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Financing Alternatives to PPP for Struggling Small Businesses

by
Julie Farless
on
6/24/2020
Financing Alternatives to PPP for Struggling Small Businesses

You don’t have to be a financial expert to understand how dramatically the global pandemic has impacted American businesses. The government has attempted to provide remedies for businesses hard hit by closures and stay-at-home orders, including the availability of PPP loans. Unfortunately, these were not available for everybody. The program itself is entering its final phase, leaving some entrepreneurs wondering where to turn if they are unable to avail themselves of the monies, and others wondering what to do once the funds they did manage to get approved for run out.

The goal of the PPP program, and of business owners around the nation, is to secure their business and their employees’ jobs. For all the good that was intended, the PPP loan was not sufficient to accomplish much more than covering expenses for a short period of time, leaving a gaping hole for many trying to survive the economic shock and reboot supply chains and cash flow.

If you find yourself facing this dilemma or trying to provide guidance to clients who are struggling, the availability of other sources of financing may make all the difference in their ability to endure. Here are some resources that may provide the funds necessary to bridge the gap between PPP loan funding and recovery.

Loans Offered by the Small Business Administration

The Small Business Administration (SBA) is currently the face of the PPP loans, but that is by no means the only source of SBA funding available, nor does it address all of the needs that small businesses are likely to face. One of the aspects of the PPP loan that has made it most attractive has been the fact that it is considered forgivable, but this is only true for the monies spent on interest on mortgages, rent, and utilities and for payroll – and a minimum of 75 percent of the expenses must have gone to the latter.

The SBA has several traditional loans that go beyond the temporary programs covered under CARES Act. These include:

  • EIDL Loan Advance – Economic relief for businesses facing temporary difficulties. Provides up to $10,000.
  • SBA Express Bridge Loans – Available for those small businesses that already have a business relationship with an SBA Express Lender. Provides up to $25,000 in an expedited manner.
  • SBA Debt Relief – Variety of financial supports, including deferral of loan payments, provided to help secure working capital for resolving debts, paying for overhead or operations, financing supply chains, etc. Approval will be extended depending upon elements including number of employees, type of industry and business, etc. 

Financing of Accounts Receivables  

Businesses that had accrued significant accounts receivables are able to use them as a source of immediate cash by selling them and then using the amount that they sell them for to cover their own bills and expenses.

There are several resources available for this type of financing, including invoice auction marketplaces. More and more small businesses are taking advantage of this unique option, as it offers the advantage of providing cash without adding more debt. The most immediate resource for this type of financing is likely available through the vendor that administers your accounts receivable function; if they do not provide this service, they are likely to be aware of organizations that do to whom they can refer you.

Local Government Support

Both city and state governments have the resources to provide local support and assistance to the businesses that support their economy. The amount that is available, as well as the criteria for eligibility, shift from state to state, with many offering grants, access to expert guidance, or subsidized wages for expanded hiring. Governors’ websites are a good place to start to see what is offered in your home state, and can easily be accessed via this link found on the National Governors’ Association website.

One thing that troubled business owners should look into immediately is what offers are generally being made to small businesses to soften the pandemic’s blow. Examples include eviction moratoriums and zero percent interest relief loans like what can be found in California, as well as cash incentives and low- or no-interest loans like those being offered in Oklahoma and New Jersey.

There’s no doubt that COVID-19 has brought financial distress and uncertainties that the Paycheck Protection Program has completely remedied for business owners. Fortunately, other options for funding exist to keep you afloat until fortunes and the economy stabilize in the future.

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Julie Farless

Julie Farless

Martinez & Shanken, PLLC is a Certified Public Accountant (CPA) firm based in Gilbert, Arizona. We provide a full range of accounting, bookkeeping, consulting, outsourcing and business services, but we specialize in tax preparation. We work with you to ensure that your personal or business processes are conducted in a manner that ensures ongoing integrity in your financial transactions. We are available to answer your questions and help with your ongoing tax planning and changing business needs.

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