The Top Financing Alternatives to PPP Loans Small Businesses Can Turn To
Running a successful business is an exciting venture. However, it can also be costly. Ultimately, the pandemic has even made things more difficult. Most businesses have had a lot to deal with, from disrupted cashflows to inadequate revenue streams.
What’s more, the Paycheck Protection Program (PPP), which was formed to help companies that were hit hard by the pandemic, has run out, and most lenders no longer accept PPP applications. The good news is that numerous financing options are still available for those who need help funding their businesses. But what are the top financing alternatives to PPP loans? And, are business loans right for you? Find out here.
Traditional Business Loans
Business loans are still an alternative to PPP loans. It may be tougher to get a loan today than it was initially before the pandemic, especially for specific industries since lenders now have more strict standards to minimize risk. However, businesses that demonstrate good financial positions or revenue streams can still obtain funds.
Even though the PPP program has ended, SBA continues to roll out business loan options. Online lenders can also facilitate business loans to small businesses. They come with faster applications and approvals and are less lenient on major bank requirements like a credit score.
Microloans
Though many overlook them, microloans are among the best PPP loan options for small businesses. These loans are usually small and are repaid on a short-term basis. Microloans may be available locally or regionally through different SBA programs and cater to those who need loans not exceeding $50,000.
Equipment Financing
It can be challenging to afford all the equipment your business needs outright. But efficient business equipment is vital to help run the operations, increase productivity, and yield substantial revenue. That is where equipment financing comes in.
This alternative financing solution enables business owners to obtain equipment or machinery to run the business without an upfront payment. Business operators can use equipment financing in different ways, such as purchasing new equipment, leasing equipment, upgrading, and maintenance.
Business owners strapped for cash can consider this alternative to spread payments and keep a healthy cash flow. Usually, the equipment serves as the loan’s collateral.
Merchant Cash Advances (MCAs)
Businesses that benefit highly from credit and debit card payments or high sales volumes can take advantage of MCAs. An MCA is a financing option that allows a business to obtain a lump sum cash advance repayable as a percentage of the card payments through a credit card processor. MCAs are good options for relatively new businesses that have not yet qualified to acquire traditional bank loans.
Business Line of Credit
This loan provides small businesses with the capital required for short-term needs. It gives a business owner the financial cushion necessary for emergencies and unexpected expenses. The good thing about using a business line of credit to obtain funds is that lenders give access to a predetermined amount of capital as needed.
A business owner can withdraw funds whenever they need capital or immediate liquidity and then pay back later on with interest. A business line of credit is essentially a revolving fund, and someone is not obligated to utilize all the money. Business owners may use what is needed or leave some funds for future use.
Invoice Financing
Business owners can address financial challenges using invoice financing, especially those who work based on invoice payments. This lending option enables businesses to borrow funds against the money the customers owe. Invoice financing can be a good option for companies expecting payments from customers.
It can help a business obtain working capital and manage cash flow. Usually, waiting for payments for 30-60 days can make it challenging to cater to daily expenses and other costs.
Crowdfunding
Lending crowdfunding can help a business owner to raise capital from family, friends, and the public to support their business venture. Crowdfunding is a good alternative for those challenged in getting their business off the ground or those just starting but do not qualify for a business loan.
It may take time to raise money, and it is challenging to obtain as much as is required. However, crowdfunding can be a good option that yields value with an effective strategy for people to invest in a promising venture.
Final Thoughts
Since the end of the Payment Protection Program, many business owners keep wondering how they can obtain financing. An unsatisfactory PPP experience may also have caused some to consider other options.
The truth is, there are many PPP loan product options to consider out there, as evidenced above. They can help by providing funds needed immediately or even for later use. Business owners only need to reach out to a financing option that will cater best to their business and individual needs.
