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    How To Apply For A Business Loan During The Coronavirus Crisis

    A recent McKinsey & Company report reveals the devastating impact COVID-19 has had on small businesses. 

    Before the pandemic, small businesses provided almost one-half of private-sector jobs. Yet, 54% of the total jobs lost due to coronavirus is from the small business sector. The most vulnerable are small businesses involved in the retail, restaurant, and construction industries. 

    As a small business owner, see how you can access immediate financial relief to help you weather this global storm.

    What You May Need A Loan For

    A business loan can help reverse the negative cash flow that is making it difficult to meet your operational obligations such as payroll and rent.

    Restoring Cash Flow

    The economic slowdown it caused is affecting business in many ways, chief among them being cash flow. Cash flow is the money that is literally flowing in and out of your accounts. Positive cash flow means that you can meet your debt commitments, pay expenses, and invest in growing your business. 

    The negative cash flow that you may be experiencing due to coronavirus means you cannot meet your recurring expenses. More importantly, it robs you of the flexibility you need to respond to emerging challenges or to invest in new business opportunities.

    Overhead: Rent, Storage, Maintenance

    Your small business overhead costs should be kept low, but there are expenses that are unavoidable. Unless you work from your basement or garage, you have rental payments. 

    Virtually every small business has equipment such as computers and printers, or large-scale manufacturing equipment. Safety and longevity require regular maintenance. If you are experiencing cash flow gaps right now, you will find it almost impossible to cover these expenses. 

    Perhaps you warehouse some of your inventory. You need to pay storage fees. If you cannot meet your obligations, you could be facing eviction or the loss of your inventory.

    Making Payroll

    More than 38 million Americans have filed for unemployment because of coronavirus. If you are a small business owner, your employees may be among them. If your business was forced to close, you likely have no customers or sales. Supply chain disruptions have impacted customer loyalty. Making payroll is impossible. However, you do not want to lose your employees. 

    While there are government programs for them, such as unemployment, you want to do everything you can to hold on to your employees until your small business reopens and is back to full operational status.

    Your Options

    Fortunately, help is available. The Federal CARES Act contains $367 billion to help small businesses and workers. The SBA is managing these programs in conjunction with alternative lenders offering a streamlined online application process to help owners cover cash flow gaps, meet debt obligations, and stay operational until the crisis ends.

    PPP

    The SBA Paycheck Protection Program (PPP) was added to the 7(a)-loan program to provide emergency financial assistance to small businesses. PPP loans are focused on helping you keep your employees on your payroll. 

    To be eligible, you must have less than 500 employees, including full and part-time, and meet the SBA’s size standards for a small business. Loan terms are 2 years and can be forgiven if you keep all your employees on the payroll for eight weeks. You must use the money to cover payroll, rent or mortgage, and utilities.

    SBA Loans

    • SBA Express Bridge Loans: If you already have a relationship with an SBA Express Lender, you can apply for $25,000 to help you while you wait for your application for an Economic Injury Disaster Loan (EIDL) to be approved.
    • SBA Debt Relief: If you have a current 7(a) loan, the SBA will make your loan payments for six months, including principal and interest. If your loan is in deferment, payments begin once the deferment period ends.
    • EIDL Loan Advance: The Economic Injury Disaster Loan Advance provides up to $10,000 and does not have to be repaid. Currently, the program is restricted to agricultural businesses with less than 500 employees.

    Alternative Lenders

    Online lending platforms are making a special effort to help business owners overcome the pandemic. You can access unsecured, short, or long-term small business loans from online lenders. Online loan platforms are known for their easy and speedy application process. 

    Once approved, funds are deposited into your account immediately. Many states have set up special loan programs through their economic development departments or small business agencies. You should check online for local resources to assist you.

    Conclusion

    There are other options including banks and credit unions, yet, loan terms are not the best and it can take months before an application is approved. At a time when you are dealing with so many emergencies, a bank or credit union loan may not be the best resource. 

    The CARES Act stimulus and debt relief loans offer the best terms and more immediate access. Online small business lenders might be a better option if you are short on time and facing an emergency cash crunch.