Small Business Funding During COVID: A Comprehensive Guide
In normal times, it can be hard to get enough small business funding to start your next venture. Add to that a pandemic that has crushed the economy, and you have a recipe for financial disaster.
Luckily, small business owners have multiple options for getting money during the pandemic. Whether you’re starting a new business or need help with your current company, you can get through this.
Keep reading for some traditional and COVID-specific funding options.
When you open or grow a small business, you need some money in your savings. If you don’t have a decent emergency fund, any financial loss could be detrimental to you and your business.
Assuming that you have an emergency fund or some sort of savings, it’s a great small business funding option during the pandemic. You can use just what you need to get by so that you can still bring in a profit.
Now, you shouldn’t completely dry up your emergency fund. However, dipping into it might be necessary to keep your business from failing financially.
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Help From Family
If you don’t have much in savings or need more money for your small business, ask friends and family if they can help. You don’t need to ask for a ton of money from one relative.
Asking everyone to contribute a small amount can add up. It might even be enough to get you through until you can get more small business funding.
However, make sure you and your relatives agree to some terms. Investments from loved ones can take a toll on your relationship. Make sure you all know what will happen with their investment in case your business loses that money.
Crowdfunding is another great way to get some small business funding in tough times. Like with family, you can rely on more than one investor or donor to get the money you need.
But this time, you can rely on strangers who are already fans of your product or service. You can set up a crowdfunding campaign online, and you can offer rewards to people who support you.
With the current crisis, try to keep rewards virtual, such as a quick consulting session with you or a discount code to your store. That way, you can keep yourself and your customers safe.
Traditional Small Business Loan
The next traditional way you can fund a small business during these times is with a loan from your bank. Many banks offer small business loans, so you don’t need to go to any specific office.
You can talk to the loan officer at your nearest bank branch to start an application. Going this route can be good if you have your business account at the same bank. They’ll already know your financial situation and history.
Then, you can get a decent loan amount, term, and interest rate. You can get the money you need to maintain your business until your sales start picking up.
Economic Injury Disaster Loan (EIDL)
Whenever your business experiences an economic disaster, you can get an Economic Injury Disaster Loan (EIDL). The loan can subsidize your business when you see a short-term drop in revenue, such as during a pandemic.
You can use the loan to pay for your ongoing business expenses, and you can pay the loan back over 30 years. These loans have excellent interest rates, all at under four percent.
If your business bounces back more quickly, you can even pay off the loan early. That way, you can save money on interest and invest it back into your business.
SBA Express Bridge Loan
If you have received loans through the Small Business Administration (SBA), you can also look into an SBA Express Bridge Loan. These loans provide COVID relief to small business owners who have worked with SBA express lenders.
You can get the loan money more quickly than other loans, which comes in handy if you’re behind on rent or payroll. The loan program lets you get up to $25,000 that you can use for regular business expenses.
It can be part of a bigger EIDL, and you can pay the two loans off together. This loan can give you money while you wait for your EIDL application to go through, keeping you from closing your small business.
SBA Debt Relief
You can also consider SBA debt relief for any loans you get through the organization. If you received a 7(a), 504, or a microloan before September 27, 2020, you can qualify.
The debt relief program can save you six months of your loan principal and interest. It will also keep you from having to pay any fees associated with your loan for that time.
During that period, the SBA will pay for all of those expenses for you. You can apply this debt relief to loans you have that are active or that you’ve deferred. The SBA will make six payments for you no matter when the payments start.
State and Local Funding
If you still need small business funding, consider your state and local governments. Some states, like Illinois, offer emergency small business loans. Illinois businesses can get up to $50,000.
Another program in the state grants small business loans up to $25,000 for immediate assistance. Then, you can get the money you need to keep operating your business.
The interest rates are low, and the state will give you six months before you have to make payments. And if you don’t operate in Illinois, check with your city or state for information on what loans you can get.
Paycheck Protection Program
Another option for COVID relief to consider is the Paycheck Protection Program. Unfortunately, the program closed in August 2020.
However, if you did get a PPP loan when the program was open, you can keep using it for your small business. Consider the terms of your loan so that you can follow any restrictions.
Small Business Funding Options
During the COVID-19 pandemic, many small businesses have suffered financially. Luckily, there are many COVID business loans and grants out there.
Whether you want to get small business funding for the pandemic or in general, you have multiple options. Consider how much money you need and what type of loan you need so that you can keep your business up and running.
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