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What to do if your PPP loan is too small to help

The PPP wasn't made with sole proprietors and independent contractors in mind. Here are other options that can help.

The Paycheck Protection Program (PPP) has been the main source of federal financial assistance to businesses struggling from COVID-19 restrictions, but some smaller businesses have been left in the dust, especially those with low profits.

Some sole proprietors and independent contractors qualified for as little as $1 in some cases, according to The New York Times. If that’s the case for your business, the second round of PPP funding won’t be much help. Instead, consider these options.

Shuttered venue grants

Yes, this program was created for saving Broadway, which went dark in March 2020. But sole proprietorships that work with eligible venues can qualify for this program too. Eligible businesses open before 2019 can receive 45% of their gross annual revenue earned during that year. Those open after January 2019 can earn six times the average monthly gross revenue in 2019.

Relying on gross revenue makes it easier for businesses with low profit margins to receive more funding. The amount you can receive is also generally higher than your standard PPP loan. If your business is still making less than 30% of its 2019 revenue during the first quarter of 2021, it could also be eligible for more funding — up to 50% of your original grant.

EIDL grants

The most recent round of stimulus reopened the Economic Injury Disaster Loan (EIDL) grant program to small businesses that have been particularly hurt by COVID-19. To qualify, your business must be located in a low-income community and have suffered an economic loss of over 30% during the coronavirus outbreak compared to the year before. You also cannot have more than 300 employees.

If you meet these requirement, you can receive a grant of up to $10,000 by applying for an EIDL — regardless of whether you’ve been approved. If you’ve already applied for an EIDL and received a grant under $10,000, the SBA will give you the difference between $10,000 and your current grant.

The SBA hasn’t announced when it will reopened applications for EIDL grants at press time, though it has extended the regular EIDL application until December 31, 2021. But they will likely be available at the end of January.

SBA microloans

The recent stimulus bill temporarily made the SBA’s regular small business loan program more favorable to businesses by waiving certain fees and upping SBA guarantees. It’s also expanding its microloan program to make it more accessible to small businesses. And it temporarily extended loan terms from seven to eight years.

You can apply through an SBA microloan intermediary in your area, which sets its own rates and requirements. You can borrow up to $50,000, although the average microloan is $13,000. This option is best for businesses located in rural or low-income areas, where microlenders are typically based.

Private and local loans and grants

In many states, counties and cities, it’s still possible to apply for financing through your local government — though options are more limited than they were before.

For example, the New York Forward Loan Fund is accepting preapplications for low-cost financing to New York State businesses with fewer than 50 employees. Businesses that received a PPP loan under $500,000 or an EIDL under $150,000 can qualify.

Some private organizations are also still offering relief to businesses — especially those in certain industries. For example, the Southern Smoke Foundation is offering emergency relief grants to restaurant and bar owners, as well as their suppliers and employees who are struggling during COVID-19. Applications are available on the Southern Smoke website.

Look out for more options in the near future

With a new administration set to take office next week, it’s possible that we’ll see another round of stimulus in the coming months. This will likely include more financial assistance for individuals — and it’s possible there will be more funding for small businesses. Stay up to date by putting your name on the mailing list of a local business center in your area. You can find one by searching for local assistance on the SBA’s website.

Find an online lender that’s still accepting PPP loan applications

Below are online lenders and connection services offering loans through the SBA Paycheck Protection Program. We recommend applying as soon as possible, since funds are available on a first-come, first-served basis.

Image: Getty

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