Many small business owners who were hurt by COVID-19 have been waiting for unemployment or government loans to tide them over until shelter-in-place restrictions are lifted. If you’re still waiting for financial aid, here are some other borrowing options.
Given the overwhelming number of applications, many businesses will likely be waiting a while. And the Small Business Administration’s Paycheck Protection Program is not accepting new applications due to a lack of funding (though President Trump has signed into law a new stimulus package that will inject an extra $320 billion into the program.)
So what do you do if you’re running short of money and can’t afford to wait for a government loan? Here are some ideas:
Business credit cards
While you never want to rack up credit card debt you can’t pay back in your business, using your business credit card now can help you stretch your available cash while you are waiting for payments from customers to arrive.
Just make sure to get your invoices to customers early and ask for deposits on projects when customers can pay, so you aren’t relying more heavily on credit cards than you need to be. Unless you have a zero interest rate deal, this method will still cost you more than using cash.
Alternative financing providers
SBA-backed loans and traditional business loans from a bank are usually the least-expensive loan financing, but when they’re not available, you may have to turn to more costly alternative financing. Make sure you read the loan documents so you know how much you are paying for the money.
Many alternative financing sources have limited their lending right now. However, some are lending. For instance, Fundbox, which allows customers to borrow against their unpaid invoices, is doing so on a limited basis. If you have good-quality invoices – meaning invoices from companies that will pay them no matter what – this can be a useful short-term option.
“We are being very conservative, but we are originating,” says Leslie Olsen, chief marketing officer at Fundbox. “We’re focusing on our existing customers first.”
Generally speaking, if you have an existing relationship with an alternative lender, that lender may be the best place to start in the current environment. It will already have data on your business that allows it to make an educated decision about whether to lend to you.
One potential source, if you are a QuickBooks user, is QuickBooks Capital. It provides funding based on the health of your business, as reflected in your QuickBooks records and other relevant information. Businesses need to have at least $50,000 in revenue in the past year and a FICO score of 620 or higher. Interest rates vary, based on your business’s credit profile.
Personal credit cards and loans
If you lack business credit and it’s do-or-die for your business, it may be time to tap your personal resources and credit. Ivy Lender, a financial tech company, will be offering personal loans in a new partnership starting this week, says Christina Camacho, founder and CEO. Even if you can’t qualify for a business loan, she says, “someone could possibly apply and get approved on the consumer side.”
Now may not be the ideal time to try to raise money this way – many consumers are strapped for cash – but if you have invented a useful product, you never know.
Many crowdfunders take preorders from customers who’ve made donations. Essentially, their customers fund the manufacture of their products. Kickstarter and Indiegogo are two of the biggest crowdfunding sites.
One campaign that’s doing well on Kickstarter at the moment is for Green Disc, an eco-friendly system for lubricating bike chains. It makes sense, given that going for a run or a bicycle ride is one of the few things many people can do under shelter-in-place rules.
If you’ve got a great idea that will make the work-and-go-to-school-at-home life easier for the public, this could be your big moment.