To the economy is hurting due to COVID-19 would be a vast understatement. With millions out of work and small businesses across the country struggling to remain afloat, we’re all facing an uncertain future. For many businesses, the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) loan initiatives have provided a needed financial lifeline. However, not every companies are capable of taking advantage of these programs.
With this article, we’re likely to explore options to PPP & EIDL loans and examine how these options may benefit your small business over these hardship.
Why Small Businesses Are Looking For Options to PPP & EIDL Funding
Taken together, the PPP and EIDL programs have distributed a massive quantity of funding to struggling businesses in the wake from the coronavirus pandemic. However, many companies happen to be not able to secure funding from these programs despite applying when directed and meeting all the relevant qualifications. Other businesses, having received funds from all of these programs, have discovered that the funding they received was much less than the amount for which they applied. Still other businesses either haven’t met the qualifications or have avoided applying for PPP funds due to the restrictions placed on how the funds should be spent in order for the loan to be forgiven.
Whatever the reason, you will find businesses out there looking for funding which have not been with the PPP or EIDL programs. That’s why we’ve attempted to highlight other lending options — both public and private — that are now available to small businesses.
The Best Alternatives To EIDL & PPP Loans
Let’s discuss the main financing alternatives to the PPP & EIDL programs.
SBA 7(a) Loans
The 7(a) loan program is the flagship program of the Small Business Administration (SBA). These loans can be used as many business purposes, including business expansion, working capital, and equipment, inventory, and real estate purchasing. With one of these loans, up to 85% from the loan is backed by the SBA, thus mitigating the risk to the lender and giving small businesses an opportunity to qualify for a loan that, under ordinary circumstances, they wouldn’t be eligible for.
There are nine different types of SBA loans to choose from. Our help guide to SBA 7(a) loans details these different loan types, the company purposes that they're intended, and the kinds of companies that be eligible for a each type of loan.
SBA 504 Loans
SBA 504 loans are more selective than 7(a) loans, as well as the right business, these loans is definitely an ideal choice for financing purchasing fixed assets like real estate. These loans offer 90% financing and offer reduce payments than do traditional loans. While certainly not for every small business, these loans make the perfect choice for small businesses with particular financing needs centered around purchasing or renovating land, buildings, and/or equipment.
Read our guide to SBA 504 loans to find out more.
Main Street Lending Program
The development of the Main Street Lending Program was announced by the Federal Reserve in March 2022. While it bears some similarities to the PPP and EIDL programs for the reason that it is intended to provide financial relief to small- and medium-sized businesses affected by the COVID-19 pandemic, it is a separate program using its own group of eligibility requirements.
Though the program isn't yet active, it's likely to become active soon. Businesses seeking loans of at least $250,000 must take note of this new financing option. Take a look at our piece around the Main Street Lending Program to learn more.
Community Development Financial Institutions
Community Development Financial Institutions, or CDFIs, are not-for-profit banking institutions that offer credit and financial services to disadvantaged areas and populations. Compared to loans from a typical bank, a CDFI loan is typically easier to be eligible for a and carries a lower interest rate.
As part of their mission, these institutions often offer home loan programs targeted at women and minority borrowers. Additionally, CDFIs are often willing to extend money to startups and incubator businesses that would otherwise struggle to get a business loan. In case your business falls into these categories, check out the services associated with a CDFIs in your town.
Online Lenders
While online lenders are usually more flexible in terms of their lending policies than the big banks, it’s correct that now is no ideal time for you to be seeking a small business loan from an online lender. Most such lenders are not currently offering loans because of the adverse currents buffeting the economy. However, there are some exceptions. I’ll detail them in the next section.
Where To Find Alternative Funding
Now that I’ve described the kinds of small business funding that remain available, let’s enter into specifics. Here’s where you can actually access funding right now.
Fundera
We’re deciding to highlight Fundera here because we’ve confirmed that Fundera is currently open for normal funding, unlike most other online lenders.
Fundera does not originate loans; rather, it aggregates loan offers from the funding partners to present you using the loans you’re probably to qualify for. Through these funding partners, Fundera offers the following loan types to smaller businesses:
- Installment loans
- Short-term loans
- Lines of credit
- Equipment loans
- SBA loans
CDFI Loans
If your company stands to be eligible for a a CDFI loan, check out this CDFI locator website. You can filter your research by state, organization type, loan program, and more. Use it for connecting with a CDFI in your area and get about the funding choices on offer.
SBA Lenders
While the PPP and EIDL programs are presently obtaining the lion’s share of attention when it comes to SBA-backed loans, the SBA’s 7(a) and 504 loans are still being offered. These loans aren’t offered by the SBA itself, however — they are instead offered by private lenders that partner with the SBA to offer government-backed loans.
To begin to see the lenders that, through the SBA’s own estimation, are the most active providers of SBA loans, read our article, The Best SBA Lenders For Small Businesses, then get in touch with a number of the organizations listed.
Go Out & Get Funded
We’re inside a tough spot right now. Our world is beset by crisis and uncertainty, and given the fact that nobody might have predicted the entire year we’ve had, no-one can say with any confidence what awaits all of us in the years to come. However, our response to all this can’t be to forfeit and withdraw. People still have needs that must be met. Bills still need be paid. Children still need be provided for. Given that commerce still needs to happen and businesses still need provide goods and services, there will remain a need for business loans.
We’re likely to continue to keep tabs on which lenders are reopening their lending programs. As we achieve this, we’ll be updating the above list of business funders to mirror what is currently available. If you’re looking to fund your company and you’re looking for more options than the ones right here, keep checking this site for the latest updates!
