Challenges Small Businesses Face When Looking For Funding during COVID-19

For most people, we live in economically uncertain times and face new problems as effects of community restrictions. It’s even harder for small business owners, as they have to restructure their business operations and strategies to be in condition for new guidelines and therefore maintain cash flow to keep their businesses running.

Although governmental authorities have made economic relief programs to aid business owners, the unclear expectations and realities of our current situation make it challenging for business owners to keep up with up with the current and future government programs.

Government Relief Programs To Aid Business Owners

Many small businesses have sought help for aid relief but found it a challenge to navigate through the different SBA Relief Programs provided by the government. The government implemented multiple relief programs early on.

Here are the main loan programs offered by the government:

Paycheck Protection Program

This loan program directly benefits small businesses that keep their workers on the payroll during the COVID-19 crisis. This loan will be fully forgiven if the loan proceeds are used for payroll costs, rents, interest on mortgages, and utilities.

EIDL Loan Advance

This is a program designed to help small businesses that are experiencing a temporary loss of revenue due to COVID-19. The loan proceeds of this program is for business operating expenses and various working capital needs.

SBA Express Bridge Loans

This allows small business owners, who have a business relationship with SBA Express Lenders, to get a 7-year bridge loan and access up to $25,000 quickly without additional collateral.

SBA Debt Relief

SBA has notified 7(a), 504, and Microloan Lenders that it (SBA) will pay borrower loan payments. This will be a help for lenders if they were not paid back from borrowers because of the crisis.

What Happened When Small Businesses Applied For Government Programs

In April 2020, the initial allocated $349 billion emergency small business lending funds were officially exhausted within the span of two weeks, as reported by CNN. There were countless applications for the economic relief programs that were not able to receive funding due to the depletion of the first round of funds. Therefore, those applications were put on hold.

On April 27th, the second round of funds amounting to $310 billion was added. Business owners who applied for the first round and didn’t get funding were prioritized in receiving their government relief. Contrary to one's expectations, however, people did not rush in claiming this loan relief compared to the initial round─resulting in an estimated $120 billion going unclaimed 7 weeks after it was released.

Other than that, there’s been issues going on with those who applied and were approved for funding. An article featuring a survey, which surveyed 2,200 small business owners, has shown that out of the 45% who applied for PPP, only 13% were approved. And, only 7% received funding and 18% are on hold. Similar issues are experienced from the other loan programs.

For EIDL, the SBA cuts its loan offer from $2,000,000 down to $150,000 and a lot of applicants are stuck. Therefore, they are looking for other funding means to keep their employees employed and revenues coming. You can read more of that here.

Ultimately, it is safe to conclude that the situation is quite chaotic despite the ongoing pandemic. “It’s like they’re building the airplane while it’s in the air,” said Albert Campo, CPA and managing partner from New Jersey. While it’s understandable that this has been an economical emergency and the authorities are doing their best as they go, the economic shutdown has affected many businesses with real people and real lives. People are looking for other funding options to save their businesses.

Why Some Small Business Owners Aren’t Taking Government Funding

One of the suspected reasons why people are reluctant to claim the PPP relief aid despite financial struggles is because of the loan forgiveness guidelinesㄧmany are not sure how to use it and the rules are restrictive. “Because of how the program had to be established so quickly, business owners (are not sure) on what to do, who to hire back, and how much of the employees could be paid.”, an article from National Corporate Credit says.

Further, applying for government loans takes much longer in terms of approval and application. There are stringent qualifications and guidelines to get approved. Businesses that need funding urgently may find that online lending is ideal, convenient, and flexible for immediate goals.

Ways Small Businesses Can Get Help With Their Funding Options

For small business owners who are uncertain about where to turn to for their funding needs, here are tips you can keep in mind:

1. Speak to local banks, private lenders who process government programs. You can also speak to loan consultants like Lendhalo. We offer free consultation and are willing to help you assess your funding options.

2. Consult your tax advisors to make sure you are making the best decisions for your business.

What You Can Do Today

As a business owner, a lot of anxiety and uncertainty roams in the air as we look for ways to keep our businesses operating. We appreciate to remind you that there are other funding options you can explore to help your business, aside from those offered by the government. We understand that there is a lot of studying that needs to be conducted for you to arrive on your best funding option―and we’re glad to help you with that!

Most online lenders and loan consultants offer free consultation to help you in your decisions. We advise you to take advantage of that. For more insight or guidance for the funding options that may be available to you, our funding experts are here to help!