Options to get funding for your business in a crisis

If the coronavirus pandemic has taught us anything, it’s that you can never be assured of tomorrow, especially for small businesses. With mandates requiring restaurants and bakeries to stop or limit serving diners on-premises, many find themselves on shaky financial footing.

Following are some financing options for businesses in crisis. Understand that programs have been changing and may continue to do so.

SBA financing options

Paycheck Protection Program: The Paycheck Protection Program (PPP) offers a low interest loan that may be entirely forgiven if spent the right way—mainly on payroll-related expenses. If you received funding through PPP, your next most important question is how to qualify for forgiveness. The rules are very specific, so make sure you follow them to a T.

Economic Injury Disaster Loans: The SBA is still working through a backlog of Economic Injury Disaster Loan (EIDL) applications. This program provides low-interest working capital loans of up to $2 million. There is also an option for an advance (“grant”) of up to $10,000 ($1000 per employee), which does not have to be repaid. Currently there is no way to check the status of your application, so if you’ve already applied at SBA.gov, make sure you check your email—including your spam folder—for a message from the SBA. Keep in mind that an EIDL advance reduces PPP forgiveness if you obtained both.

Small Business Debt Relief Program: If you already have an SBA loan, such as a 7(a), 504, or microloan, you won’t have to make payments, including principal, interest, and fees, for six months under the Small Business Debt Relief Program. The SBA will make those payments on your behalf, as long as the loan is current.

City and state programs

In addition to federal aid, many cities and states offer bridge loans, grants, and other relief. Your local Small Business Development Center (SBDC) or SCORE office can be an invaluable source of information on local offerings. Locate yours at SBA.gov/tools.

Crowdfunding

There are four main types of crowdfunding that may help you raise the funding your business needs:

1. Donor: Think GoFundMe. You raise money you don’t have to repay.
2. Rewards: Think Kickstarter. You offer a reward such as a gift certificate, special recipe or perhaps a video-based baking class to backers.
3. Loan: Think Kiva. You borrow funds to pay back. With Kiva it’s a 0% loan for up to $15,000.
4. Equity: Think NextSeed. You’ll take on investors who want to invest in the future of your business.

You’re more likely to be successful with crowdfunding if you have a loyal following and a way to reach them—by email or social media, for example.

Grants

It’s not just governments trying to help small businesses right now. There are numerous private companies trying to help, including these examples:

• Yelp, Quickbooks, GoDaddy, Bill.com and GoFundMe have created the Small Business Relief Initiative and Fund, which matches funds raised through GoFundMe up to $500.
• Facebook is offering $100 million in cash grants and ad credits for up to 30,000 eligible small businesses.

About the Author

Gerri Detweiler

Gerri's been guiding individuals through the confusing world of finance and credit for 20+ years. She is the author or coauthor of five books, including her most recent, Finance Your Own Business: Get on the Financing Fast Track. Today, Gerri serves as the Education Director for Nav, an online platform that matches small business owners to their best financing options and gives free access to personal and business credit scores.