What’s next? Financing alternatives to PPP

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As applications for the second wave of PPP loans move into the final phase, many businesses, including clients or perhaps your own firm, will have the following question at the forefront of their minds: What do I do next if I don’t secure this loan?

With the uncertainty of the pandemic, leaders must be diligent in putting processes and plans in place to survive shelter-in-place orders, preserve business continuity and safeguard job security where possible.

However, even if you do secure a PPP loan, it’s likely to only cover your expenses for a few weeks. So what happens if you need capital to rehire staff, kickstart supply chains and manage operating costs?

There are a few options and financing alternatives for businesses, so they aren’t entirely reliant on aid from the PPP loans.

Traditional SBA loans

While the PPP loans might not be accessible to all, small businesses can also apply for other resources that the Small Business Administration (SBA) offers. The CARES Act established several new temporary programs to address the COVID-19 outbreak including:

EIDL Loan Advance: A loan advance providing up to $10,000 of economic relief to businesses experiencing temporary difficulties.

SBA Express Bridge Loans: Enables small businesses who currently have a business relationship with an SBA Express Lender to quickly access up to $25,000.

SBA Debt Relief: A financial reprieve to small businesses, such as deferral of loan payments

These loans and initiatives can support businesses in securing working capital for things like overheads, covering operational costs or financing supply chains, resolving debts and more.

The eligibility for these loans is based on things like the type of business, employee count, industry and more. The PPP loan will be fully forgiven only if the funds are used for payroll costs, interest on mortgages, rent, and utilities (at least 75 percent of the forgiven amount must have been used for payroll).

Facebook's Small Business Grants Program

In response to the pandemic, Facebook has partnered up with mentorship platform Ureeka to offer up to $100 million in grants and ad credits.

To be eligible for these relief supplements, businesses must have 50 employees or less and can only use the aid to support payroll, rent and operational costs.

Facebook has also launched a resource hub to support small businesses here. The hub offers tips and training on how to stay open and operational during the crisis.

Other companies are also offering support to small businesses including:

  • Google Ad credits for future ad spend
  • Spanx’s The Red Backpack Fund is giving female entrepreneurs up to $5,000 in grants
  • Yelp is waiving advertising, product, and service fees for restaurant and nightlife businesses
  • Verizon is investing in small business grants

Receivables financing

Now, more than ever, a crucial and immediate need is cash, and one of the most time-efficient means to secure this is through accounts receivable financing. This method allows businesses to sell receivables such as invoices, for cash that can be used for working capital.

Some platforms have an invoice auction marketplace that allows small businesses to access funds already owed to them, that are tied up in unpaid invoices. With remittance cycles being extended, and more invoices going unpaid, invoice financing is increasingly becoming a mainstream alternative to traditional loans.

For companies who are struggling to qualify for other relief loans and funds, receivables financing is one way businesses can access funds without overextending their capacity for debt. Check with your accounts receivables vendor if they provide an option like this.

State and city support

In an effort to provide businesses with assistance on a more localized level, some state governments have created their own assistance programs. Eligibility requirements and offerings vary from state to state, however, some opportunities available include subsidized wages for new hires, grants, as well as providing access to educational financial experts.

The National Governors Association offers a list of governors’ websites where information about state-based programs can be found.

Many states like California have introduced a moratorium on evictions for SMBs who are struggling, as well as 0 percent interest relief loans. Others like New Jersey and Oklahoma are offering cash incentives, like no-interest loans and low-interest loans to support businesses. More information can also be found here.

For businesses doing it tough, PPP isn’t your only option. There are other ways to gain access to emergency funds to survive the COVID-19 pandemic, but also thrive and grow long after this crisis has passed.

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