The Paycheck Protection Program has disbursed billions of dollars to businesses impacted by the coronavirus pandemic. For many business owners, the PPP's low-interest, potentially forgivable loans are a critical lifeline.
Not everyone is taking advantage of the program, however. Some impacted businesses don't want to abide by the PPP's rules of loan usage, while others are unsure that they'd be able to qualify for full loan forgiveness and don't want to carry debt. There's also the specter of being held criminally liable for taking out a PPP loan that you don't technically need, according to guidelines that the government is still clarifying.
There's also another segment of business owners who haven't been negatively impacted by the pandemic, and instead want to find financing that can help them grow, rather than just survive.
The PPP is a lot of things, but it's not the perfect financing option for every small business in the U.S. right now. If the PPP isn't the right solution for your business, here are some other financing options to explore:
Traditional SBA loan products
Alongside the PPP, the SBA continues to partially guarantee low-interest loans through a network of national and local lenders.
These loans--through the SBA's 7(a), 504/CDC, and Microloan programs--don't have the same forgiveness opportunities or miniscule interest rates as PPP loans. But the use cases are broader, the repayment terms are longer, and the rates are lower than just about any other small-business loan product on the market.
Take the SBA 7(a) program, for example. This is the SBA's most popular loan program, used by businesses seeking working capital to expand, improve, or otherwise grow their business in prosperous times. You can also use it to refinance debt, or as a seasonal line of credit.
There are different types of 7(a) loans as well: the 7(a) Small Loan (good for loan amounts under $350,000), the 7(a) Express Loan (for when you're willing to take on a slightly higher interest rate for a faster application process), and loans geared toward international export businesses.
If you have major real estate needs, you can apply for an SBA 504/CDC loan. New business owner seeking startup capital? SBA Microloans are available to you as well.
Community and nonprofit lenders
One surprising takeaway from the PPP application and funding process was that small business owners often had greater success going through smaller community banks than through well-known, national institutions. During the first round of PPP funding in particular, many community banks around the country worked hard to fund both existing and new customers.
If you don't already have a relationship with a community bank--maybe you use a major bank for your business banking needs or an online-only bank--it may be time to get in touch with one and see what lending options are available for you. At the very least, that bank may refer you to another potential lending option that better suits your needs.
Discuss with a relationship manager at a community bank whether it would potentially work with your business on a loan if you moved your money over to it. You may choose to do this anyway; support your community, and have your community support you.
Many online lenders--which offer business loans at higher rates but with less stringent requirements--turned off lending to small businesses at the beginning of the pandemic. But not all of them stopped, and now some are returning to the field.
Some of these lenders are focused on connecting business owners to PPP loans, as well as continuing to offer other financing options. BlueVine, for example, has become a major player in the PPP space, but continues to offer invoice factoring for businesses that need it.
Explore your options in the online lending space if you are a relatively new business, have less-than-stellar personal credit, or are otherwise shut out of traditional lending options such as bank and SBA loans.
Economic Injury Disaster Loans
It's worth mentioning EIDLs--another SBA loan program--if only because this option is no longer viable for many businesses.
Due to overwhelming demand and limited funding (compared with the money that was allotted to the PPP), the SBA recently announced that it would focus on providing EIDLs to U.S. agricultural businesses only.
It's possible that as time goes on, Congress will replenish funding for this program and it will become more widely available again. So keep an eye on this, but for now, look elsewhere unless you own an agricultural business.
The PPP may be the biggest name in small-business financing right now, but it's not your only option. Look into the above possibilities, and explore your options for small-business grants that may be available for your business as well. You may be able to find financing that better suits your needs for both the short- and long-term.