Here’s How You Can Get a Loan During the Pandemic
While The coronavirus pandemic is creating havoc and changing the way we live our lives. Small and medium enterprise (SME) owners might want to get a loan. However, banks having limited operations, and the process of getting a loan might not be the same. The increasing financial burden on SMEs at the time of the pandemic is way higher than the impact on large business establishments.
That’s because the small businesses are facing a crunch of money inflow that keeps the business going. If you are one such establishment too and have been considering taking a loan for your business, here’s how you can go forward with it.
Reasons to apply for a loan.
a. Salary payments – As an SME owner, you might have a handful of employees whose lives depend on the salary you pay them. While most organizations across the globe are pushing employees to take a pay cut until the business restores itself to the normal operations, these are people whose lives will come to a standstill if they miss a payroll. However, you might not be in a position to pay them all out of your pocket. At a time like this, you can apply for a business enablement loan.
b. Restore cash flow – Small businesses thrive from the money they make out of day-to-day sales. However, with the lockdown, your business is either shut down, or the sales have hit an all-time low. Either way, there’s a fund crunch in your business. A short-term business loan will come handy at a point like this.
c. Revamping business – The pandemic has to change the way businesses operate. Everything is either online or sold through contact-less delivery. However, your business might not be ready for this model.
While you might be want to do it too, the fund crunch might be holding you back. A short-term loan can help you stay in business and make the necessary developments to thrive during the crisis.
d. Rent for land and machinery – Your business is on hold, but that doesn’t mean your landlord will be fine with you not paying the rent. The same goes for the machinery you have on lease or rent at your factory too. Getting a loan will help you keep things rolling until the business operations resume.
How to apply:
The new federal government made it possible for SMEs to get a loan as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. If sources are right, this is the most significant economic bill in the history of the United States, with a $350 billion set as the limit.
The CARES act aims to help SMEs continue operations despite the pandemic. The Small Business Administration will be administering this loan to businesses that need financial assistance.
Types of Loan
There are different types of loans proposed under the CARES Act. This is to make sure the loan covers every business type. As there are different categories of loans, it makes it easy to finish the paperwork necessary just for your loan type.
a. Paycheck Protection Program – As the name suggests, the Paycheck protection program is to help business owners pay their rents, salaries, and the interests for business debts. This is a forgivable loan, meaning the borrower might not need to repay it. However, businesses must rush into applying for this loan sooner as it is available on a first-come, first-serve basis.
b. Economic Injury Disaster Loans – The Economic Injury Disaster Loan is for people whose business has less than 500 employees and has experienced a direct business loss as a result of the pandemic.
c. Other SBA Loan Options – There are many more different types of SBA loans that are available for you to apply. You can check their official website for more loans and criteria to apply for each of these.
d. Private Lenders – A lot of private money lenders are coming forward to offer loans to SMEs to help them sustain. However, please make sure you read the clause carefully before applying. The last thing you want is to have a huge debt that you cannot repay.
Examine your business needs, make sure you have a strong credit report. Also, make sure you do thorough research on the loan type before applying for one. Talk to a financial advisor and see that you get the financial assistance that your business needs during the pandemic.
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