COVID-19 Emergency Funding Options
Virtually every business throughout the country are being affected by the COVID-19 (SARS-CoV-2) pandemic. Regardless of region and industry, businesses are either taking a direct hit because of closings and restrictions, or being taking a indirect hit because of loss of demand due to patrons and customers limiting their purchases and needs for services. In this article we will look at bridge financing and alternative business lending options for businesses affected by the Coronavirus (COVID-19 – SARS-CoV-2) virus
Quick-jump to the following sections:
- SBA Disaster Loans
- SBA 7(a) Loans
- SBA Disaster Bridge Loans
- Bank Loans
- Alternative Loans
- Cash Advances
- 0% APR Credit Cards
No one would have predicted that travel, schools, businesses, the NBA, and Entertainment around the world would be virtually suspended within a one-week period in this new decade. In recent news, the global entertainment market surpassed $100 billion in revenues for the first time in history in 2019 and prepared for another profitable year, while the NBA’s average 15,000-20,000 fans per game were the norm. Now, officials and government around the world are urging or forcing businesses and schools to close. Also, to create alternatives to combat the spread of the COVID-19 and keep the economy afloat. However, some still may not know how the COVID-19 began and why it has created a pandemic in such a short time.
Thus, the virus was actually on the radar of many health professionals months before it hit the U.S. and other parts of the world. The first known case was in November of 2019, leading to 270 people infected, weeks before authorities acknowledged the new virus. Doctors were forced to keep it under wraps (some still tried to warn colleagues and were reprimanded as a result), leading the Chinese government to be widely criticized over their attempts to cover up the outbreak in the early weeks. Originating in Wuhan in Hubei province, the pandemic has infected at least 128,343 people across the world and killed 4,702. Out of those among this group, 68,324 people have recovered, while 81,000 of the cases occurred in China. It has now reached over 100 countries since the first incident and is proving to be highly contagious and quickly spread. Even among all these cases, the virus’ symptoms are not specific and are similar to the common flu and other diseases, making it harder to pin down without confirmatory testing. Another possible troubling factor is that infected people without symptoms might be encouraging the spread of COVID-19 more than we realized. Such as with the current outbreak in Massachusetts that further support this. Officials are mostly emphasizing that the virus spreads mainly by people who are already showing symptoms. These include cough, fever, or difficulty breathing. However, it is becoming more complicated with the Massachusetts Coronavirus cluster that had 82 cases started by people who were showing no symptoms. Studies are showing that these people without symptoms are causing considerable amounts of infection. Nevertheless, even with the asymptomatic cases, the primary driver is still the symptomatic individuals. As for children, COVID-19 is shown to be not as severe but should nevertheless be taken seriously to avoid passing it to others.
Moreover, it is essential to not only know how the virus came to be but what it is. Therefore, coined COVID-19, it is caused by a member of the Coronavirus family (come from animals) in which this particular one has never been encountered before. Symptoms similar to the flu, the virus can cause pneumonia, but in extreme cases, there can be organ failure. Furthermore, the type of pneumonia is viral, making antibiotics ineffective, plus the antiviral drugs against the flu will not work. To fight the infection and recovery, it depends on the strength of the immune system. A large number of people who have died were already in poor health. For individuals that suspect they have it (cough or high temperature), it is recommended by medical professionals that they stay at home for seven days, keep away from other people—even those in your home. If symptoms get worse after seven days, it is advised to visit the doctor. However, to narrow down the symptoms to the most concerning, look out for shortness of breath, followed by a high fever and worsening cough. People older than 65 and with previous medical conditions such as heart disease, diabetes, chronic lung disease, cancer, HIV, chronic kidney disease, or taking immunosuppressive medications are especially at risk for contracting COVID-19 and it being fatal as well. Moreover, individuals and businesses are encouraged to work from home and limit contact with large groups when possible to help combat this steadily growing virus to save lives and support the economy as much as possible going forward.
COVID-19 Emergency Funding Options
We understand that as a business owner, the loss of business and uncertainty in local, state and national economy due to the Coronavirus (COVID-19) is greatly affecting your business. Many companies are facing loss of revenue while still having obligations like making payroll for staff, making upgrades to your company, paying bills, paying taxes, etc.. Because of this, many companies are now seeking financing for working capital for the first time and may find it hard to navigate the business lending process. Below we will take a look at the top emergency funding options for companies dealing with the effects of COVID-19 (Coronovirus).
SBA Disaster Loans
This is the most sought-after financing options for business affected by the Coronavirus (COVID-19) epidemic. This program offers low rate financing (3.75% for businesses that are for-profit companies, and 2.0% nonprofit companies) with terms as long as 30 years. While this is a fantastic option for companies seeking SARS-CoV-2 relief, the process is still unclear and, at best, would take nearly a month to fund. Additionally, not every state government has applied to have their state designated as a disaster area – which is needed to apply for such loans. Additionally, expecting a huge influx of applications, the SBA loan officers (who are already dealing with low manpower) may be completely overwhelmed, therefore the process may take as long as 2 months to get approved.
|Terms||Up to 30 years|
|Funding Amounts||Up to $2,000,000|
|Collateral||Required if Available|
SBA 7(a) Loans
This is the flagship program of the SBA loan program. SBA 7(a) loans offer great rates and long terms for a variety of uses, including business purchases, refinancing, and most of all working capital. Unfortunately, this process may also take as long as 30-45 days, but a subprogram of the 7(a) program is the Express program that can fund much quicker (3-10 days)
SBA Express Loans
This SBA 7(a) Express program offers loans up to $350,000 and can be structured as either a term loan, or an interest-only line of credit. The funding process is much quicker than the general 7(a) loan because the individual banks, community lenders and credit unions who are approved to offer SBA Express loans are able to fully-underwrite and approve loans in a way that requires less work from the SBA. In return, the SBA can give final approval in just days, and funding occurs within a week of application
|Collateral||Not be Required|
SBA Disaster Bridge Loans
Since much of the SBA Disaster Loan program is still not fully operational (as of the date this article was published) many companies needing immediate financing may look for alternative options to help bridge their needs will waiting for approval for SBA Disaster Loan approval. Additionally, since many SBA resources have been depleted over recent years, SBA loan officer manpower may become completely overwhelmed by the huge influx of applications. Add in the fact that only 11% of SBA Disaster Loans have traditionally been used for personal property destruction – not for businesses – the program may have lots of problems to work out. Therefore, alternative funding options may be needed to help provide COVID-19 affected businesses bridge options until they complete their Coronavirus SBA Disaster Loans application process.
|Terms||Up to 5 years|
Banks offer both conventional term loans and lines of credit for businesses affected by the COVID-19 (SARS-Cov-2) pandemic. For most, the process can take as long, or even longer than it takes to get funded through the SBA Disaster Loan program. But, if you have a good relationship with your local bank, community lender or credit union, you may find yourself in a position in which you can obtain bridge financing while you complete the SBA Disaster Loan process.
|Funding Amounts||$10,000 – $5,000,000|
|Fees||Low to Medium costs|
Mid prime alternative business loans are a great funding option for companies affected by the Coronavirus who are looking for lower-rate financing without having to wait more than a week for financing, as well as limit the amount of paperwork involved in the application and underwriting process. Mid prime loans can have rates as low as single digits with terms as long as 5 years, while only needing a year or two of tax returns and 6 months of bank statements. From application to funding, the process can be completed in less than a week
Cash advances are simply the fastest alternative funding options for Coronavirus affected businesses. The process of getting approved for a cash advance only requires an application and 4 months most recent bank statements, with approvals provided within an hour. Additionally, for companies that get approved for cash advance alternative financing, they can receive funds in as little as a few hours – so its not uncommon for COVID-19 cash advances to fund the same day a business applies.
|Factor rates||1.10 – 1.50|
|Fees||Low to High costs|
0% APR Credit Cards
For business owners with credit scores above 700 and have not exhausted more than 50% of their own credit cards, a good financing option for these COVID-19 affected businesses could be an unsecured 0% APR credit cards. This preapproved unsecured financing is a quality form of COVID-19 alternative business funding because the rate is 0% APR for 12 months before it readjusts to a higher rate. This allows businesses to have the breathing room to take care of their liabilities while they work on securing longer-term financing.
|Factor rates||0% for 12 months|
|Fees||Low to High costs|
As you can see there are plenty of funding options for staffing companies – especially those looking for short or long-term working capital. While there are many options to choose from, the abundance of options may be confusing to some business owners. If you’re a staffing company and looking for the best possible financing, please feel free to reach-out to one of our funding specialists, and we’ll help you secure the best possible financing.