The Paycheck Protection Program (PPP) is a business loan program intended to help businesses continue paying their employees amid the economic impact resulting from the COVID-19 pandemic. It was established through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in 2020 to provide cash flow assistance for eight weeks via loans and backed by the Small Business Administration (SBA) and fully guaranteed by the federal government.
Although PPP is a great program for businesses across the United States, some might miss out on this loan for different reasons, including ineligibility. If you don't meet PPP loan requirements or, for some reason, you are denied, you need to look for other ways to secure funding.
Below are the five alternatives to PPP loans for fast funding.
1. Term Loans
Term loans are alternatives that provide clarity on the exact amount small business owners owe and how the repayment plan will work. A business can properly plan how to use the funds since there is a thorough discussion when signing the agreement. Term loans typically have fixed and lower interest rates since business owners prefer to repay them over a long period.
Most businesses prefer them for their unique flexibility, not seen in other types of funding. But besides the interest you pay on the debt, there could also be other fees, including an origination fee that adds to the cost.
2. Line of Credit
Unlike traditional business loans, a line of credit gives more flexibility to small business owners. It provides them with funding up to a particular limit. There is an agreement that owners spend the money provided when they require them and only pay interest on the used amount. Unfortunately, the lender has a right to call any line of credit payable without warning, meaning you will have to settle the full balance.
3. SBA Loans
Small businesses can apply for SBA loan products such as Microloans and Express loans. Microloans have a limit of $50,000, but business owners might have to receive training to help uplift their business with the funds they receive.
For Express loans, a business gets credit decisions in 2-3 days, and the loan amount can go up to $350,000. Typically, they are overwritten and given by SBA's permitted lenders.
SBA loans are attractive due to their attractive rates similar to those of non-guaranteed loans. However, the spending restrictions for SBA loans inconvenience most small businesses.
4. Equipment Financing
Equipment financing closely resembles the inventory financing lending program in structure and concept. However, you won't use your inventory as collateral but the equipment you purchase. This structure makes equipment financing easy to qualify. Unfortunately, it is restrictive in that it funds equipment; thus, you can't use the loan for other purposes.
5. Invoice Factoring
A slow collection process can greatly slow down a business despite the accounts receivable ledgers indicating sales. Slow pay customers might end up forcing you to lay off workers, turn down new projects, and delay tax payments and bills. Luckily, you can factor in your invoices, and you will receive the funds you need quickly. Factor your invoices and get the money you need within 1 business day.
Crown can help you with invoice factoring. For example, if your accounts receivables are $100,000, Crown Financial gives you 80% - 90% of the invoice amount as advance. After that, Crown deducts a factoring fee based on the amount of days it takes your customer to clear the invoice. That is, if your customers take a month (30 days) to pay, the factoring fee will be 2.8% of the outstanding invoice that is $2,800. When the invoice is fully settled, Crown gives you the reserve amount and deducts the factoring fee.
Invoice factoring is the best alternative to PPP loans since it gives you a healthy cash flow when you use it month to month. Besides, it won't cost you any monthly minimums, signup fees, or hidden charges when you work with Crown. Try out Crown's Invoice Factoring Calculator to check your rate in real-time.