The health crises we are currently experiencing as a result of the Corona-virus has made a crushing impact on the entire world. The effects are not just limited to our physical health. Some argue that the effects of this pandemic have been more damaging to the world economy than the actual healthcare crisis itself. Many long-standing businesses such as GNC, Pier1 imports, Macy’s, AT&T have been forced to shutter hundreds of locations. Some have closed their doors permanently.
According to the PNAS (Proceedings of the National Academy of Sciences of the United States of America), the effect on small businesses is far more damaging. A survey conducted between March 28 and April 4 2020 demonstrated that at least 43% out of 5,800 businesses had temporarily closed. The active employment rate has been reduced by 39%.
Small businesses simply do not have the cash flow available to stay in business. The survey also highlights the financial fragility of many businesses. According to their findings: “The median firm with monthly expenses over $10,000 had only enough cash on hand to last roughly two weeks. Three-quarters of respondents only had enough cash on hand to last two months or less.” With the duration of the pandemic lasting through the greater part of the year and its end unknown, many small businesses will be forced to close for good.
Do not despair relief is available! In this article, I will provide you with resources and information in order to help your business to continue operating.
In order to stay afloat, many businesses will need to rely on business loans if they wish to keep their doors open. The United States Small business association has several funding options and programs available that have been created in response to the pandemic:
The economic Injury disaster loan (EIDL)
The EIDL is designed to provide economic relief to business that are currently experiencing a temporary loss of revenue. The proceeds can be used to cover working capital, and normal operating expenses such as continuation to health care benefits, rent, utilities, and fixed debt payments.
By filling out the straightforward form, the SBA will determine the loan amount your business is eligible for. Loan amounts are determined on a case by case basis. The loan can be up to $2 million. The New York Times reported that the SBA is unofficially capping the amount at $150,000 due to the high volume of applications received.
The maturity of the loan is up to 30 years. The interest rate is 3.75% for companies, and 2.75% for nonprofits. The principal and interest payment are automatically deferred for one year, while the loan term can be for up to 30 years.
The grant is made available just a short 3 days after submitting your application. In addition to the loan. As a side benefit, the applicant will receive a free $1,000 grant per employee up to $10,000! It does not need to be paid back. Furthermore, it is not contingent on the acceptance of the actual loan. Even if your application is denied, you are still eligible for the grant.
In order to be eligible, your company has to have been doing business as of January 31, 2020, or earlier. The loan is available to you If you have less than 500 employees, operate a nonprofit, tribal business, cooperative, employee stock ownership plans, sole proprietors, or act as an independent contractor.
This SBA Covid-19 born loan can help your business to stay operational during these uncertain times. With the low-interest rate, coupled with the 30-year maturity, this is clearly a viable option for anyone wanting to keep afloat during these turbulent times. Not to mention the grant perk!
Many states and municipalities are also offering various programs aimed at helping small businesses. By going to the National Governors Association (NGA), you can find links to your state governors’ website to see what programs are available in your state. There you will find up to date information regarding local programs that may offer additional assistance for your business.
There may also be relief in the form of deferment and forbearance to business loan customers. You can do a search for your bank on the American Bankers Association website to review an up to date list of Corona-virus response programs: https://www.aba.com/about-us/press-room/industry-response-coronavirus.
Cash Advance Loans
Another option that might alleviate cash flow issues as a result of COVID-19 is taking out a cash advance loan for your business. With the right company, a cash advance loan can provide good rates and terms, approval within a few short hours, expedited funding, and best of all it’s not credit-based. So if your credit has been hit hard due to COVID-19, do not despair. Taking out a cash advance loan may just be what you need to get you up and running again.
As with any loan or program, always be sure to review the terms and conditions to see if they are right for your circumstances. Seek advice from your financial advisor or accountant regarding any questions or concerns you may have. These loans can help you to maintain your business, and continue to allow your hard work and vision to continue for many years to come.
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