What Short Term Business Loans Are Available Due to Coronavirus?

Author: / 5 May 2020 / Business

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While the Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDL) you’ve heard about have been tapped to the max, the good news is that Congress is expected to approve more funding soon. Other short term business loan options include:

  • SBA Express Bridge Loans
  • Discounted business loans
  • Local government loans
  • State government loans
  • Local grants

If you’re having trouble securing one of these loans for COVID-19 affected businesses, you can also borrow from your own retirement savings with a low-interest 401(k) loan.

SBA Express Bridge Loans

  • If you have a current business relationship with an SBA Express Lender, you can access up to $25,000.
  • There is a fast turnaround (45-90 days) and less paperwork involved with this type of loan.
  • This loan is ideal if you are waiting to hear about your EIDL application, which can be used to repay it.

Discounted Business Loans

  • FundRocket – $1,000 with 0% APR, repaid with 10% of sales or $100 weekly once sales resume.
  • LiftFund – Up to $50,000 with variable APR, repaid after 120 days with collateral and recovery plan.
  • US Bank – $5,000 to $20,000 with 1-2% APR, repaid in an 80-month term.
  • WaFd Bank – Up to $200,000 with 0% APR for the first 90 days, available in select states only.
  • Wefunder – $20,000 to $50 million starting at 3% APR, repayment deferred until 2021, then 2-20% sales.

State and Local Government Loans

A number of state and city governments have announced loan programs to buoy their economies. You can check your city’s Chamber of Commerce website, or your state’s Small Business Development Center’s website.

Examples of programs offering loans for COVID-19 affected businesses include:

  • Bexar County, TX – LiftFund Disaster Relief loans
  • Buffalo, NY – Economic Development Corporation for Erie County loans
  • Chicago, IL – Community Development Financial Institutions loans
  • Corpus Christi, TX – LiftFund Disaster Relief loans
  • Los Angeles, CA – City of LA Small Business Emergency Microloan Program loans
  • New York, NY – New York Community Trust nonprofit loans
  • San Diego, CA – South County Economic Development Council interest-free business loans

Government loans are often low-interest over extended terms.

Federal and Local Business Grants

Grants are even better than loans because they needn’t be repaid in the future. In other words, grants are “free money.” The one caveat is that access may be limited due to the availability of funds or the specific purpose for which the grant was set up.

Visit the Small Business Administration to learn about federal business grant programs pertaining to research and development, exporting, education, and other areas.

Visit the Economic Development Administration and local Small Business Development Center websites to find local business grant programs.

Large corporations sometimes offer grants; try Amazon, CISCO, Facebook, FedEx, GoFundMe, Thryv, Verizon, or VOGUE Magazine. The National Association of the Self-Employed is offering growth grants up to $4,000, if you’ve been a member for at least three months.

Traditional Lender Business Loans

It’s worth contacting your local lender to see what options are available. Bank loans can be difficult to secure–particularly if you don’t have a terrific financial track record – but collateral is not always necessary, and a good relationship with a lender can go a long way.

Loans can be short or long-term, they can be secured or unsecured, and lines of credit can be taken with 0% APR for a time. Most APR rates range from 4 to 40%, so it could be a good option or a rather expensive one, depending on the terms you’re offered.

401(k) Loans

The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in March 2020 doubles the amount of retirement savings you can borrow from your 401(k) plan from 50% of savings ($50,000 max) to 100% of your savings ($100,000 max).

  • Your 401(k) is your future paycheck, so you should think twice before spending it.
  • The funds will not have the opportunity to grow while your loan is out.
  • You could be missing out on a lot of capital return on investment as the Stock Market recovers.
  • Interest rates are generally relatively low, ranging between 6.5-7.5% over a five-year term.
  • You may have less than five years to pay back the loan if you lose your job.
  • The benefit of borrowing against your 401(k) is that it won’t impact your credit rating, and the interest you pay ultimately goes back into your retirement account.

Contact Ubiquity if you have questions about short term business loan options like taking out a 401(k) loan.

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Contact Jay Jacob, Sr. Retirement Plan Consultant

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© 2024 Ubiquity Retirement + Savings
44 Montgomery Street, Suite 300
San Francisco, CA 94104