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How to finance personal protective equipment
Multiple funding options are available to keep your employees and customers safe.
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Personal protective equipment (PPE) is a necessity when operating during the pandemic. If your business needs it to reopen — or needs to stock back up — a loan may be the quickest way to fund PPE. But there are a few alternative ways to buy PPE you may also want to consider.
What types of PPE financing are available?
Although personal protective equipment is in high demand right now, there's no special financing process. If your business qualifies, it may be able to borrow one of these seven types of loans to fund its PPE purchase.
| Loan type | Loan amount | Cost | Guide |
|---|---|---|---|
Equipment financing | 85% to 100% of equipment value | 8% to 30% APR | |
Term loan | $5,000 to $5 million | 6% to 60% APR | |
Line of credit | $5,000 to $5 million | 8% to 80% APR | |
Invoice factoring | 80% to 95% of the invoice value up front and up to 99% after invoice is paid | Discount rate of 0.5% to 6% of the invoice value | |
Invoice financing | 80% of invoice value | Fee of 2% to 5% of the invoice value | |
Merchant cash advances | $2,500 to $250,000 | Fee of 0.14 to 0.3 times the amount of your advance |
Which type of PPE financing is best for my business?
The right financing choice depends on your industry and your business's current needs. Whichever option you choose, be sure your business will be able to handle the debt and repayments. Every loan has long-term implications that could impact your business for years to come.
Best for restaurants and bars
Bars and restaurants may have luck with a short-term solution like a merchant cash advance for a small supply of PPE when reopening. If your credit is good and your business has remained profitable, it may be worth getting a term loan or line of credit to purchase a larger supply at once with a potentially low APR.
Best for retail stores
Retail businesses that typically have a high volume of credit card sales and need PPE to reopen may be better off sticking with a short-term loan like a merchant cash advance. This is especially true if you only have a few employees who will be working in the space at once.
However, many short-term options require daily or weekly repayments, so if your business isn't making many sales, it may be difficult to repay on schedule.
Best for offices
Offices may also be able to use a short-term option like invoice factoring or invoice financing to quickly fund a PPE purchase for employees. You may also want to look into a term loan or line of credit if you're attempting to outfit many employees at once.
Best for dental practices
If your business already has some PPE, but needs to resupply, equipment financing, term loans or lines of credit may be more appropriate. These allow you to purchase a large volume of PPE, and a line of credit can be reused as you repay it to give your business access to working capital. Some PPE manufacturers are offering financing to businesses.
Can I use a PPP loan to buy PPE?
Yes, but it won't be counted as a forgivable cost. A loan issued under the Paycheck Protection Program (PPP) must be used for payroll expenses, utilities, rent and mortgage expenses to be forgiven. PPE doesn't fall into these categories, so any PPE purchases made to protect your employees or customers will have to be repaid.
And while the PPP deadline has now passed, you could use funds from an SBA disaster loan to purchase PPE.
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How do I get approved for PPE financing?
The specific approval process depends on the type of loan and your lender, but these three factors play a big role in a lender's approval decision:
- Proof of past revenue. Lenders understand dips in revenue due to local quarantines and limited business, but if you can show proof of steady income before the COVID-19 outbreak, you're more likely to be approved for a loan.
- Strong personal credit score. Because most business loans require a personal guarantee from the owner, having good to excellent credit of 670 or above can help increase your chance of qualifying.
- Business plan. Outlining why your business needs the loan, how it will be used — in this case, protecting employees and customers — and how your business will repay your lender will put your business in a strong position.
Lenders also consider other factors, like time in business, when making a decision. Although wait times have been longer than usual, reaching out to your lender for more details can help you submit a well-rounded application for funding. You can also use a business loan connection service to see which lenders you might prequalify with.
3 alternative ways to pay for PPE
Depending on the amount you need, you may not necessarily need to rely on a loan to fund the purchase of PPE. Other options include:
- Increase cash flow. For retail businesses and restaurants, consider adding a surcharge to help cover the cost of PPE. Increasing the price of items or creating a separate fee are two common methods to increase cash flow.
- Government and private grants. Some states are offering grants and low-interest loans to businesses affected by COVID-19. The exact amount of funding — and the application process — depends on your state. Contact your state's commerce department to learn more about your business's options.
- Reach out to the local community for support. Members of your community may be willing to donate equipment or money to supply your business with PPE. Consider crowd-funding platforms and social media to help spread the word of your business's need.
Where can I buy PPE supplies?
PPE is available from a variety of manufacturers and retailers, including Amazon and eBay. But because supplies are limited, you will likely need to shop for specific PPE to find the right type of equipment for your business.
Ensure any PPE your business uses is certified by the CDC and is effective in preventing the spread of the coronavirus. You can learn more about how to safely reopen your business with our guide.
How much PPE should I purchase?
The amount you need to buy will depend on a number of factors, including the number of employees you have, whether the PPE is reusable and how often employees will be in contact with each other and the public.
Bottom line
PPE is a necessary part of keeping your employees and customers safe during the coronavirus outbreak. To understand your full range of financing options, read our guide to business loans so you can make an informed decision on how to fund the gear and supplies your business needs.
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