and are excellent alternatives for businesses with enough business volumes.
Angel Investment and Venture Capital
Angel investors and venture capitalists provide businesses with funds to start or expand the capital, usually hoping to get some Return on Investment. Typically, angel investors fund from their own pockets while venture capitalists pump cash pooled from trusts, funds, or investment companies.
Both investors fund a business based on where it is at development wise-Angel investors lean more toward start-ups while venture capitalists prefer to invest in existing businesses. Both are excellent alternatives for businesses that consistently generate creative solutions, products, and services.
Self-Funding and Borrowing from Friends and Family
A business owner can choose to tap into their savings to fund their businesses. If the savings are insufficient, they can consider asking for help from friends and family by obtaining the funds as a loan or selling equity.
Self-funding gives the business owner control over their business and the freedom to operate and run it as they see best. On the other hand, friends and family may avail funds at lower rates and be less strict on repayments, unlike lenders like banks.
Small business owners may no longer have access to PPP loans following the program’s ending. Nevertheless, that does not mean all is lost. There are other options they can consider to keep their business ventures running. The alternatives mentioned above are worth considering.
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