The Paycheck Protection Program (PPP) provides qualified small businesses affected by COVID-19 with loans that may be up to 100% forgiven. First and second draw loans are made available for the latest round of PPP financing enacted as part of the CARES Act and Consolidated Appropriations Act, 2021.
To qualify for an initial draw loan, your business (such as sole proprietorships, self-employed people, and independent contractors) must have been in operation on or before February 15, 2020, and have 500 or fewer workers.
To be eligible for another draw PPP loan, your business (such as sole proprietorships, self-employed people, and independent contractors) must have been in operation on February 15, 2020, have 300 or fewer workers, have used the total amount of your initial PPP loan before the disbursement of the next PPP loan, and be able to demonstrate at least a 25% decrease in gross premiums in the first, second, or third quarter of 2020, relative to the same quarter in 2019.
For any part of your PPP loan that’s not forgiven, the remaining balance will be converted into a loan using a non-compounding and non-adjustable 1 percent interest rate with a 5-year loan term.
3. Term Loan
Term loans are among the most popular kinds of small business loans. If you have ever taken out a mortgage or financed a car purchase, you are probably familiar with the mechanics of a term loan.
Term loans are delivered using a lump sum of funds from a lender and paid off in fixed payments by a schedule until you repay the principal plus any applicable interest (and any penalties ).
Repayment periods can differ from short-term (12 weeks or less) to medium-term (1 -3 years) to long-term (3+ years). A lien usually secures term loans on your company assets (a right for the creditor to seize those assets should you default on the loan). It may require a personal guarantee, which means your assets could be liable if your company defaults on the loan. One of the perks of a term loan is the rate of interest, which may be either fixed or variable, will be competitive and lower than other forms of small business funding.
This is particularly true when you consider that you might be repaying the loan over several years. Business owners have flexibility concerning how they may use the funds. For example, an individual could use a little company term loan to expand to another place, replenish inventory, or hire new workers.
4.Merchant Cash Advance
Merchant cash advances (MCAs) are not just small business loans. Instead, they are a cash advance against your future credit card earnings delivered to you in a lump sum. The advanced sum, which is anywhere from $2,500 to $400,000, is determined by the issuer and based on your average monthly credit card sales.
Since the cash advance is repaid as a percentage of your daily credit card earnings, it might take anywhere from 90 days to two-and-a-half years to settle. Among the main dangers of MCAs is piling on a lot of these – called stacking – that may completely deplete your cash flow. You should also bear in mind that interest rates (often expressed as a variable rate) can be quite large, ranging between 40-350%.
A working capital loan is a short-term loan to enable a business to cover its regular operations needs. It can be directed toward costs such as making payroll, paying rent, or making debt payments. A working capital loan isn’t meant to purchase long-term assets or assets.
5.Working Capital Loans
You may apply for a working capital loan via Funding Circle and get a decision in as little as 24 hours. Two The speed of acceptance is one of the most significant aspects of the small business loan. Find out more about applying through Funding Circle. A line of credit is a flexible type of short-term financing.
You have a set amount of credit that you can access as you require. Having a business line of credit, you don’t make any payments or pay any attention until you use the funds.
A line of credit is excellent for unexpected expenses, so you don’t need to rely on cash flow when crises arise—as an example, having to replace a significant piece of equipment or offsetting a seasonal reduction in earnings. A line of credit may be in the range of $5,000 to $500,000 or more. Having a line of credit, you will only pay interest on the money that you draw.