Have you already redeemed and reinvested your PPP loan? If you’re a small business owner in need of PPP loan alternatives, read this guide! In it, we’ll break down the best government and commercial alternatives to the PPP loan.
PPP loans were crucial in keeping small businesses afloat during the pandemic. However, the turbulent economy has caused many business owners to need additional financial assistance. If you’re a small business owner, you’ve probably noticed how hard it is to find good financial help. Banks are extremely reluctant to offer loans, and the process of applying for government loans can feel like a never-ending battle. Are you looking for loans like the PPP loan but don’t know where to start? This guide can help! Keep reading to find out the best loans similar to PPP!
We’ll begin by examining government alternatives to the PPP loan. Government loans have fixed interest rates that are lower than what private financial institutions will typically offer. If you received a PPP loan and are in need of another small business loan, we recommend going through the Small Business Association (SBA). The SBA is a government-funded program entirely focused on assisting with small businesses’ finances. It is the only cabinet-level federal agency with the sole purpose of small business administration and finances. The SBA is the first channel to explore if you’re in need of PPP loan alternatives because it offers these excellent loans:
The SBA 7(a) program is the government’s most popular loan program. The SBA 7(a) loan is extremely versatile and can be used for nearly every business need, from purchasing real estate to securing working capital for inventory, equipment, or operations. The SBA 7(a) loan is substantial as well, capping out at $5 million.
Wondering if your business is eligible? In order to be eligible for the SBA 7(a) loan, you must:
- Be a for-profit business
- Be defined as a small business based on the SBA parameters
- Operate in the United States
- Have substantial invested equity
- Have used other financial resources and personal assets
- Demonstrate adequate need for the funds
- Justify the use of the funds
- Not be delinquent on existing loans to the U.S. government
Alternatively, the SBA also offers microloans. These loans go up to $50,000 and have lower eligibility requirements than the SBA 7(a) loan. Microloans are designed to have a faster turnaround time compared to the full SBA 7(a) because they’re driven to address specific and pressing business needs. Interest rates for microloans are typically between 8 and 13%. Interested in learning more about microloans? Click here.
Some of the best commercial alternatives to PPP loans include:
A business grant is money offered by governments, non-governmental organizations, trusts, foundations, and other sources. Unlike a loan, a grant is money that is freely given and doesn’t need to be paid back. The vast majority of grants have strict eligibility requirements and are tailored to specific industries. For government grants, check out this SBA page. We recommend researching commercial grants more specific to your industry online.
Overall, grants are the greatest financial resource your business can receive. It’s a no-obligation cash infusion and is usually accompanied with prestige and merit. If you think your business is eligible for a governmental or commercial grant, we highly recommend applying.
Credit financing is another viable, albeit riskier, option for your business. It’s possible to acquire credit financing from a home equity loan or directly from your credit card.
A home equity loan puts your house as collateral against your business. This means that if you’re unable to pay back your loan, you can lose your home. We would not recommend taking out a business line of credit or loan against your house because it’s extremely risky and you stand to lose a lot.
A safer credit option comes from business credit cards. You can use these credit cards to pay expenses that are directly tied to your business. Once you’ve accrued the revenue from a project, you can use it to pay off your credit card debt. While still risky, business credit cards can be invaluable for businesses that don’t need much money.
The final option that we’ll be discussing is peer-to-peer (P2P) lending. P2P lending is the process of collecting small sums of money from a huge variety of lenders to work towards one collective amount that can be used for your business. An interesting aspect of peer-to-peer lending is that these investors aren’t actually invested in your business—they’re lending you money personally.
Compared to traditional bank term loans, P2P lending has extremely low interest rates and doesn’t require a high credit score. The key drawback of P2P lending is that it provides limited capital, usually maxing out at $35,000 through most channels.
QualiFi can help! While the PPP loan is not still available, we can help you track down PPP loan alternatives that can give your business the working capital it requires. Contact us today and get the cash that your business needs!