Don’t Want (Or Were Denied) An EIDL Or PPP Loan? Here Are Your Best Small Business Loan Alternatives
To say the economy is hurting because of COVID-19 would be a vast understatement. With millions out of work and small businesses across the country struggling to remain afloat, we’re all facing an uncertain future. For some businesses, the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) loan initiatives have provided a needed financial lifeline. However, not all businesses are able to take advantage of these programs.
With this article, we’re going to explore alternatives to PPP & EIDL loans and examine how these options can benefit your small business during these trying times.
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Why Small Businesses Are Looking For Alternatives To PPP & EIDL Funding
Taken together, the PPP and EIDL programs have distributed a massive amount of funding to struggling businesses in the wake of the coronavirus pandemic. However, many businesses have been unable to secure funding from these programs despite applying when directed and meeting all the relevant qualifications. Other businesses, having received funds from these programs, have discovered that the funding they received was far less than the amount for which they applied. Still other businesses either haven’t met the qualifications or have avoided applying for PPP funds due to the restrictions placed on how the funds must be spent in order for the loan to be forgiven.
Whatever the reason, there are businesses out there in need of funding that have not been served by the PPP or EIDL programs. That’s why we’ve set out to highlight other lending options — both public and private — that are currently available to small businesses.
The Best Alternatives To EIDL & PPP Loans
Let’s discuss the primary financing alternatives to the PPP & EIDL programs.
SBA 7(a) Loans
The 7(a) loan program is the flagship program of the Small Business Administration (SBA). These loans can be used for many business purposes, including business expansion, working capital, and equipment, inventory, and real estate purchasing. With these loans, up to 85% of the loan is backed by the SBA, thus mitigating the risk to the lender and giving small businesses a chance to qualify for a loan that, under ordinary circumstances, they wouldn’t be eligible for.
There are nine different types of SBA loans to choose from. Our guide to SBA 7(a) loans details these different loan types, the business purposes for which they are intended, and the types of businesses that qualify for each loan type.
SBA 504 Loans
SBA 504 loans are more selective than 7(a) loans, but for the right business, these loans can be an ideal option for financing the purchase of fixed assets like real estate. These loans offer 90% financing and offer lower down payments than do traditional loans. While certainly not for every small business, these loans are a good option for small businesses with particular financing needs centered around purchasing or renovating land, buildings, and/or equipment.
Read our guide to SBA 504 loans to learn more.
Main Street Lending Program
The creation of the Main Street Lending Program was announced by the Federal Reserve in March 2020. While it bears some similarities to the PPP and EIDL programs in that it is intended to provide financial relief to small- and medium-sized businesses affected by the COVID-19 pandemic, it is a separate program with its own set of eligibility requirements.
Though the program is not yet active, it is expected to become active soon. Businesses seeking loans of at least $250,000 should take note of this new financing option. Check out our piece on the Main Street Lending Program for more information.
Community Development Financial Institutions
Community Development Financial Institutions, or CDFIs, are not-for-profit financial institutions that provide credit and financial services to disadvantaged areas and populations. Compared to loans from an average bank, a CDFI loan is typically easier to qualify for and carries a lower interest rate.
As part of their mission, these institutions often offer loan programs tailored for women and minority borrowers. Additionally, CDFIs are often willing to extend money to startups and incubator businesses that would otherwise struggle to get a business loan. If your business falls into any of these categories, look into the services of any CDFIs in your area.
While online lenders are typically more flexible in terms of their lending policies than the big banks, it’s true that now is not an ideal time to be seeking a small business loan from an online lender. Most such lenders are not currently offering loans due to the adverse currents buffeting the economy. However, there are a few exceptions. I’ll detail them in the next section.
Where To Find Alternative Funding
Now that I’ve described the types of small business funding that remain available, let’s get into specifics. Here’s where you can actually access funding right now.
We’re choosing to highlight Fundera here because we’ve confirmed that Fundera is currently open for normal funding, unlike most other online lenders.
Fundera does not originate loans; rather, it aggregates loan offers from its funding partners to present you with the business loans you’re most likely to qualify for. Through these funding partners, Fundera offers the following loan types to small businesses:
- Installment loans
- Short-term loans
- Lines of credit
- Equipment loans
- SBA loans
If your business stands to qualify for a CDFI loan, check out this CDFI locator website. You can filter your search by state, organization type, loan program, and more. Use it to connect with a CDFI in your area and ask about the funding options on offer.
While the PPP and EIDL programs are currently getting the lion’s share of attention in terms of SBA-backed loans, the SBA’s 7(a) and 504 loans are still being offered. These loans aren’t offered by the SBA itself, however — they are instead offered by private lenders that partner with the SBA to offer government-backed loans.
To see the lenders that, by the SBA’s own estimation, are the most active providers of SBA loans, read our article, The Best SBA Lenders For Small Businesses, then reach out to one or more of the organizations listed.
Go Out & Get Funded
We’re in a tough spot right now. Our world is beset by crisis and uncertainty, and given the fact that nobody could have predicted the year we’ve had, no one can say with any confidence what awaits us all in the years to come. However, our response to all this can’t be to forfeit and withdraw. People still have needs that must be met. Bills still need to be paid. Children still need to be provided for. Given that commerce still needs to happen and businesses still need to provide goods and services, there will remain a need for business loans.
We’re going to continue to keep track of which lenders are reopening their lending programs. As we do so, we’ll be updating the above list of business funders to reflect what is currently available. If you’re looking to fund your business and you’re looking for more options than the ones listed here, keep checking this page for the latest updates!