May 06, 2020

PPP Loan Wasn’t Enough? Here Are Some Other Options

As incredible and lifesaving as the Paycheck Protection Plan (PPP) was, it was also deeply flawed. Its poor design and execution, built-in big business loopholes, and monumental breakdowns in communication left many Americans (and their deserving small businesses) unaided and forgotten or struggling to get by with a mere portion of the funds they needed to keep their doors open. 

If you’re one of the millions of small business owners left twisting in the wind, there is still hope. PPP loans aren’t the only way for you to secure the funds your business needs to stay afloat.

Business Line of Credit

A business line of credit is a unique and powerful tool to have at your disposal as a business owner. By nature, a business line of credit is flexible enough to handle most every business need that arises, and, instead of receiving one lump sum, the credit is revolving—which means it’s always there for you to use whenever you need to tap into it. Unlike a PPP loan, you can spend this money on any business expense that tickles your fancy, and it’s available for use in about 1–2 weeks.

Amount

$1,000–$500,000

Rates

8–24%

Qualifications

Merchant Cash Advance (MCA)

Letting businesses borrow against future earnings is precisely how a merchant cash advance works. With a speedy delivery time of as few as 24 hours, this type of financing is as popular as it is flexible among business owners everywhere. To determine the potential amount of a merchant cash advance, lenders will want to take a peek at your earnings before fronting you the funds. As you start repaying the advance, your lender will likely take a specified daily percentage of your credit card sales or a portion of the total daily business sales.

Amount

$5,000–$200,000

Rates

18%+

Qualifications

Be able to provide the last 4–6 months of bank statements or receivables
Automated Clearing House (ACH)

A close relative to the merchant cash advance, an Automated Clearing House (ACH) loan might be better called a “cash flow” loan because lenders focus on the average daily balance of your business checking account rather than worrying too much about your credit score. Similar to the merchant cash advance, once you’re approved, the lender will withdraw set amounts directly from your account. It certainly can be quick cash, but you’d better do your research first. ACHs have repayment expectations that are just as fast and can be a little risky.

Amount

Individually calculated but likely not more than double your monthly revenue

Rates

Additional rates and fees vary

Qualifications

Short Term Loan

When time is of the essence, short term loans fly in to save the day. If you are (or know you’re about to be) in a tight spot, this loan type can get you financing in as little as 24 hours. Whether you need to cover unexpected expenses, hire new staff to pivot in a jam, expand, or fill any other business need, a short term loan may be a good option to consider. Additionally, short term loans come with a fixed interest rate (or flat fee), so you don’t have to worry about any surprise rate changes. 

Amount

$2,500–500,000

Rates

As low as 8%

Qualifications

Accounts Receivable Financing

Unpaid invoices are the bane of every business owner. Fortunately, there’s a way to work around the difficulties they present and find a way to turn them into capital. Accounts receivable financing can get you access to cash by selling existing purchase orders or receivables. Plus, it takes the onus of tracking down the people who owe you money off your shoulders and passes it to the lender. It’s definitely a nice option for some of us confrontation-averse people.

Amount

Up to 80% of receivables

Rates

As low as 5%

Qualifications

The factoring company is more worried about the creditworthiness of your customer with the overdue balance than with your credit. So it’s important that you’ve been doing business with credible and legitimate individuals or businesses.

Business Credit Card

Probably the simplest and most straightforward loan type, the business credit card is exactly what it sounds like—a credit card for your business. This user-friendly approach to business financing is largely intuitive if you’ve ever had a personal credit card, and access to funds rarely takes more than 2 weeks. This pocket-sized access to easy capital also makes it easier for you to track expenses and build credit for your business, even if you’re a new startup. What’s more, when you combine it with free bookkeeping services, a business credit card can be an essential tool in your figurative (or literal) toolbelt.

Amount

Depends on the card limit

Rates

Rates and fees vary

Qualifications

Typically, a credit score of 680+

A Final Note About Your Finance Options

Just like every business, each finance and lending option is a little different. It’s incredibly important for you to do your research, talk to a professional, and carefully consider what is both right and feasible for your small business. The coronavirus (COVID-19) pandemic has undoubtedly rattled the economy. Still, as we move forward and start to reopen businesses, it’s crucial for all of us to keep a clear head and a long-term perspective. Don’t jump into more debt than you can dig yourself out of. Be careful and considerate as you make your choices, and always scrutinize every option you have available. When one particular choice checks out and everything lines up, then you can move forward with confidence. 

About the author

Bjolan Holyoak
Bjolan Holyoak
Bjolan Holyoak is a small business finance writer based in Utah. As a copywriter for Lendio, he fuels the American Dream by giving small business owners the information they crave. He believes that with the right panache, financial information can be as much of a "breath of fresh air" as a hike in the Utah mountains.

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