Missed out on the PPP loans? Here’s what you can do instead

Update: The recent passage of the Paycheck Protection Flexibility Act makes changes to the requirements for loans to be forgiven. It extends the covered period to 24 weeks, increases the length of time allowed to rehire employees who have been laid off, and decreases the percentage that must be spent on payroll to 60%.

The Paycheck Protection Program (PPP), as part of the CARES Act, provided much-needed funding for small businesses who are feeling the pinch from COVID-19 and the associated economic downturn. But the program received so many applications that it ran out of funding in just a few days. What can small businesses do if they missed out on getting a PPP loan? Fortunately, you have options. 

Main Street Lending Program

The Federal Reserve has instituted the Main Street Lending Program to help small and medium-sized businesses. This program will provide loans for businesses with up to 10,000 employees or revenue of less than $2.5 billion in 2019. Businesses can apply for new loans or to increase the size of an existing loan. Ninety-five percent of the loan will be purchased by the Federal Reserve, so lenders will only take on 5% of the risk. 

You can get a Main Street Lending Program loan from an eligible lender (a U.S. bank or credit union), and you can qualify for this program even if you have also received a loan from the Paycheck Protection Program. Loans are available for $1 million to $25 million for four years at an adjustable interest rate. 

Microlenders

If your financing needs are more modest, you may find the help you need from a microlender. Microlenders make loans to small businesses, even if the businesses aren’t currently served by a bank. Some microlenders invest their own money, while others aggregate funds from a large number of investors in amounts that may be as small as $25. Microlenders may make loans that charge low or no interest and have a payment schedule, or they may take an equity position in the company they are financing. 

Crowdfunding

Crowdfunding lets you raise money from friends, acquaintances, and even strangers. You can publicize your product or service and take orders in advance of availability. Investors can send money for pre-orders or invest in your project with the expectation of a future return, depending on the platform you choose and the way you set up your campaign. 

Paycheck Protection Program part two

While the initial $349 billion provided by the Paycheck Protection Program was quickly exhausted, a new bill including additional funding was passed in early May. Demand for these funds has not been as robust as it was for the first round, so contact your lender to see if there is still money available. Have your payroll records for the past twelve months available, and don’t wait.