Traditional Bank Loans Vs. Lines of Credit

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When running a business, it’s likely that you’ll borrow money at some point in some form or other. There are various options when it comes to borrowing money. If you have to decide between bank loans vs. credit, then it’s useful to first understand how they are similar and different from one another. 

Let’s take a look at everything you need to know so you’ll be prepared to make the right decision.

What is a Loan?

A loan is a lump sum of money that gets repaid with interest. Interest is the cost of borrowing money and is often set at a fixed percentage of the lump sum. Repayment typically happens over time in regular payments until the full amount borrowed is paid back. The majority of loans are amortized, meaning that each payment is the same amount. 

There are a myriad of kinds of loans. Throughout life, people tend to take out loans for personal reasons, like a mortgage when buying a home or a student loan for education. Businesses take out small business loans to help cover their expenses.

What is a Business Loan?

A business loan is also known as a commercial loan. Loans are provided to help businesses with operational costs, hiring staff, buying inventory or for any other capital need. Business loans come in different forms, some of which include: a bank loan, invoice financing, microloans, business cash advances, cash flow loans, asset-backed financing, and mezzanine financing. Depending on your need and business structure, it’s best to research the types of loans you can receive to find out what works best.

What is a Line of Credit?

A line of credit allows borrowers to draw money and spend it up to their limit. Once the money is repaid, often with interest, then the credit can be spent again. It serves as a revolving account. 

For example, if you have a business credit card, then you are given a business line of credit, or an amount you can borrow for the month. Let’s look at what this may look like with numbers. Say you have a business line of credit for $10,000 and you spend $3,000. Then, you have $7,000 in credit to still use before you hit your credit limit. Once you repay the $3,000, then your line of credit is back to $10,000. 

Bank Loans Vs. Lines of Credit

There’s no right or wrong answer in terms of choosing between a bank loan and a line of credit. However, depending on your needs and timeline, one could be more beneficial than the other. 

 

A business line of credit provides you with advantages like:

  • Payment flexibility – you can choose how much to pay back each month, from the minimum payment to the total balance (or any number in between). Just be aware that you will pay interest on the balance. 
  • Readily available – a line of credit is readily available as part of your credit card offering every month. 

 

On the other hand, a bank loan can be more useful in specific instances, including:

  • Specificity – if you know exactly how much money you’ll need for a project or expense, then a loan could prove to be more cost effective as you’ll know the amount and repayment structure upfront. 
  • Budgeting – you can budget your business goal by allocating funds for the loan repayment, as well as the cost of the project or need. 

An easy way to decide between a bank loan and a line of credit is to think of it this way:

  • Choose a loan when you have a specific purchase or one-time investment (cost). Loan amounts are up to $5 million for a small business loan. 
  • Choose a line of credit for ongoing expense or a small need for cash. Loan amounts are up to $1 million. 

Another big difference between the two is the interest rate and terms. 

  • Lines of credit tend to have variable interest rates, although fixed may still be an option. You can pay back minimums, or fixed weekly or monthly payments. 
  • A small business loan has a fixed interest rate, with loan terms from 1 to 20 years. You can pay it back in fixed weekly or monthly payments.

A Look at Your Options

Lines of credit and loans are offered based on assessments of your business. It’s possible that you will apply for a small business loan and be denied by a lender. When this happens, there’s no need to panic. There are alternative funding methods to consider like a merchant cash advance. At Uplyft Capital, you can simply apply for a merchant cash advance and receive capital almost immediately. Take a look at our programs to see what may be fit for your needs!

Picking Between a Loan Vs. Line of Credit

Both small business loans from traditional banks and business lines of credit have helped businesses stay afloat and prosper. To determine what is the right funding method for your business, start by determining the amount of capital you need. Then, take a look at your inflow of money and ability to pay back the borrowed amount. After you calculate interest rates and weigh your costs and benefits, you will be able to find the funding option to support your business goals.

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PPP Loan Extension: All You Need to Know

There’s some good news regarding the PPP.

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By now, you’ve probably heard of the Paycheck Protection Program (PPP). For small business owners, this federal loan program was set to close to applicants at the end of June. Just four hours before the program was set to expire on June 30, a bill passed to extend the program. President Trump signed the “PPP Extension Act” on July 3, which means that eligible borrowers now have until August 8 to apply for funds and receive loans with forgiveness terms.

What’s the Status of Available Funds?

The goal of the program is to provide a loan that will help to pay employees’ salaries, mortgage payments and operational costs. Over 4.8 million small businesses have already submitted their applications to receive aid from the government during the coronavirus pandemic. 

Before the program expired, there was still $130 billion left unused. The application process is still set up to be reviewed on a first-come, first-serve basis.

What’s the Paycheck Protection Flexibility Act?

Not to be confused with the Paycheck Protection Program Extension Act, there was another bill recently signed regarding PPP. The Paycheck Protection Program Flexibility Act of 2020 (PPPFA) slightly amends the original PPP forgiveness terms. 

Here’s a look at what got updated:

  • Maturity Date Extension: Initially, the minimum maturity date was two years, and now it has been extended to five years. 
  • Covered Period Extension: The loan period was set to an eight-week period running from February 15 to June 30. Now, the period is extended to 24 weeks from the origination of the loan or until December 31 (whichever happens first). If you received a PPP loan before the extension bill was signed, then you can choose to stick to the original eight-week period. 
  • Timeline Extension: The PPP loan has loan forgiveness terms that are related to the loss of full-time employees. If a borrower fired their employees and rehired them before June 30, 2020, then they could receive loan forgiveness. If not, then their eligibility for loan forgiveness is reduced in proportion to the loss of employees. With the new extension, employers have until December 31, 2020 to rehire their team members. 
  • Loan Deferral Extension: Borrowers may receive authorization to defer loans for up to one year and no payment needs to be made for six months after disbursement. 
  • Payroll Spending Changes: At first, employers had to spend 75% of the loan on payroll costs. The government has since reduced this amount to 60%.

  • Employment Tax Deferral Eligibility: All borrowers are eligible for tax deferrals for employment taxes, not just those who seek loan forgiveness.

Want to Apply for PPP?

If you fall into one of the following categories, then you are eligible to apply to receive a Paycheck Protection Program loan:

  • Small business (less than 500 employees)
  • 501(c)(3) 
  • Sole proprietor
  • Independent contractor
  • Self-employed
  • Tribal business (meeting SBA size standard)
  • 501(c)(19) Veteran’s Organization 

To apply, you have to fill out the necessary documents and submit an application online.

More Funding Options

Some applicants for PPP have been denied. While there are many reasons why your PPP application could be rejected, it doesn’t mean that your funding options stop there. At Uplyft Capital, our goal is to provide small businesses with nearly immediate funding through our merchant cash advance programs. 

Merchant cash advances could be better than loans for some businesses for several reasons. Some of the benefits are that you don’t need a high credit score for a cash advance, the repayment terms are relative to your monthly sales, there’s no personal guarantee, and there are no strings attached. This money is yours to use for whatever you need, not just for payroll or operational costs. 

Even if a merchant cash advance is not the right fit for you, you can leverage Uplyft Capital’s marketplace to find a loan provider that is tailored to your needs.

Get Funded, Stay Afloat

There’s nothing new to say about how dramatically impacted small businesses owners have been at the hands of the coronavirus pandemic. But, the upside is that there are many ways to still keep afloat by applying for financial aid from outside sources. Whether it’s through the government’s PPP program and its extension, or through Uplyft Capital’s programs or a different lender, it is possible to get funding fast. 

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How to Fund A Small Business Without a Loan

Starting any business requires two very important things.

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The two main ingredients are your good idea and capital. But, if you’re new to the business world and don’t have access to capital from a trust fund or personal savings account, you’ll likely need to look to outside sources for financial assistance.

Many people may opt for a loan to start out, but for some, a loan may not be a viable choice. In this case, knowing
how to fund a small business without a loan simply begins with some education about your funding options and best practices to minimize expenses. 

Common Challenges for New Businesses to Get a Loan

When you’re just starting a business, there are many challenges you may face for loan approval. These are some of the most common reasons why your small business loan could be declined in the early stages: 

  • Your credit score is too low
  • You don’t have enough business credit history (this is like when you’re entering the workforce and the job requirement calls for years of experience, but it’s an entry-level position.) 
  • You don’t have enough collateral 
  • Your debt utilization is too high (i..e you’re using too much of your credit line which makes you a high risk for default.) 
  • You don’t have enough cash flow (this is understandable since you’re just getting started, and that’s why you need the loan in the first place).

Best Practices for Starting a Business

Before we jump into all your funding options, let’s talk about some best practices to keep costs low when you’re just getting ramped up. 

The Bare Necessities 

Don’t go big, go home. That’s right – when you’re just getting your idea off the ground, don’t commit to expenses that aren’t necessary for the time being. 

If you can, choose to work out of your home before signing an office lease or renting a co-working space. Leverage marketing tactics like social media that can begin as free and grow into a part of a larger marketing budget. 

More Ways to Minimize Costs 

Here’s a list of ideas to help you minimize costs when you’re building your business: 

  • Hire freelancers instead of employees 
  • Try to run your business online, if possible
  • If you need an office space, rent a ready-to-use space 
  • If you’re working from home, hire meeting rooms on daily basis when needed 

No Loan? No Problem - Funding Alternatives

If you’re at the point where you’ve kept costs low and even reinvested your profit, but you are still in need of fast funding, then, congratulations! You’re one step closer to achieving your dream. 

If your small business loan has been declined, don’t worry. 2020 is an especially precarious time for small businesses to obtain loans. On the bright side, there are many small business funding options to choose from, including: 

  • Family lending: You’ve probably thought of this and may have even been hesitant to take this route. If you have family members who would be willing to help get your idea off the ground, it’s a good alternative to bank loans (for some obvious reasons). Some family members will give you the money as a gift, but you can also promise back interest or equity. Whatever agreement you come to, it’s best to get this in writing with signatures so it’s legally binding. 
  • Equity: Equity is the sale of a stake in your business. You can give equity to an individual, group of investors, crowdsourcing platforms or private equity houses. At the start, the most common type of investor may be an angel investor, granting you with your first influx of cash. In your future rounds of funding, it’s common for venture capitalists to join the party. When your business is in good standing and perhaps ready to go public or make an exit, then private equity firms may make their appearance. 
  • Crowdfunding: There are crowdfunding platforms that can help you greatly widen your market. Crowdfunding is the process of sourcing money from a group of people. There are several well-known platforms in existence. Here are some popular websites for this service: Kickstarter (project funding), Fundable (business funding), Indiegogo (product funding). 
  • Asset Financing: You have the option to borrow against assets you’ll need for your business. For example, you can borrow against equipment you’ll need to purchase or even stock. 
  • Merchant Cash Advance: A merchant cash advance allows you to borrow against a portion of your future credit card sales. One of the most desirable aspects of a merchant cash advance is that the amount you pay back can be based on your monthly sales. So, if you have a slow month, you won’t be disproportionately affected. Check out our programs to help find what works for your business needs. 
  • Invoice Financing: If your business has been running and you are owed outstanding invoice payments, then you can borrow against them. While you wait to collect on account receivables, you can get fast cash by selling the invoices to an auction platform or directly to a provider. The goal is that when your customer pays their invoice, you will easily be able to pay back the advance. 

Remember that no matter what kind of funding you receive, no money is completely free. You should evaluate your risks, especially of not being able to pay back the amount you have borrowed. It’s also important to understand the interest rates (or equity) which is your cost of borrowing from any of these sources.

Don’t Give Up!

Lack of funding tends to be one of the most common reasons why new businesses fail. With the various amounts of funding methods available to you, it would undoubtedly be a shame to give up for this reason. 

 

To choose the right funding method for you, start by evaluating your needs and assessing the amount of funding you’re seeking. Be sure to consider timelines and any promises you’ve made to customers. Then, apply for the funding method that makes the most sense for your business model. 

 

No matter what you do, do not give up! Your business has the potential to change the world.

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How Do I Get My SBA PPP Loan Forgiven?

A look at the criteria and all you need to know.

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If you’re a business owner, you’ve probably done research on or already applied for the Paycheck Protection Program (known as the PPP loan). Perhaps, you’ve even started to use this financial aid to help you in this time of need and immense uncertainty. So, if you’re now asking, “How do I get my PPP loan forgiven?” we are here to share all the details on what you need to know, including forgiveness criteria and the documents you’ll be asked to provide to your lender. 

For a quick refresher (if you need one of those), we’ve already shared a small business owner’s guide to financial aid during COVID-19 that goes into more details about the PPP. 

Without further ado, let’s jump into the information you came here for.

Quick Review of Terms

First, here are the basics about the PPP loan you need to know so that the forgiveness rules will make sense. 

  • 100% of the loan may be forgiven (check requirements below
  • PPP funds are meant to be used for:
    • Payroll (salary, vacation, wage, medical, sick leave and health benefits) 
    • Mortgage interest (for mortgages signed before February 15, 2020) 
    • Utilities (for services that began before February 15, 2020) 
    • Rent (for lease agreements made before February 15, 2020)

If you used the loan as it was intended (i.e. solely for the aforementioned needs), then you are eligible for loan forgiveness.

Loan Forgiveness Conditions

Here’s your easy-to-read guide to all of the forgiveness conditions.

1. Covered Period

The covered period includes the eight-week period that began on the date the loan was disbursed. 

2. 75%/25% Payroll Rule 

The SBA designated that at least 75% must be used for payroll costs. However, any payment made to an independent contractor cannot be considered part of the 75%. The amount that is forgiven will scale proportionally with the amount you used for payroll. 

3. Payroll Retainment

You must maintain at least 75% of the total salary for your employees from 2019. This rule stands for every individual on payroll that received less than $100,000 in 2019. If at any point during the eight-week covered period, they received less than 75% of their annualized salary from 2019, then the eligible loan forgiveness amount will be reduced by the difference between their current pay and 75% of 2019 pay. 

4. Staff Headcount 

You have to retain the number of employees on your headcount. Here’s how you can assess if you’ve met the requirement:

  • Determine your average full-time employees for:
  1. The eight-week covered period 
  2. February 15, 2019-June 30, 2019 
  3. January 1, 2020-February 29, 2020 
  • Take A and divide it by B. Take A and divide in by C. Take the larger number. If the number is larger than 1, you’ve met the requirement. If it’s a number smaller than 1, then your forgiven loan amount will be reduced proportionally to the change. 

There is another exception within this rule, though. Say you laid off or furloughed employees during this period, but then you tried to rehire them. If they declined the offer (and you can prove it), then you have an exception to this rule. 

You’ll have to be able to show that: 

  • You made a written offer in good faith to rehire 
  • You offered the same salary and hours of work 
  • You have documentation of the employee rejecting the offer 

Additional exceptions include if:

  • Your employee quit voluntarily
  • They were fired for a cause 
  • They chose to reduce their hours voluntarily 

5. Grace Period 

Keeping these forgiveness rules in mind, the SBA extended a grace period for rehiring. If you decreased any pay by more than 25%, you can reinstate your staff and/or pay before June 30, 2020 and still be eligible for loan forgiveness. Even if your eight-week period is over before June 30, 2020, you still have until this date to reinstate employees. You’ll just need to apply for forgiveness after June 30, 2020. 

What About Loan Forgiveness for Self-Employed Individuals?

For self-employed individuals, the PPP loan is meant to replace lost compensation due to effects of COVID-19. Your loan can be forgiven for eight week’s worth of your 2019 net profit. For mortgage interest, utilities or rent to be forgiven, you must show that they were claimed as a deduction in your Form 1040 Schedule C from 2019. 

While it’s possible to have your loan forgiveness, the forgiveness amount is capped. To calculate eight weeks of net profit from 2019, take your net profit reported on your 2019 Form 1040 Schedule C and multiply it by 8/52. (On April 20, the SBA gave a final interim rule that the maximum amount is $15,385). 

How to Apply for Loan Forgiveness

If you’ve met the forgiveness criteria (and exceptions to the rules), then you can apply for loan forgiveness. You will submit a SBA Form 3508 Paycheck Protection Program Loan Forgiveness Application, which consists of 4 parts:

  • The PPP Loan Forgiveness Calculation Form (required to submit to lender)
  • PPP Schedule A (required to submit to lender
  • PPP Schedule A Worksheet 
  • PPP Borrower Demographic Information Form (optional

As required by law, your lender will have 60 days to provide you with an approval or denial on your loan forgiveness application.

The Documents You’ll Need

When you’re ready to apply, be sure to have these documents ready to submit (along with any additional paperwork that your lender may require): 

  • Payroll/Headcount documents 
    • Payroll reports 
    • Payroll tax filings (Form 941) 
    • Income, payroll and unemployment insurance filings 
    • Any documents verifying health insurance and retirement contributions 
  • Documents verifying rent, utilities and mortgage payments were active in February 2020

It’s more than likely that your lender will want these documents in digital format. It’s important to stay organized and maintain your bookkeeping accurately during these times. 

Loan Forgiveness Denied? Try These Next Steps

If you’ve already applied for PPP loan forgiveness but you have been denied, try to ask your lender if there are any additional documents that you can provide to reassess your application. 

If the answer is still no, then you’ll be repaying your loan. Keep in mind: 

  • You will accrue interest at a fixed 1.00% rate for the rest of the 2-year period 
  • You are able to pay off the outstanding balance early without facing prepayment penalties 

Things to Remember

Before you go, here’s a few extra tidbits of information about the PPP loan. 

 

  • The forgivable PPP loan is tax-free; therefore, you cannot claim any expenses that have been forgiven under the PPP as tax deductions 
  • Utilities include: electricity, gas, telephone, internet, transportation, and water bills 
  • After the loan is fully repaid or forgiven, you have to keep your documents for at least 6 years thereafter 
  • You cannot use PPP loans to prepay mortgage

The Bottom Line

If you’ve been approved for a PPP loan, try to stick to the criteria so that your loan can be forgiven! These are undoubtedly hard times and the goal of this program is to help small businesses stay afloat. 

That being said, the PPP loan is a solid option for small businesses that have medium-high payroll costs and low-medium overhead costs. However, for self-employed individuals, this equation is often flipped and so, the PPP may not be the best solution because of the forgiveness criteria (i.e. 75%/25% rule). 

If your small business still needs additional capital and funding, check out Uplyft Capital’s funding programs. Whether you end up receiving funding straight from our platform or from a lender in the marketplace, our AI-based solution helps you and our team find the best funding partner for your business.

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Why Was My Business Declined for PPP?

A look at why your PPP application may have been denied.

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The coronavirus pandemic has caused a stir in the business community and left many business owners seeking financial assistance. As such, the government has extended financial aid in the form of loans under the Paycheck Protection Program (PPP). For qualifying small businesses, this means that you can use the loans to help pay your employees and other essential expenses during the crisis. However, you may be a business owner that applied for PPP and was denied. 

If you’re wondering, “Why was my business declined for PPP?” we will share some of the most common reasons why your application may have been rejected. We’ll also dive into the details about PPP qualification and alternative funding options that are worthwhile to consider. 

General Information about PPP

The Paycheck Protection Program is a government program that authorizes $349 billion in forgivable loans. These loans can be forgiven if and only if borrowers adhere to these two requirements:

  1. The loan amounts are used for payroll costs or mortgage interest, utility costs and rent over 8 weeks after the money has been given 
  2. Compensation and employee headcount remains unchanged 

For each employee, payroll costs max out at $100,000 annually. There’s a 6 month loan deferment period.

Who Can Apply?

The application process opened on April 3, 2020. The application initially opened to sole proprietorships and small businesses. One week later, self-employed individuals and independent contractors could apply for the loan to cover specific expenses, as well. 

Any business with less than 500 employees is eligible to apply, including: veteran organizations, Tribal businesses, nonprofits, self-employed persons, independent contractors and sole proprietorships. 

So, if your business does not fit those descriptions, your application would have been denied.

What Can PPP Loans Be Used For?

Loans in this program are mandated to be used for:

  • Payroll costs 
  • Rent (for lease agreements made before February 15, 2020)
  • Utilities (for services that started before February 15, 2020)
  • Mortgage interest (incurred before February 15, 2020)

Loan amounts can be made for up to two months of average monthly payroll costs (from 2019), with an additional 25% on top of that number. This amount is capped at $10 million. The interest rate is a fixed 1.00%

The loan is forgivable as long as these conditions are met:

  • The funds are used for the above reasons within 8 weeks after the funds are given 
  • Employee headcount remains unchanged 
  • You do not change employee salaries by more than 25% for any employee who made less than $100,000 annualized in 2019 
  • You rehire full-time employees and provide their salaries by June 30,2020 for any changes that have been made to your headcount between February 15, 2020 and April 26, 2020. 

Things to Check on Your Application

Now that you have all the details, it’s time to look at why you may have been denied for your PPP loan. It could be something as small as a simple mistake. For example, maybe you left a number off your Employee Identification Number or made a different typo that led to denial. 

If you’ve been denied, it’s likely that the lender will reach out to notify you directly, rather than the Small Business Administration. In some cases, they may tell you why you were denied, but in others, you may not be given a reason. 

Additional reasons for denial include:

  • You don’t meet the lender’s requirements 
  • You applied for a loan for various businesses or franchises 

To problem-solve the reason for your denial, it’s worth it to try these steps:

  • Check that the information your submitted in your application is accurate
  • Reach out directly to a representative to discuss why your application was denied
  • Try work with another PPP lender

Automatic Reasons for Disqualification

If you still don’t understand why you’ve been denied, it could have been because of an automatic disqualification. Automatic disqualification is based on your answers to the questions in the application. 

You would have been automatically disqualified to receive PPP aid if you answered yes to the questions about the following:

  • SBA Default: You’ve defaulted on a SBA or Federal agency loan in the last 7 years
  • Criminal Charges: You have been indicted for criminal charges or are currently on parole 
  • Federal Agency Suspension/Exclusion: You’re currently involved in a bankruptcy or have been suspended, debarred, declared ineligible or voluntary excluded from Federal departments or agencies
  • Felony Records: You have a felony record in the past 5 years. Whether you’ve been convicted, pled guilty, pled nolo contendere, been placed on diversion or been placed on probation, your application will be denied.

Other Financing Options

It’s undoubtedly stressful to feel financially strained, especially as a small business owner. You want to be able to keep your doors open and take care of your employees’ needs during this unprecedented time. 

Don’t worry, even if your SBA PPP loan was denied, you have other funding options. 

Here’s a look at a few alternatives you can consider:

  • Credit card: Apply for a business credit card. The Prime Rate was cut by the Federal Reserve so many credit cards have much lower APRs. 
  • Line of credit: A business line of credit can be taken out and you’ll only have to pay for what you borrow. Since some lenders may be tightening the amount they are lending, it could be worthwhile to draw funds sooner than later. 
  • Merchant cash advance: Take a look at merchant cash advances from providers like Uplyft Capital. A merchant cash advance provides almost instantaneous cash in exchange for a promise of a portion of your future sales. Even if you don’t access funds directly from Uplyft Capital, you can leverage our marketplace to automatically connect you with a lender that best suits your needs. 
  • Access home equity: As a last and final resort, you may want to discuss the option to use your home equity for access to capital. It’s best to discuss this option with your CPA or financial advisor before doing so because it’s obviously a big risk. 

The Bottom Line

Getting business funding and financial aid during an economic and global health crisis may present challenges, but it is surely possible. Some businesses simply don’t qualify for the Federal government’s programs, and others may qualify but have been denied for one reason or another. 

Be sure to double check your application and reach out to your SBA lender to find out more information regarding your specific case. However, if you need cash quickly, you can take advantage of other funding options like credit cards or merchant cash advances.

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Small Business Owner’s Guide to COVID-19 Financial Aid

The pandemic is threatening big and small businesses alike.

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There is high pressure on small businesses to find ways to survive this situation.

While many businesses have been ordered to close their doors for the foreseeable future, others have already permanently shuttered because the losses have loomed too large. To mitigate the damage, the Federal government has extended financial aid loans and grants. 

There are also other methods for small businesses to source much needed funds during this time. For example, small businesses can turn to merchant cash advances for quick and easy financial aid. 

Here’s your overall guide to some popular COVID-19 financial aid options as a small business owner. 

Federal Aid Options

First things first, the Federal government and local governments are extending a lending hand. Let’s take a look at some of their programs and how they may help your business survive. 

Recently, the Federal government created the Coronavirus Aid, Relief and Economic Security (CARES) Act. Under this, the Paycheck Protection Program (PPP) was initiated with a $350 billion budget. On top of that, the PPP received an additional $310 billion in funding through the Paycheck Protection Program and Health Care Enhancement Act (PPPHCE). 

Under the PPP, a loan can be taken out for up to 2.5x the borrower’s average monthly payroll costs up to $10 million. The loan has a 1.00% fixed interest rate and repayment term of two years. This aid is currently intended to be in effect through June 30,2020. 

Billions on billions of funds are floating to small businesses, so how do you get your hands on it? 

 

We’re about to get to that!

All About the Paycheck Protection Program (PPP)

The Paycheck Protection Program offers government-backed interruption loans. Plus, these loans may be forgiven if a small business is able to sustain its employees on payroll. 

Let’s take a look at some of the benefits of the PPP:

  • Covering Operating Expenses: The loan is equivalent to 10 weeks of a company’s payroll up to $10 million. This money can be used flexibly to cover operating expenses like rent, utilities and payroll. The goal is to keep small businesses afloat, but you already knew that. 
  • Rehire Incentives: If you’ve already laid off some of your workforce, the program allows for you to rehire them and still reap the benefits of the loan. This is a win-win situation for everyone involved. 
  • Broadened Eligibility: The eligibility of the program covers: 501(c)(3) nonprofits with less than 500 employees, as well as businesses meeting the Small Business Association’s (SBA) small business criteria. It also is applicable to sole proprietors, self-employed persons and independent contractors. See more on eligibility below!
  • Loan Forgiveness: If a business is able to maintain their workforce, they are granted 8 weeks of loan forgiveness to cover utility, mortgage payments, rent and payroll. The loan forgiveness is adjusted and reduced relative to any layoffs or reductions in salary made during the loan period.

Is My Business Eligible for a PPP Loan?

Small businesses, stand up. You are eligible to receive a PPP loan if you’re a:

  • Small business (500 employees or less) 
  • A 501(c)(3) with less than 500 employees
  • A sole proprietor, independent contractor or self-employed
  • A Tribal business meeting SBA size standard
  • A 501(c)(19) Veterans Organization 

Additionally, if you can prove that your maximum tangible net worth is $15 million or less and the average net income for the past 2 fiscal years before your application submission is less than $5 million, you are eligible, too! Keep in mind that if your business is in the food services sector (NAICS 72), the 500 employee rule is applied per physical location.

What Will Lenders Be Considering?

OK, so it sounds easy enough to get this loan if you’ve matched the eligibility requirements above. Let’s see what lenders will be checking in order to approve your application: 

  • Because of the current economic situation, your business undoubtedly requires this loan to support ongoing operations 
  • You will use the loan to retain employees or fulfill mortgage, utility and lease payments
  • You don’t currently have an application pending for this same reason and amount
  • You have not received a duplicate loan amount from the government between February 15,200 and December 31, 2020


For those who are sole proprietors, self-employed or independent contractors, lenders will require documents like: 

  • Payroll tax filings
  • 1099-MISC 
  • Income and expenses (for sole proprietors) 

Economic Injury Disaster Loan and Grant (EIDL)

Small businesses can also apply for an Economic Injury Disaster Loan (EIDL). This is being provided to businesses who are experiencing a temporary loss of revenue at the hands of disaster (yes, we’re looking at you, COVID-19). The SBA allows borrowers to receive up to $2 million over 30 years at an interest rate of less than 4%. 

Additionally, the government has supplemented this loan with an EIDL grant of up to $10,000 (this one is a grant which means you don’t have to repay it)!

Common Challenges

We are in uncharted territory, and you’re not alone in facing such dramatic changes and challenges. 

It’s likely that you’re facing these types of hurdles and financial constraints:  

  • Access to capital: Consider a merchant cash advance which offers a quick alternative to receive cash in as little as 24 hours. 
  • Maintaining your workforce: From paying payroll to protecting their health, consider government loans, grants and alternative funding methods aimed to secure these needs. 
  • Sanitation costs: You’ll likely have to increase cleaning and maintenance contracts / pay for extra supplies. 
  • Changing market demand: Stay at home orders and higher unemployment rates have greatly shifted consumer demand. 
  • Insurance coverage:  Contact your insurance provider to see what may be covered in your interruption insurance. 
  • Inventory and supply chain management: This virus is affecting businesses globally so the supply chain may be delayed/ suppliers may have shut down.
  • Marketing:  Create a marketing plan to communicate with your customers on your policy and operational changes during this time. Try to retain as many customers as you can with promotions and incentives.

Small Business Best Practices During Coronavirus

As a small business owner, there’s a lot to manage, especially now. Along with the financial pressures, you need to also focus on protecting the health and wellness of your employees. 

 

Try to follow these best practices to further protect your business and its people:

  • Encourage sick workers to stay home
  • Postpone all non-essential travel 
  • Keep employees at least 6 feet away from one another 
  • Provide antibacterial, face masks and potentially gloves 
  • Clean consistently and routinely

Your Next Step: Apply Today

Despite the challenges caused by this pandemic, the ability to keep your business’ doors open is a possible feat. Whether you choose to lean government support or leverage private options, all you need to do is fill out applications and press submit! 

If you’re a small business that seems to qualify for the aforementioned government aid, find a lender. If you’d like to learn more about merchant cash advances and Uplyft Capital’s quick funding options, don’t hesitate to apply now!

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How Do Business Cash Advances Work?

Let's talk business cash advances

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Every business faces the need for capital sooner or later.

Whether you’re just getting started or need a quick influx of cash on hand, you may be wondering: “What is a merchant cash advance?” A merchant cash advance is a more flexible and faster funding alternative to a business loan.

What makes a merchant cash advance the right choice for your business? Let’s find out! 

We’ll explain all you need to know about business cash advances, the benefits of this funding option, and how you can apply for your own cash advance online. 

What is a Merchant Cash Advance?

A merchant cash advance (MCA) provides you with an upfront sum of money. In exchange, you give back a percentage of your future sales. 

 Two of the most popular methods of business funding are a merchant cash advance or a business loan.. Here’s how they differ:

  • Merchant Cash Advance: A MCA provider gives a business upfront cash. The repayment terms are based on a portion of future sales. 
  • Business Loan: A loan is also upfront cash, but the repayment is made in set monthly installments with a fixed or compounding interest rate. 

Benefits of a Merchant Cash Advance

Need cash fast? A merchant cash advance can provide you with it. But, that’s not the only benefit of choosing this funding option.  

Here are a few more benefits that a MCA brings to the table: 

  • Forget Credit: When you apply for bank loans, the bank will assess your credit rating and could deny your loan based on a poor rating. If you have less than optimal credit, you shouldn’t lose the opportunity to build your business. A cash advance provider cares more about your monthly sales over (than ) your past credit history. That’s why you don’t need a high credit score to be approved for a cash advance. 
  • Payback Varies: When you take out a loan, you have to pay it back according to a set repayment term. With a cash advance, you are promising a portion of future sales. This means that if you have a bad month of sales, you pay back a smaller amount than you do during a month of high sales. 
  • No Personal Guarantee: Unlike standard business loans, MCAs do not require a personal guarantee. This means that in the unfortunate case that your business cannot repay its cash advance, the business owner is not individually liable for the business debt. 
  • Your Money, Your Way: When you get a lump sum of money from a merchant cash provider, the money is yours to do what you want with it. Unlike loans, you don’t have specific restrictions on how you use it. For example, you can allocate 50% to purchasing inventory, 25% to payroll and the remaining 25% to marketing efforts. On the other hand, many loans come with strings attached. For example, a SBA 504 loan cannot be used to buy inventory. In this way, a merchant cash advance offers a more flexible option for business capital.  
  • Lowered Risk: Forget about putting your assets on the line. With a cash advance, your business’ health is not used as collateral for the money you borrow. You give back a portion of what you’re making, so you don’t have to worry about your credit score or legal repercussions of defaulting payments.
  • Fast Cash: The ability to get capital quickly could make or break your business. On average, a loan could take 10 to 15 days to process. Instead, you could apply for a cash advance online and receive funding within as little as 24hrs.
  • No Collateral Required: Many traditional business loans require the business to use its assets as collateral. These include the business premises, inventory and even vital equipment. This is not the case with merchant cash advances.
  • New & Non-Traditional Businesses: MCAs are perfect for new and non-traditional business. Unlike banks that require a business to have been in operation for more than 2 years, MCAs are available for businesses that have just 6 months of revenue. They are also a great resource for online businesses, ecommerce, drop ship businesses, social media influencers that may not have physical premises.

Drawbacks of a Merchant Cash Advance

For all their advantages, merchant cash advances have a number of drawbacks. As a responsible and informed business owner, it is important to be aware of these when applying for an MCA.  

Here are a some of the drawbacks of this form of business financing:  

  • Cost of Capital: MCAs can be expensive. The cost of capital is calculated as a factor rate rather than an interest rate. For example a factor rate of 1.28 indicates that the borrower will pay 28 cents for every dollar they borrow. 
  • Daily or Weekly Payments: Most MCAs have daily or weekly payment terms. These work well for businesses with consistent daily revenue such as restaurants but may not suitable for businesses with less consistent cash flow such as consultants, construction companies and lawyers.

How Do I Repay a Cash Advance?

A fast cash advance feels like a gift, but it’s important to remember that it’s not free money! 

You will have to pay back the lump sum over time. However, the repayment term is set up to correlate with your monthly sales. 

There are generally two ways to pay back your cash advance. These include:

 

  • Percentage of Credit Card Sales: Your cash advance provider will deduct a percentage of your credit or debit sales until the lump sum amount has been paid back in full. This means that the more sales you have, the less time you’ll need to repay the total amount borrowed.
  • Fixed Withdrawals: There’s a daily or weekly payment that will be deducted automatically. This amount is determined based on an estimate of your monthly revenue. The withdrawal amount is set in advance. Therefore, this option does not depend on how your sales are doing.

Is a MCA Right for My Business?

While a merchant cash advance may not be the solution for all businesses, it is the best option for many. These are some of the most common reasons and types of businesses that seek a merchant cash advance:

  • Your business is new and doesn’t qualify for alternatives 
  • You have a poor credit rating 
  • You lack assets to be used as collateral 
  • You want capital for a short-term need 
  • You have a preference for flexible repayment terms 

The Bottom Line

It’s inevitable to have to fund your business. Yet, the way you choose to do so is up to your preferences and potential constraints. A merchant cash advance offers you with a flexible, fast, and easy way to get business capital whenever you need it! 

Want to find out more about Uplyft Capital’s programs? Or, do you want to be matched with the best loan provider through our marketplace? No matter your preference, our team is here to help you get the funding you require as fast as possible. 

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Building Business Credit In 2020

How does business credit work?

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Growing your business comes down to a few key principles. It simple but not easy.​

Building business credit in general I believe is one of the most sought after yet overlooked topics when it comes to building your business. I personally believe it is overlooked because it just sounds scary, “Business Credit”. The reason I believe it sounds soo scary is that people compare it to personal credit and let’s be honest most of you reading this still haven’t figured out fully how to manage your own personal credit. I’m here to tell it’s actually not as complicated as it seems, and there’s a lot of benefits when building business credit. In this article, I’m going to go over a few key points and jumpstarting your business credit journey.

Do I qualify for business credit?

Building business credit in general I believe is one of the most sought after yet overlooked topics when it comes to building your business. I personally believe it is overlooked because it just sounds scary, “Business Credit”. The reason I believe it sounds soo scary is that people compare it to personal credit and let’s be honest most of you reading this still haven’t figured out fully how to manage your own personal credit. I’m here to tell it’s actually not as complicated as it seems, and there’s a lot of benefits when building business credit. In this article, I’m going to go over a few key points and jumpstarting your business credit journey.

You Must Get An EIN Number

Your EIN number or Tax ID number is basically your Social Security number but for your business, it is literally its own entity. This way you don’t have to use your own personal SSN which looks unprofessional to lenders and helps mitigate any personal guarantees. The last thing you want to do is have your personal credit and business credit all mixed up, to apply for an EIN you can obtain one from the IRS.

Open A Business Bank Account

When it comes to business funding a business bank account is required for all business loan type products, in addition to this, it will help you keep track of your business finances and keep them separate from your personal finances and tax purposes. Also, most lenders are required to see your business bank account in good standing and consistently with a positive balance. If you do not have a business bank account in place and need help opening one you can open one online here.

Get A Dun & Bradstreet D-U-N-S Number

This is a process that most entrepreneurs either look over or don’t even know it exists, and this number alone can help take your business’s finances to the next level. The Dun & Bradstreet D‑U‑N‑S Number is a unique nine-digit identifier for businesses. This number is assigned once their identity process has confirmed and identifies a company as being unique from any other in the Dun & Bradstreet Data Cloud. The D‑U‑N‑S Number is used as the starting point for any company’s Live Business Identity. To create your D-U-N-S Number go to https://www.dnb.com/duns-number.html

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Merchant Cash Advance’s For Cashflow Gaps

Merchant Cash Advances

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A good strategy for cashflow gaps.

There are a few short-term business loan type products in the market, these are designed to allow you to obtain a reasonable amount of cash for you to use as working capital quickly when you’re in need of a quick fix. How it works is you’ll receive a lump sum of cash upfront, which is then repaid to the lender over a short period of time. Even though loans like these come with higher interest rates than most loans out there, but the overall total cost for these loans may be less expensive than longer-term options with a lower interest rate.

The Merchant Cash Advances (MCA):

MCAs are the popular term of these types of loans, the MCA loan gives you a cash advance that you’ll have to repay in a shorter period of time with a potentially higher interest. This method is most suitable for businesses that receive a large portion of payments through credit cards (such as retail).

In this for you?

Merchant cash advances are great for the retail and leisure niches – so businesses that make a majority of their sales through card payments are ideal.

Merchant cash advances are a really unique and innovative way for businesses to get funding fast. Whether you’re planning your next product launch, taking on new employees or looking for a business funding solution to a cash flow gap, it could be a great way to fund it. Unlike many other types of business funding, it’s relatively easy to obtain and the repayment structure is perfect for businesses that go through seasonal high and low periods.

There are many situations that can leave you with a gap in your cash flow. Let’s say you are in an industry where your customers do not pay you on delivery. If you are collecting money on a monthly basis, you will likely encounter a common problem: how do I pay my bills if my customer fails to pay on time?

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How To Get A Tax ID Number For Your Business

How to get a Tax ID

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A very important step to get any venture started.

Disclaimer: In this article, we will be citing websites with the exact content that’s being used on their site so that their information does not get lost in translation. 

What Is A Federal Tax ID Number or EIN

Federal Tax ID Number or EIN is also referred to as a Taxpayer ID, Employer ID, TIN, and FEIN. It is similar to a Social Security Number in that it is used by the Internal Revenue Service for tax identification purposes. An EIN is issued with a unique 9 digit number in the following sample format: 00-0000000. EIN Numbers do not have an expiration date and will only be issued to a Sole Proprietor once. Any of the following entity types must be issued an EIN to conduct business: LLC, Corporation, Partnership, S Corporation, Non-Profit Organization, etc. When an EIN has been assigned by the IRS to a business entity, it becomes the permanent Federal Taxpayer ID Number for that entity.

How Do I Get A TIN?

SSN

You will need to complete Form SS-5, Application for a Social Security Card (PDF). You also must submit evidence of your identity, age, and U.S. citizenship or lawful alien status. For more information please see the Social Security Administration web site.

Form SS-5 is also available by calling 1-800-772-1213 or visiting your local Social Security office. These services are free.

EIN

An Employer Identification Number (EIN) is also known as a federal tax identification number and is used to identify a business entity. It is also used by estates and trusts which have income which is required to be reported on Form 1041, U.S. Income Tax Return for Estates and Trusts. Refer to Employer ID Numbers for more information.

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