If you own your own practice, you understand the importance of financial security for ensuring the survival of your business. If you are experiencing financial insecurity due to Covid-19, your business may be feeling the pressure of the economic downturn. Are you struggling to keep up with the costs associated with running your practice? If you are finding yourself struggling financially, you might be wondering if a business loan is the right option for you.
There are a variety of reasons to consider taking out a business loan, including:
- Ensuring you can cover your overhead costs
- Ensuring you can keep up payroll
- Purchasing equipment or inventory
- Possibly adding to or expanding your current business
The Covid-19 pandemic has brought with it profound challenges for many practice owners. You too may be struggling. Covering payroll and bills when there is a substantial drop in income can be challenging.
In this article, we first discuss the unprecedented government support in the midst of this pandemic, followed by non-government options. Government support information is included because you may decide that it’s sufficient for you and choose against a business loan. However, it is imperative to understand what options are available so you can make an informed decision.
- Is a Business Loan Right for You?
- Unprecedented Government Support in the Midst of the Covid-19 Pandemic
- What Small Business Loans Are Available?
- Financial Security May be Right Around the Corner
Is a Business Loan Right for You?
Maybe you’ve realized that being entirely in-practice limits your financial security? If you have a lull in business, now could be the ideal time to consider:
- What can you offer online?
- Are telehealth consultations a possibility?
- What specialty areas or products could be turned into digital or delivered products
A business loan to invest in expanding your capabilities in these areas might make financial sense.
You may have a secure practice and ample financial resources to see you through lock-down or quieter times. As some practices inevitably fail or are forced to sell, you could even possibly find yourself in the enviable position of purchasing a preexisting practice to expand your current business.
Or, if you are ready to get into the market as a startup, this pandemic might offer an unlikely opportunity.
Before you plunge into applying for a business loan, consider doing a cost-benefit analysis. Questions to consider include:
- Will this loan benefit your business or create stress or unmanageable debt?
- Is this the best way to secure the additional money you need?
- Do the benefits appear to outweigh any actual or potential costs?
- Does the loan give you security into the future, or does a high-interest rate place you at an indefensible risk? Be honest about what you want and why.
Whatever your situation, you need to be clear on whether taking out a business loan makes financial sense, or not.
Unprecedented Government Support in the Midst of the Covid-19 Pandemic
If Covid-19 has induced your need for financial support, particularly with regard to payroll, federal government policies may offer respite.
The U.S. government has enacted several relief options for businesses:
The Employee Retention Credit offers a “refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021.”
The Families First Coronavirus Response Act provides small to medium American businesses with up to 500 employees the “funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members.”
States and cities are also providing emergency bridging finance, grants and low-interest business loans. Learn more in this article posted on the US Chamber of Commerce’s website, A State-by-State Guide to Coronavirus Financial Assistance.
Additionally, it is worth tracking your state’s legal responses to this crisis. Keep an eye on the Tax Foundation’s page, Tracking State Legislative Responses to COVID-19.
What Small Business Loans Are Available?
Whether you utilize government assistance or not, as a small business owner you may be eligible for a variety of business loans. Here are 5 types of loans that may be options for you.
What government small business loans can I get?
The Small Business Administration (SBA) provides business assistance and loan guarantees. By partnering with lenders, the SBA can help practitioners secure startup business loans or low-interest disaster loans.
The 7(a) loan program is the SBA’s primary loan program for small businesses, with the maximum amount you can borrow being $5 million. One of these loans may suit you if you are a start-up, need additional money to acquire equipment or inventory to perform leasehold improvements, for the purchase of real estate, or to bolster cash flow.
The SBA may also be able to assist you in gaining access to the federal resources designated due to the coronavirus outbreak. You can learn more in its report, Coronavirus (COVID-19): Small Business Guidance & Loan Resources.
Can I get an equipment loan from the bank?
While you may be able to take a loan from your bank, banks typically have strict lending policies that make it difficult for new businesses to secure funding. This may be a good option if you are an established practice. However, funding for these types of loans can also only be used for equipment.
Can I get a loan from my business credit cards?
Business credit cards allow you to establish a business line of credit and help you separate your personal and business finances. As with most credit cards, having a solid line of credit and being able to prove a steady flow of income are both necessary. While some business credit cards may require collateral or a guarantor, this is not the case for all cards.
We recommend looking for a credit card that offers a 0% introductory financing offer.
How do I get a business startup loan?
If you are ready to start your practice and don’t want or have the capacity to bootstrap it, small business startup loans are a viable option.
Perform your homework diligently. Understand the likely costs and realistic potential income. Create a logical business plan. Research appropriate financiers. Begin the process of reaching out to lenders who look like a fit. Ask questions. It is worth considering hiring a startup consultant to make getting a small business loan easier and ensure it is tailored to your specific needs.
What is a business acquisition loan?
Depending on your credit history and personal and professional situation, now might be an ideal time to secure a loan to buy a business.
Be prepared to provide business records, your new business plan, and any financial projections. Companies like Lendio allow you to apply for this type of loan and gives you access to their network of over 75 lenders.
Financial Security May be Right Around the Corner
Remember to look after yourself as well as your business during this challenging time. With the monumental, swift changes to practice life, added psychological strain, and, for some, the move to working from home, the switch to altered ergonomics and significant emotional upheaval have created financial insecurity. When business stresses are knocking on your door, rest assured you have several viable options to make it through.