By Tom Haney on August 25, 2020
The COVID-19 pandemic has disproportionately affected small businesses and sent them scrambling to figure out survival strategies. Just look around your neighborhood—you’ll probably notice a ton of “For Lease” signs hanging on shop windows.
Some retailers have shown amazing creativity and been able to adapt quickly to the shifting retail landscape—for example by accelerating their shift to e-commerce, changing their product offerings, and innovating and partnering with local companies—but many continue to struggle (think restaurants and gyms) and need capital to ride out the storm.
You’re likely familiar with the big government small business programs by now, such as the U.S. Small Business and Administration’s Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL), as well as the SBA Express Bridge Loans and SBA Debt Relief, which we discussed in this article. But there are a ton of other options out there for loans, lines of credit and other financing products.
Loan or line of credit?
The main difference between a loan and a line of credit is how you obtain the money. A loan is a fixed lump sum that you must repay with interest over a given period, while a line of credit is a revolving loan (i.e., as soon as the debt is repaid, you can borrow up to your credit limit again) that gives you access to a set amount of money and does not need to be renewed.
Loans are typically used for large, one-time expenses, while a line of credit is typically used to finance short-term expenses. If you’re wondering which is best for you, take a look at this great article.
Online marketplaces such as Fundera connect small business owners to lenders. It doesn’t lend money directly, but rather provides a bunch of options and allows business owners to compare different loan offers from different lenders. The company offers a number of financing options:
- SBA loans
- Business lines of credit
- Term loans
- Startup loans
- Equipment financing
- Invoice financing
The advantage of Fundera over traditional lenders like banks and credit unions is that you won’t have to provide as much paperwork and you’ll likely be approved faster. Larger institutions like banks, however, generally offer longer terms and larger amounts, and potentially lower rates.
Peer-to-peer business lending
If securing financing from a traditional bank or conventional online lender is proving difficult, you might want to consider peer-to-peer (P2P) lending. You won’t be borrowing money from an institution—instead, you’ll be connected directly to an investor or group of investors. Rates can be as low as 4.99% and you can borrow up to $500,000—and you might still qualify even if you have a low credit rating.
The three F’s
If all other financing avenues have hit a dead end, you could consider putting your pride aside and calling on two of the three F’s—friends and family (the third is fools, as the old saying goes).
These lenders usually have good rates and flexible lending standards, but involving friends and family can have some serious pitfalls, such as strained relationships and complicated repayment terms, and may ultimately not be worth it.
Trimming the fat
Last but not least, think about reviewing your operations and seeing where you can cut some costs. Streamlining your payment-processing ecosystem is a great place to start and could add up to serious savings. Get in touch with Sekure and we’ll review your statement with you. Read about some of our success stories here. Other ways you can save money:
- Obtain quotes to make sure you are paying a fair market rate from your vendors.
- Negotiate with your vendors. These are tough times, so you could be frank and ask for a discount. They will likely be more inclined to offer a discount than lose a client.
- Track expenses and reduce paperwork with software like Turbine.
To conclude… As you can see, government relief programs aren’t the only game in town when it comes to shoring up or even saving your small business. Whether you obtain financing from a private lender, borrow money from friends or family, or cut business costs here and there, there is solution to help you navigate these interesting times.