Business Loans for CoronaVirus Affected Businesses

coronavirus small business loans

If your newsfeed has turned into a stream of coronavirus notifications, you have probably already felt the impact on your small business. Customer-facing businesses have seen a huge drop in business, supply chains have been disrupted, people are not placing orders, and the world is moving to lockdown. Small business owners feeling the pinch of an unprecedented worldwide pandemic may be asking themselves – how will my business survive?

Although there is direct assistance coming to the entire country through the 2 Trillion Dollar Congressional Stimulus Package for Coronavirus, Congress has passed the Coronavirus Preparedness and Response Supplemental Appropriations Act and President Trump announced that he was authorizing the Small Business Administration to lend $50 billion to small businesses.

Qualify for Business Loans

If the Coronavirus pandemic has affected your business, and you are hoping for help, here is how you can get started. Shield Funding can help you secure and sba loan or you can go directly to the SBA yourself. Below are the steps to go directly to the SBA.

How to Get a Coronavirus SBA Loan

1. Go to SBA website and click Economic Injury Disaster Loan Program.

2. Check if the SBA has issued a disaster declaration in your area. The website lists all states that are eligible to take part in this program.

3. Click Apply and follow through with all the steps in the application.

4. Once completed you can come back and login to check your application status.

5. If you require additional information you can call the customer service department for SBA Disaster assistance at 1-800-659-2955 (TTY: 1-800-877-8339) or send an email to disastercustomerservice@sba.gov.

Your Business Must be in an Affected Area

To apply for funding under the SBA’s Coronavirus (COVID-19) Disaster Relief Lending, your business must be located in a designated state or territory. Even if your company has suffered because customers aren’t eating out as much, or no one is using your services, due to coronavirus fears, that is not enough to qualify for the SBA’s Economic Injury Disaster Loan.
Only businesses in designated areas will be able to access the additional funds.

The State’s Governor Must Submit a Request

Before the SBA can allocate disaster loans to your state, your state’s governor must submit a request. Once the Federal government approves the request, affected communities will receive information on how to apply for funds.

Each State has its Own Individual Coronavirus Loan Application Process

As of this moment it is important to go to your local state officials.

If you are not eligible for disaster relief or if that relief is just not enough, below are some additional business funding resources.

Important Requirement: You Cannot Have Access to Other Funds

If you still have an open line of credit or business credit card, you cannot borrow under the COVID-19 Disaster Lending program. Small business owners must have exhausted all other available sources of funding before applying.

This could put your business in a precarious position. If you have already used available funding, you must wait for the loan application and approval process at the SBA before they grant a disaster loan.

SBA Loan Requirements Remain the Same

The qualifications for an SBA loan remain stringent. While the program received authorization to lend more, it did not receive approval to relax lending standards.

Only businesses that have been operating longer than two years qualify for an SBA loan. In addition, you must have excellent credit. Typically, lenders prefer to work with borrowers with credit scores above 650. There are also industry-specific size requirements, and you must apply through a qualified lender.

The SBA loans do have some restrictions. They can be utilized for payroll, to cover fixed debts or accounts payable that cannot be paid because of the Covid-19 impact. The interest rates on these loans are 3.75 for small businesses and 2.75% for non-profits.

The reality is that many small business owners do not qualify for an SBA loan, and this will not change even though the program now has additional funds to lend.

Qualify for Business Loans

Additional State and Government Resources Outside the SBA

Each state is different as mentioned earlier and has additional funding programs for Coronavirus relief not in the form of SBA Loans. For example, New York is offering aid in the form of zero interest business loans if your company has experienced 25% or more of a decrease in revenue due to Covid-19. Additionally there are grants to cover some payroll costs for small businesses with fewer than 5 employees that have experienced losses due to the virus. Check with your state offices at the links above for any additional Covid-19 state funding programs.

What to Do If You Do Not Qualify for an SBA Coronavirus Loan

If you do not qualify for an SBA loan, you do have options. Alternative lenders offer a quick and easy application process, fast approval, and funding in just a few days. For a business in crisis mode, this could be a lifesaver.

Bad Credit Business Loans for Businesses Affected by COVID-19

A bad credit business loan helps businesses unable to qualify for traditional financing access capital. Designed to quickly put money in the hands of those who need it, they feature an approval process that can take as little as 24 hours and can fund within days. Even if you have good credit, its fast funding could make it the right choice for you.

To qualify for a bad credit business loan, your business must generate minimum monthly revenues of $8,000. But you only need to have been in business for two months and have a credit score above 500, which means qualifying is easier than with an SBA loan. Applications have low documentation requirements, so you will not have to scramble to put together a complex loan package while trying to keep your doors open.

Because underwriters at alternative lenders base their lending decision on monthly revenues, you might want to apply now before quarantines and self-isolating impact your cashflow. That way, if you do need the money, it is available.

Merchant Cash Advances for Businesses Affected by COVID-19

Restaurants, retail stores, salons, and other businesses that process a lot of credit card transactions and rely on customers coming into the store might find that a merchant cash advance best suits their funding needs.

When you take out a merchant cash advance or MCA, you are borrowing against future credit card sales. The lender analyzes your past few months of credit card transactions and then advances you an amount based on your anticipated sales. Instead of an interest rate, they will charge a factor rate.

That factor rate, which can range from 1.0x to 1.5x the loan’s capital, is the flat fee you pay to borrow. If you take out a $10,000 loan with a factor rate of 1.5x, you will pay $5,000 to the lender for the loan. You do not have to make a large monthly payment to repay the loan. Instead, after the loan funds, the lender deducts a percentage of every credit card transaction swiped until they are repaid.

Because repayments come from future sales, an MCA could be the best choice if you think the coronavirus will impact current sales. You can use the funds to keep afloat, and then repay them when business recovers. You can borrow between $8,000 to $250,000 as long as you have a minimum credit score of 500, minimum monthly revenues of $8,000, and have been in operation at least two months.

If you need access to capital to stay afloat during the pandemic, contact a business loan specialist at Shield Funding. They can answer all your questions and get you started on the application process. For additional funding resources check out crowdfunding options for Coronavirus and for news related to small business funding programs because of Covid-19 check out this news resource. Also, keep checking daily on your state and local official websites as well as the SBA Disaster Assistance Loans Program for CoronaVirus for the latest news and information.