More business owners across America are considering bad credit business loans as they face unprecedented financial and logistics struggles. These struggles followed state orders that shut down non-essential businesses to keep more people at home. To maintain some income, many business owners were forced to get creative, seek out disaster relief, or both. Where government assistance programs have failed, some people tried to fill the gap with business loans for bad credit.
Banks across America now face accusations from customers and politicians who allege that money meant for small businesses went to large enterprises instead. If true, this might explain why the small business emergency relief fund emptied in less than two weeks, with many business owners receiving either nothing at all or much less than promised. Take a look at the shortcomings of the three government assistance programs and how start-up business loans can fill the gaps.
Paycheck Protection Program
The main purpose of the PPP loan is to help you keep your workers employed for as long as possible. In fact, according to the SBA, if companies keep their workers employed for at least eight weeks after receiving the money and use it for payroll, utilities, rent, and mortgage interest, the business owner can treat the loan as a grant. This attracted many business owners to apply for the PPP loan.
However, banks remain unprepared to process applications, even now. Business owners have reported system crashes during applications for both traditional and online banks.
To add to this, funds ran out before many people even completed the application process. Business owners report that they expect the same result for the funding rounds scheduled for the months ahead. Many have taken to social media to share their frustrations with the system and continue to await further updates.
SBA Economic Injury Disaster Assistance Loan
Despite the opportunity to treat PPP loans as grant money, many business owners flocked to the SBA disaster loan program instead. Several factors made this loan option attractive. Even if business owners had to repay portions of the loan, they could get up to $2 million at an interest rate of only 3.5%. An additional advantage came in the form of a promised $10,000 grant that business owners would receive upfront within days of applying.
Thousands of business owners waited weeks before receiving payments, and some have received nothing at all. The SBA later decided to pay out “up to” $10,000 instead, at $1,000 per employee. Many people that did get the grant haven’t received the rest of the loan or information on getting anything at all.
Pandemic Unemployment Assistance
Unfortunately, for many business owners, the only other option they have is to apply for unemployment benefits. In the past, unemployment benefits were only available to people with full-time jobs who worked for companies that paid into the unemployment benefits fund. The U.S. Department of Labor now allows state governments to open up Pandemic Unemployment Assistance to self-employed individuals.
The sad reality is that some states might make it harder than others for self-employed workers to get benefits.
Benefits also do not keep businesses afloat for a long period. The payments provide only a small income to the owner, but it might help business owners who do not have a brick-and-mortar to pause rather than close their businesses until the economy recovers. Business owners should also make strategic decisions to ensure they do not disqualify former employees from receiving benefits while they are unable to work.
Bad Credit Business Loans
Not all business owners are comfortable with the idea of closing their doors for any time and relying on unemployment checks. They want to keep serving customers and employing workers for as long as possible. The good news is that there are still many existing programs you can tap into to fund your business, balance the books, keep people employed, and continue to serve customers in new and creative ways.
Business loans for bad credit can help to level the playing field for not only people who are still waiting for assistance but also those who were unable to apply. For instance, people currently on parole or who earned a portion of their income from certain industries were disqualified.
Bad Credit Business Loans: One of Four Main Solutions Business Owners Now Turn To | First Capital Business Finance