Unquestionably, PPP and EIDL funding has assisted many small businesses to keep their doors open. At the same time PPP and EIDL has not resolved the challenges that businesses continue to face. Gil Zapata, CEO of Lendinero explains the challenges and how Latino-Owned businesses are looking for alternatives to PPP & EIDL funding.
What are the challenges to PPP & EIDL funding for businesses?
1. Many businesses have not been able to secure funding from these programs
2. Other businesses received far less than the amount they anticipated
3. For some businesses, the funding was not enough
4. Accountants and businesses were not prepared
While this applies to many small businesses, Latino-Owned businesses were not an exception to these hurdles. In fact, they faced greater challenges.
Whatever the reason, there are Latino-owned businesses out there in need of funding that have not been served by the PPP or EIDL programs. At the same time, businesses that did not receive enough funding. “ For instance, we have a customer that generates $500,000 in monthly revenues and expenses are approximately $470,000. Between EIDL and PPP they received a little over $300,000. While that may sound like a lot, it is not for a business with annual expenses of over $4 Million. On the other hand, we have the same issue with businesses that generate far less per month,” states Mr. Zapata. That is why many Latino-Owned businesses are looking for alternative to PPP & EIDL funding.
What are the best alternatives to EIDL & PPP Loans?
1. The SBA 7(a) loan program
2. Online personal loans
3. Online business loans
SBA 7(a) Loans
The SBA 7(a) loan program has been one of the most traditional programs from Small Business Administration (SBA). These loans allow businesses to use the funds for numerous purposes.
The advantages of this program are the cost of capital and the repayment terms. Within the 7a there is the standard 7a and the 7a small loan. The differences are the loan amounts. On the 7a the maximum loan amount is $5 Million and on the 7a small loan, the maximum is $350,000.
Businesses that apply for these loans must be prepared to provide a lot of financial documentation. Also, many businesses who suffered declining revenues may not qualify.
Do not worry there are other alternatives.
Online Personal Loans
While personal loans are not business loans, many businesses have benefited from these types of loans. Lendingclub.com, Prosper.com, and Bestegg.com have not discontinued funding during the pandemic. These lenders are actively lending. While their guidelines may have tightened up a little more, they are still funding. The great benefit to obtain a personal loan from these online lenders is the processes. Prior to the pandemic, you could obtain a personal loan within 1 to 5 business days. Today, the process may be taking 3 to 10 business days. That is relatively fast compared to a bank. At the same time if you have exhausted PPP & EIDL funding or you were denied, this is an alternative. A personal loan can be used for business purposes.
Online Business Loans
In 2020, lenders in the fintech space came to a standstill. In the last quarter of 2020, many online lenders resume to lend. Lendinero, has been helping Latino-Owned businesses with PPP & EIDL. “Our core product has been online lending to Latino entrepreneurs when banking is not an option. More and more we are seeing Hispanic businesses seeking more capital via our core programs. I believe that after the 2nd quarter of 2021 this will be the only option for many businesses. History and financial markets are cyclical and repetitive. In 2008, we saw a similar trend in business lending,” states Gil Zapata.
While online lenders are typically more flexible in terms of their lending policies than the big banks, PPP and EIDL, this may be the only option for some businesses. Lendinero indicates that in the fourth quarter of 2020, originations at their fintech company were 60% EIDL and PPP and 40% alternative funding options from Latino-Owned Businesses. Now, may be the time to turn to these alternatives.
