Prior to the Coronavirus pandemic, I do not think any one of us could have imagined the country shutting down for just one day, not to mention several months. But this is the reality most of us faced in late March/early April as states began issuing stay home orders.
Not only did the coronavirus impact our individual lives, it severely hampered small business owner's capability to repay what you owe, pay your employees, and increase your business. Actually, as was the case with most smaller businesses, profits and margins may have declined for many months.
The government attempted to intervene by passing a stimulus bundle including the Paycheck Protection Program (PPP). This program was established to provide direct incentive for smaller businesses to keep their workers on payroll by providing 100% federally guaranteed loans. The problem was this program was confusing and hard for a number of smaller businesses to actually get.
When small business owners turned to their bank or alternative lender, they were rejected. Not because they did not have a successful, profitable business just before COVID-19. It was because several lenders were focused on helping businesses obtain the PPP loan. Those that didn't service the PPP, were unsure the impact coronavirus would have on businesses. As an effect, they were overly cautious to lend to small business owners. Bottom line – most financiers slowed up or simply stopped funding. Actually, some are still not funding.
Now that states have opened up and smaller businesses are operating again, a minimum of at some capacity, those companies that lost several months of revenue are still looking for a loan or any other funding option to have them through the restart.
The issue is the lending industry has shifted post-coronavirus turn off. While you might have qualified for business funding earlier in the year, those self same requirements may not be sufficiently strong for you to be approved today.
So, what can you do to obtain a business loan following the COVID-19 turn off?
Lender Business Loan Requirements
Many lenders have stopped funding. The ones that are have specific requirements to be considered for any business loan or other funding option. These requirements will be different by lender. Since SmallBusinessFunding.com and our network of lenders are funding smaller businesses today, we've listed a few of those requirements.
Time in Business
A few months ago you might have gotten a working capital advance or even equipment financing with less than A few months running a business. Now lenders want to see you have been around at least 6 months but 12 months is preferred.
Monthly Revenue
Just like with age your business, the necessary quantity of revenue you produce a month is higher than just a few months ago. $15,000 a month or $180,000 annual revenue must be considered for funding. Lenders need to know that you have the money to pay back the loan or advance.
Consistent Cash Flow
A consistent income happens to be important when it comes to a lending decision. Lenders understand that your April and May revenues may not be a real indication of your business. But to get an agreement, underwriters need to see a recover starting mid-to-late May. And growth, or stability based on your revenue levels, the months following with a minimum of 30 days consistent revenue.
Credit Score
Having a favorable credit record has always improved your odds of getting funding. However, business people with a bad credit score also have historically had the opportunity to obtain funding by having an alternative lender. While our minimum credit score requirement remains 500, as mentioned above, you stand a greater chance of getting an approval with a higher score.
Short-term Fix
Not only exist less lenders funding smaller businesses, not just are the requirement a little tighter, but you may get approved at a lower price funding than you requested.
Now what?
You can research more lenders, however this will require some time and does not guarantee you'll get an approval. Another option would be to accept the funding amount and use it to bolster your business. Then when credit or advance is near to being paid off, get in touch with that very same lender you worked with to obtain additional capital. If you'll be able to re-pay during or appearing out of the COVID era, that's a great register lenders eyes which lender could be more prepared to boost the funding offers.
Common Reasons Businesses Need Funding coming out of the Shutdown
SmallBusinessFunding.com did with several small businesses seeking funding appearing out of their recent state's shutdown which would be the most common reasons they require additional cash.
Inventory
Coming from the shutdown businesses have to replenish their shelves, particularly those that saw their cash reserves depleted.
Cashflow Crunch
This may be the top reason given. Business owners need to build up their cash reserves to make sure they've enough money to pay for their expenses.
Overhead Expenses
You might have been shutdown for many months but that did not mean the rent and other bills weren't due.
Advertising
Now that you've reopen or expanded your company operations following a decelerate period, it's time to spread the word. Advertising is definitely an investment, which if done right, will start paying for itself quickly.
Equipment Purchases
Does your business model look different within the “new normal”? Within the new normal of operating your business, there might be some equipment purchases which require to be made.
How SmallBusinessFunding.com can help
Small Business Funding and our network of funding partners have been actively helping small businesses get much needed capital.
To find out if you qualify, you are able to call our Funding Specialists at 800-742-2995 or by completing our online business funding request form.
