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My PPP Loan Wasn’t Enough For My Business

May 26, 2020

To reduce the impact of the recent economic downturn, the government issued many stimulus programs to American businesses and consumers. Among them was the Small Business Administration’s Paycheck Protection Program.

What is a PPP Loan? PPP Loan

If you are reading this, there is a good chance you are already familiar with PPP. But just to be comprehensive, let us go over it again. A Paycheck Protection loan is a loan issued by a private lender backed by the federal government. 100% of your PPP loan can be forgiven if used for approved purposes and you maintain employee headcounts at or above pre-pandemic levels.  Under the latest PPP legislation, PPP borrowers have up to 24 weeks to utilize their PPP funds.  For any unforgiven portion, the loan has a maturity of up to 5 years and an interest rate of 1%.

In early April, just a few weeks after the crisis started, the Small Business Administration opened up its PPP Loan system. It allowed banks all over the country to submit loan information for their clients.

The system had some issues: there was a backlog of applications, and the funds were depleted within a few days. But that just means the program is popular! Thousands of businesses were able to pay their employees because of the PPP loan program.

PPP loans were relaunched on April 28th, after Congress added another $310 billion to the fund. As of August 8, 2020, the Paycheck Protection Program was closed.  There is a current discussion in Washington about opening the program back up, however, this is uncertain.

PPP loans have helped thousands of businesses. Interestingly, however, many business owners are reporting that their loan is not sufficient. While $650 billion in total funding may sound like a lot, it’s dwarfed by the $4.84 trillion paid out yearly as wages in the United States.

The reports are clear: sometimes, an SBA PPP Loan is simply not enough.

Other Financing Options Alternative financing options

If you’re unable to get a PPP loan or the loan you got was too small, you’re not alone.

This situation is, after all, completely unprecedented. The SBA is working around the clock to get American businesses the money they need, and we have to commend them for that. But sometimes, there’s just not enough money to go around.

Thankfully, America’s business architecture was not built to be reliant on the government.

Our free market system has allowed private-sector solutions for almost any problem to flourish and make life easier.  Financing is no different.

If you didn’t get a PPP loan (or you did, and it’s not enough), don’t panic. You’ve always had many other options for business financing. The virus didn’t erase that.

Traditional Loans Bank loan or line of credit

Your first option is a traditional, standard, private loan.  While taking on a conventional loan will require expenses, later on, it’s not a bad idea to get out of a short-term tight spot. While it can be hard to get one, especially if your credit isn’t sterling, a loan could do wonders for your business.

Let’s explore other financing options, too, just in case debt doesn’t work for you. The next two possibilities involve selling something you own, which means no debt!

Selling Equity

First, you can sell equity. Selling equity means finding a buyer to purchase a part of your business. It’s widespread among companies of all sizes, from startups to hundred-year-old blue chips. Selling equity is excellent because you avoid debt, but you often gain a business partner! That means more hands-on-deck and more minds at work for your business!

There are a couple of things to keep in mind when selling equity. You will need to find the right buyer, which can take time. They will also be entitled to some of the business’s gains in proportion to how much equity you sell to them. Regardless, selling equity is a great way to get cash without adding debt to your balance sheet.

Payroll Funding Payroll Funding

The other thing you can sell to get instant cash in your future cash flow itself! Often called invoice factoring or payroll funding, this financing method ensures you can get the funds you need to maintain payroll operations without having to sell off ownership or take on debt.

Instead, it just temporarily cuts into future cash flows.

Here is how payroll funding works: You have contracts with clients you signed before this situation started.

Those contracts have a real monetary value associated with them, which means they can be bought and sold like commodities. For payroll funding, you sell your business’s contracts to an invoice factoring company. They give you instant cash that you can use to pay rent, utilities, and wages. Simple as that!

Think of it as pushing up the timetable on payments from your clients. Of course, because of the time value of money, you will get a little less cash than if you would wait for the contract to play out like normal.

No financing method is perfect, of course. But you are spoiled for choice when it comes to keeping your payroll going through this tough situation If you are struggling to get a PPP loan, or if the one you got is not enough, you should seriously consider one of the financing methods we mentioned in order to make the next few months a little more smooth.

To apply for a custom factoring program fill out the form below or give us a call at (800) 707-4845. We’ll provide a free consultation and quote for a custom payroll funding program to meet your business demands.

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