A Small Business Guide to the Covid-19 Crisis

While the Covid-19 pandemic has affected every American citizen differently, small businesses owners have been hurt the worst financially by this crisis. Unlike large corporations, small businesses do not have the financial capital necessary to withstand months of being shut down. If you are a small business owner right now, you may be panicking. Before you lose hope, however, you need to know that although difficult, it is entirely possible to hamper the effects of the Covid-19 crisis on your small business by following a few simple guidelines. There are both short term and long term guidelines listed below. If you successfully follow many of the strategies listed, you will be well on your way to saving you and your business from a lot of stress and financial struggles.

Small Business Loans and Financing Options During The Covid 19 Pandemic

The most important short term strategy to help your small business financing is applying for a loan from the Small Business Administration (SBA). On March 27, 2020, President Trump signed the CARES Act into law, effectively providing more than $300 billion in relief to small businesses who were struggling financially from the effects of the Covid-19 crisis. Since then that money has run out, but Congress is currently working on the final details of a new bill that will supply even more funding for small businesses who are most in need. Until the economy is back on track, and small businesses have adequately recovered, it is a safe bet that the federal government will continue to provide loans to small businesses. You should definitely take advantage of these loans, as they will help your small businesses cope with the effects of the Covid-19 pandemic while it is still affecting the United States economy.

In the long term, it is a good idea as a small business owner to explore all your capital access options. Although an SBA loan may help you in the short term, they will not be around for years. The fallout from the Covid-19 crisis, however, may indeed affect your small businesses for a year or more. This is why you need to have several capital access options. Explore and develop a plan to help you access additional capital for the next 12-18 months. Many of these options may involve a loan. Other options could include taking from you personal savings. The worst thing that could happen to your small business is running out of money; that is why it is so important to have a plan in place to access more capital if you find yourself short on cash in the coming months.

Another important thing to keep in mind in the long term is potential supply chain shortfalls. This is most relevant for small businesses who have suppliers in or around China, but it affects other small businesses as well. To protect your small business from possible supply chain shortfalls, you should seriously consider taking in additional inventory. By doing this, you can prevent the total destruction of your business if your supplier is forced to shut down because of Covid-19. Additionally, you can diversify your suppliers to help prevent supply chain shortfalls. By spreading out your suppliers across the United States and the globe, you will protect your small business from shutting down if one area is hit particularly hard with Covid-19.

There are numerous other tips that you can follow as a small business owner to help protect your small business from collapsing during the Covid-19 crisis. However, if you follow the 3 guidelines listed above, you will be helping to prop up your small business in the short term, and mitigating risk in the long term.

Additional Small Business Financing Resources

Chamber of Commerce
Bank of America

The author of this article is Patrick, with editorial contributions from  Don

  • Short-Term Lending and Personal Loan FAQ Guide

    Borrowing money for the first time can be intimidating. There is a whole range of financial tools used by lenders to determine the borrower’s creditworthiness. For good reasons, however, personal loans and short-term lending are increasingly becoming popular for covering sporadic and massive expenditures.

    Here’s a guide that covers short-term lending and finding the best personal loan that suits you.

    What are business needs suitable for short-term financing?
    Different types of short-term lending are appropriate for varied business needs. Examples of needs projected to have short-term ROI include physical renovation, hiring new staff, and purchasing new equipment.
    Is APR an ideal way to make cost calculations?
    The annual percentage rate is only a single way to represent total interest cost and fees as a yearly payment which may appear higher than the overall cost of a short-term loan. When you look at other factors like the total cost of your loan and different business needs, you’ll realize that a short-term loan would better fit your business needs. At a glance, a short-term loan with a higher APR is more affordable than a long-term loan with a lower APR.
    How long does it take to receive a response?
    Depending on the loan issuer, your credit history and loan amount, the typical wait time could be 45 minutes or less. However, some lenders could take up to 3 working days to approve, it will vary from lender to lender and based on your unique lending needs.
    How does the lender determine the interest rate?
    Your personal short-term loan interest rate is determined based on your risk profile. The general rule is that the lower your credit score, the higher the risk. Lower risk means a lower interest rate, and higher risk means a correspondingly high interest rate.
    How long will I have to repay the loan?
    You’ll have to begin repaying the loan within 30 days in installments. Most lenders provide repayment terms ranging from six months to six or more years. The interest rate and monthly payment will be impacted by the period you choose to repay the loan.
    Are there other fees associated with personal loans?
    Creditors may charge sign-up, processing coupled with landing fees. In most cases, these charges are billed only once and are often outlined in the application documents. Although it’s not uncommon to have obscured payments, hidden fees would generally add up between 1 to 5% of the entire amount.
    Do I need a good credit score?
    Before you start applying for a short-term personal loan, it’s crucial to know you’ll qualify with your credit score. Most loan issuers are looking for customers with good credit scores. However, if you have a good relationship with the creditor, you may get a favorable term, particularly if your account shows a history of timely payments and honoring the terms of past loans.
    Can I get a loan with a low credit score?
    Loan issuers have different loans designated for people with varying credit scores. Lending options meant for consumers with bad credit are, without a doubt, different from those with good scores. While a higher score boosts your approval chances and gives you favorable terms, there are specific loans meant for people with low credit scores.
    How do I apply for a short-term personal loan?
    Once you’ve identified the financing option ideal for you, assemble all the documentation needed. Do not yield to the pressure to have money as soon as possible to offset the chances of making a shoddy application. It’s always good to fill the documents comprehensively, attach personal information, your resume if needed, business and personal tax returns, financial statements, and the collateral value that may be required.
    Will the lender approve my application?
    Your business and personal credit will be essential metrics in determining a lender’s decision. At its core, one of the handiest tools used by the lender is looking at your credit score. At the same time, other factors include your debt ratio, business debt, revenue trends, personal and business debt coverage.

    How do I improve my chances of getting approved?
    It sounds harsh that most loan requests are rejected. Looking at the reasons that contribute to applications’ inevitable rejection, the ideal way to improve your standing is to build your credit score. Aside from convincing the lender that you’re better suited for approval, a healthy credit score helps you qualify for favorable interest rates.

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