If a traditional lender doesn’t take your Paycheck Protection Program application, you’re not out of luck. Federal forgivable Paycheck Protection Program loans have provided a lifeline for millions of small businesses ailing from the coronavirus pandemic, but now some lenders have stopped accepting PPP applications.
Can You Get a PPP Loan?
Finding a lender could prove a challenge if you’re only looking at big banks, some of which have stopped taking PPP loan applications. You could have better luck with regional and local banks or credit unions but may need a banking relationship to apply.
The SBA also maintains a list of participating PPP lenders by state. You will need to verify loan availability and that you meet eligibility requirements.
Qualified businesses and nonprofits can access SBA-guaranteed PPP loans of up to $10 million but must work with SBA-approved lenders. The loans are forgivable if the funds are used for payroll, mortgage interest, and rent and utility costs, with at least 60% going toward payroll.
A PPP loan has a 1% interest rate and doesn’t require collateral, but each business is limited to one loan.
Alternative PPP Lenders
Unlike banks big and small and credit unions, alternative lenders may be more willing to accept your PPP application, even if you don’t have a business relationship. Alternative lending describes funding that isn’t associated with traditional financial institutions.
For PPP loans, these alternative lenders may be able to help:
- Funding Circle
- QuickBooks Capital
- Reliant Funding
What Can You Do If You Run Out of PPP Money?
Almost half the businesses polled by the NFIB Research Center indicated that they would likely need more financial support in the next 12 months, despite applying for government-backed loans to help with the health crisis.
When PPP funds are not enough, options include:
- Other government-backed loans, including SBA Economic Injury Disaster Loans; Main Street loans; and 7(a), 504, and microloans
- Traditional small-business loans
- Online loans
- Small-business lending options, such as microlending and crowdfunding.
Other Government-Backed Loans
Not only PPP loans but also many other government-backed programs can help you make ends meet during the pandemic:
Economic Injury Disaster Loans. These loans are attractive because of low-interest rates – 3.75% for most businesses and 2.75% for nonprofits – payment terms of up to 30 years and no prepayment penalties.
Main Street Lending Program. The Federal Reserve opened this program in June for lenders to provide loans to small and midsize businesses in good financial shape before the coronavirus pandemic. The loans can be paid back over five years, with deferral of interest payments for a year and principal payments for two years.
Traditional Small-Business Loans
A traditional small-business loan is still an option, even though getting one now is more challenging than before the pandemic. Lending standards are stricter as banks try to limit risk during the coronavirus downturn.
Lenders will look at your revenue, your industry – How healthy is it? – and your business and personal credit records. Before you apply for a loan, work with your bookkeeper and your accountant to organize and update your finances and make sure your credit is in good shape.
Online Lending Options
Businesses that can’t get financing from traditional lenders will often look to online lenders and credit card companies.
Online lenders may offer term loans, lines of credit, invoice-based financing, and other funding opportunities. Whatever you choose, make sure you are aware of the fees and potentially high-interest rates.
Other Lending Options for Small Businesses
Certain types of loans are suited to small businesses. Some of these choices include:
Microloans. These are small loans issued by individuals rather than banks or credit unions. These are often overlooked, but they can be found locally or regionally through SBA-designated intermediary lenders, Detweiler says.
Crowdfunding. This funding option combines investments from multiple sources, which are usually small.
Business credit cards. Using business credit cards for business expenses is an option for those who have the cards or who have a strong credit rating and can get them quickly. Getting credit is more challenging now, though, if your score is shaky.
Unsecured loans. If your personal credit history is strong, you could explore either an unsecured business loan or a personal loan for business funding.
Government programs. Many state and local governments have set up programs to assist businesses in need during the coronavirus crisis.
As you keep up with changes to relief programs, continue to look out for new aid that could help your business.