The United States government is no longer giving out the Paycheck Protection Program (PPP) loans. This is because the reason why the Paycheck Protection Program (PPP) loans were initiated in the first place is no longer considered a threat or challenge to small businesses.
The Paycheck Protection Program (PPP) loan started in March 2020 at the peak of the Covid-19 pandemic, and the program ended on 31st May 2021. The Paycheck Protection Program (PPP) loan had successfully given out over $500 billion in loans since the program started.
The main reason why the Paycheck Protection Program (PPP) loan was given is to help small businesses keep their employees during the pandemic or re-employ sacked employees so that business can continue. This is why 60 percent of the Paycheck Protection Program (PPP) is budgeted under payroll.
The fact that the Paycheck Protection Program (PPP) loan is no longer available does not mean that as a small business owner you should be stranded. As matter of fact, there are several options available to entrepreneurs when it comes to loans.
You can access loans from your state, local banks, and SBA. You can also apply for grants from a grant-issuing institution like EIDL. Having said that, here are some of the options you have when it comes to sourcing loans for your small business.
Common Places to Source Loans For Your Small Business
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Family Members and Friends
One of the easiest sources you can consider when sourcing a business loan for your small business is your family members and friends. If you are planning to start a small-scale business, this might just be your best pick. There are family members and friends that can go all out to provide you with the needed soft loan to start your small business.
Requirements:
- Good standing with your family members and friends
- Clear plan to start and run the business
- A clear plan on how to pay the loan back
Banks (Financial Institutions)
One of the major sources people go to when they need a loan is their bank. So, if you need a business loan for your small business, you should consider visiting your bank. Although it might be difficult for a startup entrepreneur to access a business loan from a bank, the truth remains that it is possible if you meet their requirements.
If you have plans to start a well-structured small business, then approaching the bank should be one of your best options. The bank has the capacity to issue you a business loan no matter how much you need.
Requirements:
Please note that each bank has its own loan requirements but the basic requirements are:
- You must own an account with the bank (preferably a business account)
- Score a good credit score (from 640 to 700)
- Bank statements.
- Meet their collateral requirements
- Business licenses and permits.
- Personal and business tax returns.
- Employee Identification Number (EIN)
- Disclosure of other debt
- Copy of your commercial lease.
- Submit a business plan
Small Business Administration (SBA) Loans
The SBA loan program is government-backed financing that is open to entrepreneurs who want to start a small business in the United States. The SBA issue what is known as microloans for businesses that may require small financing to kick-start their business.
Small Business Administration (SBA) loans help in reducing the risk lenders and borrowers are exposed to when looking for business loans. Despite the fact that Small Business Administration (SBA) does not technically loan the money to borrowers, they usually help in connecting borrowers to lenders that meet their very stringent principle.
The most popular SBA loan option is the SBA 7(a) loan. The SBA 7(a) loan is an all-purpose business loan that an entrepreneur can leverage to cover all the major expenses in their small business.
Another type of SBA loan that a small business can apply for is the SBA 504/CDC loan. The SBA/CDC business loan is a specific loan that is designed for small businesses that promise to contribute a specific amount to the growth of the community in their business is domiciled.
Requirements:
- A minimum credit score of 640
- A good business plan document
- Generate less than $7.5 million in revenue annually
- Have less than 500 employees
- Net income of less than $5 million after tax
- The tangible net worth of less than $15 million
Alternative Financial Institutions
Lastly, another good place you should consider when sourcing a business loan is alternative financial institutions. Alternative financial institutions are non-bank financial institutions that also give out business loans. Some alternative financial institutions are also known as loan sharks or loan apps et al. Most alternative financial institutions usually offer merchant cash advances, invoice financing, and short-term loans.
The truth is that most people turn to these alternative financial institutions because it is easier to secure business loans from them than from conventional banks, although their interest rates might be crazy and their method of collecting back their loans might be crude.
Requirements:
Please note that each alternative financial institution has its own loan requirements but the basic requirements are:
- Fair credit score (some may even approve a business loan for someone with a bad credit score)
- Meet their collateral requirements
- Business licenses and permits.
- Personal and business tax returns.
- Employee Identification Number (EIN)
- Disclosure of other debt
- Copy of your commercial lease.
- Submit a business plan