Options for obtaining financing for your business in a crisis

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If the coronavirus pandemic has taught us anything, it’s that you can never be sure of tomorrow, especially for small businesses. With mandates requiring restaurants and bakeries to stop or limit on-site dining, many find themselves in dire financial straits.

Here are some financing options for businesses in crisis. Understand that programs have changed and can continue to do so.

SBA financing options

Paycheque Protection Program: The Paycheque Protection Program (PPP) offers a low-interest loan that can be canceled entirely if spent in the right way, primarily for payroll-related expenses. If you’ve received P3 funding, your next most important question is how to qualify for forgiveness. The rules are very specific, so be sure to follow them to the letter.

Economic disaster loans: The SBA is still working on a backlog of applications for Economic Disaster Lending (EIDL). This program offers low-interest working capital loans of up to $ 2 million. There is also an option for an advance (“grant”) of up to $ 10,000 ($ 1,000 per employee), which does not have to be repaid. Currently, there is no way to check the status of your application, so if you’ve applied to SBA.gov before, be sure to check your email, including your spam folder, for a message from the SBA. Keep in mind that an EIDL advance reduces the PPP forgiveness if you got both.

Small Business Debt Relief Program: If you already have an SBA loan, such as a 7 (a), 504, or microcredit, you won’t have to make any payments, including principal, interest, and fees, for six months as part of the small business debt relief program. The SBA will make these payments on your behalf, as long as the loan is ongoing.

City and state programs

In addition to federal aid, many cities and states offer bridging loans, grants, and other relief. Your local Small Business Development Center (SBDC) or SCORE office can be an invaluable source of information on local offerings. Find yours at SBA.gov/tools.

Crowdfunding

There are four main types of crowdfunding that can help you get the financing your business needs:

  1. Giver: Think about GoFundMe. You collect money that you don’t have to pay back.
  2. Awards: Think Kickstarter. You are offering a reward such as a gift certificate, special recipe, or perhaps a video baking class to contributors.
  3. Ready: Think about Kiva. You borrow money to pay it back. With Kiva, it’s a 0% loan of up to $ 15,000.
  4. Equity: Think NextSeed. You will hire investors who want to invest in the future of your business.

You are more likely to be successful with crowdfunding if you have a loyal following and a way to reach them, through email or social media, for example.

Subsidies

It’s not just governments trying to help small businesses right now. Many private companies are trying to help, including these examples:

  • Yelp, Quickbooks, GoDaddy, Bill.com, and GoFundMe have created the Small Business Relief Initiative and Fund, which matches funds raised through GoFundMe up to $ 500.
  • Facebook is offering $ 100 million in cash grants and advertising credits to 30,000 eligible small businesses.

About the Author

Gerri Detweiler

Gerri has been guiding individuals through the confusing world of finance and credit for over 20 years. She is the author or co-author of five books, the most recent of which, Finance your own business: get started on the finance fast lane. Today, Gerri is Director of Education for Navigation, an online platform that connects small business owners with their best financing options and provides free access to personal and business credit scores.

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