With the recent passing of a $2 trillion U.S. stimulus package, small business owners impacted by COVID-19 have been given options for low-interest loans, financial assistance, and other aid that can help them in this uncertain economic time.
Aside from this stimulus package, a number of private, state and local institutions have also stepped up to provide aid, assistance, and loans to small business owners suddenly facing unforeseen challenges.
With a number of different options emerging, small business owners might be asking themselves, "Which options am I eligible for?" and "Which funding option is right for my particular business?"
To help business owners and entrepreneurs looking for financing options, we've compiled a list of public and private opportunities for small businesses.
This program provides low-interest loans of up to $10 million funded by the recently passed CARES Act. These loans aim to prevent the financial downturn of small businesses impacted by COVID-19. The program assists business owners in paying employee payroll, mortgage payments, or other vital business expenses.
According to the SBA's site, up to 100% of the loan is forgivable and partial forgiveness will be granted if all employees stay on the payroll for eight weeks or more after a business receives the loan.
As part of another emergency preparedness act, small businesses impacted by COVID-19 can apply on the SBA site for a low-interest disaster loan of up to $2 million. Applicants will receive a decision about their loan within three days of applying.
The 7(a) loan program is the SBA's primary program for small businesses. The terms and conditions, like the guarantee percentage and loan amount, vary by the type of loan. These small business loans are often used for smaller startup business costs and are not related to emergencies or disasters.
The 7(a) loan size is usually between $350,000 and $5 million. Lenders are not required to take collateral for loans up to $25,000. For loans over $350,000, the SBA requires a lender to accept as much collateral as possible. This collateral could include a business' fixed assets, trading assets, or real estate.
Express loans are similar to 7(a) Small Business Loans in that they max at $350,000 and will require lender collateral. The key difference is that applicants will get a decision and disbursement within 36 hours of applying for the loan. Like other SBA loans, the lender determines the eligibility and the loan's terms.
For more urgent loans, exporters can apply for an Export Express loan. Applications for these loans, which cap at $500,000, will get a response from lenders within 24 hours.
Aside from the loans mentioned above, SBA also offers assistance for veterans, businesses that require short-term seasonal loans, and small businesses that need loans for international trading purposes.
While SBA primarily provides loans, the administration also works with organizations to provide grants to businesses in certain fields, such as scientific research and development and exporting. Information about these specific grant opportunities can be found on the SBA's grant page.
In the coming months, many private banks will be offering assistance or special funding opportunities for individuals or small businesses. Here's a quick rundown of companies with temporary assistance or ongoing small business loan programs:
In light of COVID-19, JPMorgan Chase has pledged $2 million to its nonprofit partners around the world and $8 million to "assist small businesses vulnerable to significant economic hardships in the U.S., China, and Europe."
The banking company says they will be working with community development financial institutions around the world that will provide low or zero-interest loans and interest rate buydowns to owners. JPMorgan Chase will also aim to financially help those who've benefited from its Ascend and Entrepreneurs of Color funds.
According to TD, credit lines are best for borrowing $25,000 to $500,000. However, larger lines are available for commercial-sized businesses. Interest rates vary based on the credit line. When paying the money back, credit line recipients have the option to pay towards the overall credit line, or just pay interest-only.
When it comes to loans, mortgages, and equipment leasing, TD Bank says it can lend up to $1 million to small business owners. Similarly to credit lines, larger loans are available for commercial companies.
According to Capital One's website, the loans require monthly payments with a max payback period of five years. The company also aids small businesses in consolidating debt, so they only have to pay one lender each month.
As part of Wells Fargo's initiative, the institution will dedicate $2 million "to the deployment of flexible capital in collaboration with Opportunity Fund and will also provide immediate cash boosts and financial coaching support of entrepreneurs and their low-wage workers in coordination with SaverLife."
Aside from the initiative noted above, Wells Fargo offers three types of loans: unsecured business loans, Equipment Express Loans, and an Advancing Term loan. The first two loans are aimed at one time projects or purchases.
The loans can be for an amount between $10,000 and $100,000 and have payback periods of one to five years or two to six years respectively. The Advancing term loan is a $100,000 to $500,000 working capital loan which requires business assets as collateral.
BlueVine is an organization that provides small businesses with loans between $5,000 and $5 million. Interest rates for loans and credit lines start at 4.8% and vary based on the type and size of loan selected. The company offers three specific types of lending: Credit lines of up to $250,000 with no repayment penalties. term loans of up to $250,000, and Invoice factoring -- a credit line specifically for invoices -- of up to $5 million.
According to Funding Circle's website, it will soon be offering Paycheck Protection loans. Small businesses that are interested in working with this company to receive Paycheck Protection Program loans can sign up to receive email notifications when applications are launched specifically for it.
It's important to note that certain Funding Circle loans require a one-time fee before they're dispersed. When an applicant is approved for a loan, they'll receive the fee and interest information before being required to commit to the loan.
PayPal offers small business loans between $5,000 and $500,000 to companies that have been in business for nine months or more and have a free PayPal Business profile.
According to PayPal's site, no interest is due on the loan if it is paid back within the first six months. The amount of interest and payback period varies based on the type of loan businesses apply for.
Additionally, those with a Citi credit card might qualify for a forbearance program which would delay them from needing to pay back their full balance.
State and Local Funding Resources for Small Businesses
Each state offers different benefits, tax exemptions, loans, or grant opportunities for businesses. To learn more about state-based assistance and funding, visit your state department's website.
For example, small business owners in Massachusetts can visit mass.gov to find information about state-mandated COVID-19 relief. On this page, you'll find information about Massachusetts' own relief funding, as well as federal loan options.
While many big banks are currently offering loans related to the financial climate, your local bank or smaller chains might also be allowing small business owners to take out loan amounts with interest rates and payback periods that work for them.
Tips for Picking the Right Funding
While the CARES Act and private business initiatives have opened the door to a number of financial opportunities for businesses, there are still a few things small business owners should keep in mind.
First, it's important to note that some of the loans above might come with fees. For example, you might have to pay a small fee to disburse the loan in the first place.
Secondly, some of these loans do not disperse all at once. For instance, loans of up to $10 million designated by the CARES Act will offer small businesses a cash advance of up to $10,000 before the rest of the funds are dispersed.
Before committing to a loan, small businesses might need to look at their timeline for paying bills and other expenses and make sure that a loan's disbursement works for them.
Lastly, and most importantly, when accepting a loan, a small business owner agrees to pay it back.
While some loan programs are currently offering deferment or partial forgiveness programs, most will expect all the funds plus interest to be paid back. As business owners research these loans, they should fully understand the payback and interest rate terms before committing. They should also have a financial plan and backup plan for how they will pay off the loans and interest in the future, regardless of whether their business is or is not running.
Disclaimer: This blog post is meant as a basic resource and not a comprehensive guide. We will regularly update it to add more information as funding opportunities become available or change.
Originally published Apr 3, 2020 4:05:58 PM, updated March 24 2022