Last editedOct 20212 min read
The economic downturn brought about by the pandemic has seen more small businesses than ever struggling to maintain cash flow and keep operating, and needing an injection of funding in order to do so. The good news is that there are a range of loans and grants available for small businesses, from private and public sources.
Looking for business funding organizations
Perhaps the best place for any small business to start looking for funding is the Grants.gov website. This resource comprises a large list of federal, state, and local grants, and searches can be filtered by sector or industry to make it easier to find relevant funding. It should be noted, however, that many of the grants featured are focused on organizations in the non-profit, health, education, and public service sectors.
Major funding options for small businesses
The Small Business Administration (SBA) provides financial aid to small businesses – defined as those with 500 employees or fewer – in the form of debt relief and loans. It doesn’t lend the money directly, but instead oversees the lending provided by approved organizations. By setting a framework of guidelines and regulations the SBA makes it easier for the likes of micro-lenders and community development hubs to lend the money that small businesses are crying out for.
The sources of lending which the SBA coordinates include the following:
Paycheck protection program – low interest loans worth as much as $10 million to be used for paying employees, meeting mortgage payments, and other key business expenses. As much as 100% of the loan can be forgivable – meaning it does not have to be repaid if all employees remain on the payroll for eight weeks or more after the loan has been taken out.
Economic injury loan assistance – a small business that has been impacted by COVID-19 can apply to the SBA for a low-interest loan worth as much as $2 million. The period over which the loan has to be repaid can be as much as 30 years, and the interest rate is pegged at 2.75% for non-profit organizations and 3.75% for others.
Standard 7(a) small business loans – these loans constitute the main funding provision for small businesses from the SBA. The amounts lent generally run from $350,000 to $5 million, and the precise details of aspects such as the interest rates charged vary from loan to loan. The money is generally provided for startup costs, and for amounts of $25,000 or less, no collateral is needed. Loans of over $350,000, on the other hand, require as much collateral as possible in the form of fixed assets, trading assets and/or real estate.
What is private funding?
In addition to the kind of funding overseen by the SBA, many private banks and organizations offer financial support in the form of small business loans.
JPMorgan Chase's small business pledge – as a response to the impact of COVID-19, JP Morgan Chase has pledged to fund low or zero-interest loans via community based financial organizations in the US, as well as China and Europe. In addition, they are SBA approved and offer many of the SBA low-interest options.
TD Bank – the bank offers assistance in the form of equipment leasing, credit lines, mortgages, and loans. Credit lines are preferred for amounts between $25,000 and $500,000, while small businesses can borrow up to $1 million in the form of a loan, a mortgage or equipment leasing.
Capital One – as an approved SBA lender, Capitol One offers the standard SBA products, as well as installment loans of $10,000 or more. The loans are repayable monthly over a maximum term of five years.
We Can Help
If you’re interested in finding out more about public and private small business funding, or any other aspect of your business finances, then get in touch with our financial experts. Find out how GoCardless can help you with ad hoc payments or recurring payments.