How to finance your small business comeback
Tuesday, 12 May 2020
The federal government's response to the coronavirus pandemic includes billions of dollars aimed at supporting small businesses and helping them to manage through shutdowns and rebuild their businesses.
Many small business owners have not been able to access funding from the limited funds available through federally-backed loans and grants, administered by the Small Business Administration (SBA). But even for those who have received funding, those funds may not be enough to get a business back on its feet.
Fortunately, if your business is ready for a comeback, there are a number of organizations ready to help, including the federal government. Take time to consider all the options and determine which ones may be a fit for your business.
SBA loans and grants
The coronavirus stimulus package, also known as the CARES Act, created the Paycheck Protection Program, which offers forgivable loans to small businesses to help keep their workforce employed during the pandemic. The loan amounts are equal to approximately 2.5 times the amount of a business owner's monthly payroll expenses. And, if at least 75% is used for payroll (and the rest is used for rent, mortgage, or utilities), the loans may be forgivable. Competition is tough for this program, which has a limited amount of funds allocated from the federal government.
The CARES Act also made SBA Economic Injury Disaster Loans (EIDL) widely available for small businesses. These loans are typically offered for businesses that have been affected by natural disasters, but as a result of the pandemic, are now available for businesses across the country. Those who qualify can borrow up to $2 million at a low-interest rate, which can be repaid over a period of up to 30 years.
City, state, and regional assistance
The SBA has been overwhelmed with applications, delaying approvals for many businesses and leaving questions about the availability of funds. But many cities and states are working to help fill the gaps with small business assistance programs of their own. For instance, the Florida Small Business Emergency Bridge Loan Program is making loans of up to $50,000 (and $100,000 in special cases) to small businesses affected by the crisis. These loans are interest-free for one year, with a 12% rate after the first year.
In Birmingham, Alabama, qualifying businesses with 50 or fewer employees can access loans of up to $25,000 through the city's Bham Strong program. And in San Francisco, eligible businesses can access six-year, zero-interest loans for up to $50,000 from the Main Street Launch program. Los Angeles-based businesses that provide low-income jobs can get an emergency microloan for up to $20,000 from the city's Small Business Emergency Microloan Program.
BBVA USA is assisting many of the organizations that are providing on-the-ground support for businesses and individuals affected by the pandemic. The bank has committed more than $3.7 million for organizations that are providing community support, including $1 million in rapid response funding. BBVA has also provided funding on a global level to help support the response to the pandemic.
A number of corporations and nonprofit organizations are also creating grant programs to help small businesses succeed. Unlike loans, grants represent free money that never has to be repaid. For instance, Facebook has committed to offering up to $40 million in cash grants and advertising credits to 10,000 small businesses in the United States. Digital fundraising platform Hello Alice, in partnership with Verizon, is offering emergency grants of up to $10,000 to small businesses affected by the pandemic. Google and Yelp are offering grants in the form of advertising credits for qualifying small and medium businesses.
The Federal Reserve recently lowered its federal funds rate to zero, which is translating into lower interest rates for all types of loan products. As a result, many businesses may find that it's a good time to seek out traditional financing from your bank or business lender with extremely low interest rates.
The coronavirus pandemic has been difficult for everyone, and most Americans long for a return to normalcy, including the opportunity to visit their favorite shops, restaurants, bars, salons, theaters and other local businesses. There's never been a better time to reach out to your customers and offer them opportunities to do business with you in a way that makes them feel safe.
That may mean continuing curbside service or delivery, or reorganizing your space to accommodate social distancing and your local guidelines. If you can meet your customers' needs for safety—and maybe offer some discounts—they are likely to respond by spending money with you.
1. BBVA is not affiliated with these entities and is not making any representation about the availability or terms of these grant programs.
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.
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