Discontinued in May 2021, Paycheck Protection Program (PPP) loans were designed to help small business owners cover payroll costs during Covid-19. The program was implemented by the Small Business Administration (SBA) and provided funds to cover up to eight weeks of payroll expenses.
The good news is that there are even more PPP loan alternatives to tap into for disaster-related funding and debt relief — as well as small business financing options like SBA loans, term loans, lines of credit and short-term loans that offer cash as soon as the next day. Here’s a closer look at each option.
If you missed out on the PPP or didn’t qualify, consider one of these alternative financing options instead.
Many states and local governments have relaunched loan and grant programs to help local businesses cover reopening costs. For example, New York State offers loans up to $150,000 with fixed rates between 8.75% and 11.75% for eligible small businesses and nonprofits through the New York Forward Loan Fund (NYFLF).
You can find out which programs are available by contacting your local small business center. The SBA has a tool that allows you to search for business centers near you.
Enacted under the CARES Act, the ERC is a tax credit for businesses and tax-exempt organizations that continued to pay their employees while closed or partially open during Covid-19. The ERC tax credit is money that goes into your pocket — not a loan that needs to be repaid.
You may qualify for the ERC if you own a small business or tax-exempt organization that continued to pay your employees qualified wages after March 12, 2020, and before January 1, 2022. If eligible, you could claim up to $7,000 per employee per quarter for 2021. The deadline to claim the ERC for 2021 is April 15, 2025. (The deadline for 2020 was April 15, 2024.)
See our Employee Retention Credit (ERC) Loans Guide to learn more about the ERC credit and how it works.
This SBA pilot program offers fast funding of up to $25,000 to tide your business over due to disaster-related events while waiting for other financing to come through. You can find SBA Express Bridge Loans through a lender that offers SBA Express loans — not the SBA directly.
To qualify, you must have an existing relationship with the lender offering the loan, and your business must be in a community impacted by a Presidentially-declared disaster or a disaster declared under the authority of the SBA.
SBA loans are term loans partially backed by the SBA to lower the risk for lenders, which could mean lower rates for you. The SBA guarantees around 75% to 85% for these loans and limits how much lenders can charge in interest and fees. It offers up to $5 million through most of its programs for a variety of business expenses, with terms from six to 25 years.
To qualify for most programs, you’ll generally need a minimum credit score of 680, two years in business and positive cash flow. The main drawback is that SBA loans can take months to process. To get around this, try working with a preferred lender. Preferred lenders have the authority to underwrite applications and don’t need to wait for approval from the SBA.
With term loans, you’ll have your pick of short-term business loans or long-term business loans. Business term loans offer a lump sum amount — typically from $5,000 to $2 million — that you repay in fixed monthly installments. They’re available through banks, credit unions and online lenders. Term loans offer flexible repayment terms with average loan terms ranging from 18 months to 10 years, with rates starting at around 7% for the best credit borrowers.
To qualify, you typically need a credit score of 680+, at least a year in business and a minimum of $10,000 in monthly revenue. But eligibility requirements vary by lender and the amount you want to borrow. Online lenders tend to have more relaxed requirements and faster funding than banks. Compare your options:
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A business line of credit (LOC) is a revolving line of credit that can be used to pay for any type of business expense. It’s ideal for new and seasonal business owners who need to pay ongoing expenses, like payroll or purchasing inventory. Unlike term loans, you only pay interest on what you borrow and funds become available again as you pay down the line.
LOCs are available from banks, credit unions, and online lenders with rates from around 8% to 60% or higher. To qualify, you may only need a credit score of 560+, six months in business and $50,000 in annual revenue. But term lengths typically cap out at one to two years, at which time the LOC must be paid in full.
Invoice factoring is when you sell your unpaid customer invoices to a factoring company for a discount. You may be able to receive up to 85% to 95% of your invoices’ value upfront, and the factoring company takes over the job of collecting payment. You receive the rest of your invoices’ value minus fees after they’re paid.
Factoring fees can range from 0.5% to 6% of invoice value, with terms ranging from 30 to 90 days. Invoice factoring may be easier to qualify for than other types of loans, as eligibility isn’t based on your credit score but on your business financials, like your bank statements and outstanding invoices. But invoice factoring is one of the more expensive forms of business financing and it’s not suitable for all businesses.
If you’re a business owner who can’t easily qualify for other types of loans, merchant cash advances (MCAs) can provide a quick cash flow solution. They’re a type of short-term funding that lets you borrow against your future credit card sales — anywhere from $5,000 to $1 million — with funding as soon as the next day.
Repayments are either daily or weekly and are automatically deducted from your credit card sales as a fixed percentage plus fees. While convenient, rates can run high, but they are an option for new or bad credit borrowers, since eligibility is based more on your business financials than your credit score.
SBA Microloans are business loans backed by the SBA with loan amounts up to $50,000. Microloans are geared toward small businesses and not-for-profit childcare centers that may not qualify for a loan elsewhere. Because they’re government-backed loans, they may offer more competitive interest rates than other types of loans.
Repayment terms on microloans reach up to seven years, with rates between 8% to 13%. To qualify, you must meet both the SBA’s and lender’s eligibility requirements, which may include having a minimum credit score of around 620, two years in business and positive cash flow. You may also need to provide collateral in addition to a personal guarantee.
SBA Economic Injury Disaster Loans (EIDLs) serve a similar purpose to PPP loans. EIDLs provide working capital loans to cover payroll costs and other operating expenses for small businesses and private nonprofits that have suffered significant economic injury in declared disaster areas. The SBA is no longer accepting applications for EIDLs due to Covid-19 specifically, but they are available for qualified businesses that have experienced economic loss due to other disasters.
If you couldn’t take advantage of the PPP loan program, you have other alternatives for accessing emergency and non-emergency funds for your business.
In addition to government-backed programs like the ERC tax credit, SBA bridge loans and EIDLs, a wide range of business financing options are available through banks, credit unions and online lenders for both short- and long-term funding.
These include term loans, SBA loans, lines of credit, merchant cash advances, invoice factoring and invoice financing as well as personal loans and business credit cards. As always, compare your options to make sure you’re getting the best deal.
The closest thing to a PPP loan right now could be a payroll loan. This loan is a type of short-term funding that can help small businesses cover payroll expenses when they’re experiencing cash flow shortages or hardship due to a disaster. An EIDL may also be an option for qualifying businesses to keep up with payroll while being negatively impacted in declared disaster areas.
PPP loans were offered as a short-term, temporary solution to the economic hardships businesses were facing as a direct result of the pandemic. SBA loans, by contrast, are meant to help small businesses grow and succeed over the long term.
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