At the start of 2020, the U.S. economy was moving full-steam ahead, with small businesses leading the charge. Fast forward a few months, and the coronavirus—along with many virus-related state shutdowns—have caused it to take quite a dive.
Small businesses everywhere scrambled to get a PPP loan (paycheck protection program loan) to keep things afloat and continue paying their employees. If there’s one thing we know about small businesses, it’s that they’re resilient. Eventually, we’ll be back to business as usual—or better. But the question remains: what will business financing look like after the Covid-19 pandemic ends?
Before jumping into the future, let’s dive into the current state of funding.
As states began to gradually put more restrictions in place, small business lenders began tightening their lending guidelines. After all, if businesses like restaurants are closed by state mandate, then lending isn’t exactly the best move.
Thankfully, the SBA deployed the PPP loan program to incentivize small business owners to continue paying employees. These covid relief loans also helped them cover other expenses while cash flow was tight, including rent and utilities. These coronavirus stimulus loans also cover other payroll-related costs.
As of right now, covid-19 relief funds are still available. The first round of PPP loan funding went quickly, and the government is currently processing applications for the second round. Another round of SBA relief funding will likely follow. As part of the program, loan forgiveness will be granted, provided that you put the funds toward payroll.
Additionally, the SBA also made EIDL (economic injury disaster loans) available to small businesses affected by the coronavirus pandemic.
Normally, this type of SBA loan is available for up to $2 million. The new coronavirus product is an emergency advance of up to $10,000. While this funding can be available much faster, the amount provided is far less than the max of $10 million available through the PPP loan.
Covid-19 relief funds are still available, and as the SBA has not yet depleted the maximum amount allocated by the government, will continue to be.
As reported cases of the virus drop and the small business economy gradually returns to normal, small business lending will, too. However, like state reopening procedures, it probably won’t be all at once.
Instead, lenders will likely begin making normal small business loans, lines of credit, and equipment financing programs available in phases.
Following PPP loans and other federally backed options, banks may not be so quick to return to lending.
Even before the covid-19 pandemic, obtaining a bank business loan was difficult and time-consuming. To qualify, you needed a stellar credit score, at least 2 years in business, and excellent financials. If you weren’t an all-star candidate, then the chances that your application would be accepted were low.
While it’s still early to say, it’s safe to assume that banks won’t exactly ease up on their requirements. On the contrary, they may start taking additional steps to further risk-proof their lending decisions. In other words, if you don’t meet the mark, you’ll probably have to look elsewhere for funding.
Alternative lenders, also known as fintech and online lenders, will likely have a smoother process in place.
Unlike banks, fintech lenders aren’t so quick to judge a book by its cover. Instead of evaluating your business based purely on credit score and financial history, they’ll look at your potential. This gives them a better indication of how profitable your business will be in the future.
It won’t be tomorrow, and it may not be next week, but eventually, the business financing industry will return to approving loans. When they do, requirements may be tighter than usual. Or, there may be more collateral requirements in place, to ensure that the loan is repaid in the event a business defaults.
Your business financing options after the covid-19 pandemic won’t be that different from what was available before. Whether you want to solve a problem, or take things to the next level, there are plenty of alternative lending options that might be a great fit for your business.
Based on your needs and financials, you might consider one of the following options:
As the economy recovers from the coronavirus pandemic, one of these alternative lending options could be just what your business needs.
At National, we make the process quick, simple and easy.
After filling out our simple 60-second application, you’ll be contacted by an expert Business Financing Advisor. They’ll walk you through your options—answering all of your questions as they go—to help you find the best choice. Through our 75+ lender marketplace, we can help you find the best options, and it won’t affect your credit score at all!
Get started putting your business on the fast track for expansion by applying now!
National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.
Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.
We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!
Matt Carrigan is the Content Writer at National Business Capital & Services. He loves spending every day creating content to educate business owners across every industry about business growth strategies, and how they can access the funding they need!