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Updated: May 7th, 2021
The Paycheck Protection Program (PPP) returned earlier this year, promising thousands of small businesses additional funding to weather the ongoing coronavirus crisis. Despite billions of dollars sitting in the financing pool, not every business will get the funding it needs.
Second-draw applications are a bit more stringent, and many businesses won’t qualify under the PPP’s new eligibility requirements. If you’re ineligible for a PPP loan or your lender has denied your application, don’t panic! You have other financing options.
If you can’t secure a PPP loan in 2021, consider one of these alternative financing options:
Below, we’ll dive into the nitty-gritty details of each of these financing options. But first, let’s answer a few questions that are likely top of mind regarding your PPP loan application.
No, you don’t need a good credit score to qualify for a PPP loan. Your credit score plays no part in your PPP loan eligibility. However, some lenders will pull your credit to make sure you’re accurately representing yourself and your business in the application.
The government designed PPP loans to be fully forgivable, essentially converting them into grants (if businesses use the funds appropriately). That’s why the government’s not meticulously screening applicants with intensive requirements like they tend to do with SBA loans.
Your PPP loan may have been denied because you failed to pass the SBA’s eligibility requirements. There’s also a chance that you made an error on your application, such as putting a zero in the wrong place or mistyping your Employer Identification Number.
Lenders enforce their own requirements on top of the SBA’s guidelines. Some banks and lenders choose only to process PPP loans for current or returning customers, while others are setting minimum loan amounts.
Yes, you can reapply for a PPP loan. First, find out why your original application was denied. If it’s a fixable issue, correct the problem and reapply through a different lender.
Borrowers have 30 days to appeal a PPP loan denial when the SBA makes an official written denial decision. You can submit an appeal petition with the SBA’s Office of Hearings and Appeals (OHA), detailing the evidence, burden of proof, and supporting financial documentation.
PPP loans are a fantastic financing resource, but they’re not the only funding option available to small business owners. Plus, PPP loans are primarily used to cover payroll costs, and there’s a good chance you need financing to cover a broader range of expenses.
If that’s the case, your business will benefit from the following loan options:
SBA 7(a) loans are still the king of small business loans. They’re not forgivable like a PPP loan, but they do come with low interest rates, fantastic repayment terms, and large loan amounts. SBA 7(a) loans can be used to cover working capital, construction, equipment, or even debt refinancing. Learn more about SBA loan qualification here.
SBA microloans provide up to $50,000 to small businesses, which isn’t too shabby considering the average size PPP loan is around $107,000. Everything about a microloan is similar to an SBA 7(a) loan, except the lending amounts are lower and the repayment terms are shorter.
Business term loans can get you quick-and-easy financing in as little as 3 days. Funding Circle provides online terms loans ranging from $5,000 to $500,000 with terms length as short as 3 months or as long as 10 years. You can use a business term loan on just about any business expense, making it an incredibly flexible financing tool.
Even if you do get a PPP loan, a business line of credit is a handy-dandy form of financing every business should keep in its back pocket. A business line of credit gets you access to revolving credit that you can use to fund everything from your working capital expenses to your brand-new food truck—or you can keep it around for an emergency fund.
You only pay interest on the funds you use, not the entirety of your line. Plus, once you repay the portion you’ve borrowed, you get immediate access to the funds again—no need to reapply.
A business credit card isn’t technically a loan, but it’s still a flexible piece of financing that extends your working capital and empowers you to buy now, pay later. And if you use your business card responsibly, you’ll build your credit score to help you qualify for bigger, better loans down the road.
Sell your outstanding invoices for liquid cash with invoice factoring. Invoice factoring is a zero-collateral financing tool that lets you get instant cash from your IOUs by trading them at a discount. You’ll get an up to 90% advance on your unpaid invoices, and then you’ll receive the rest of the money (minus the factoring fees) when the factoring company receives the payment from your client.
A merchant cash advance lets you trade tomorrow’s sales for cash today. Businesses with poor credit or no credit can qualify, making this one of the most accessible forms of business financing. While a merchant cash advance isn’t the cheapest funding option, it’s quick and easy.
Yes, PPP loans are great, but they’re not the end-all-be-all financing tool for small businesses. If you have extensive payroll costs, do your best to secure a PPP loan—but if you don’t qualify or your loan application is denied, don’t worry too much.
Need help finding the perfect small business loan for your business? Check out Funding Circle’s loan options to learn about all the financing forms available.
Michael Jones is a Senior Editor for Funding Circle, specializing in small business loans. He holds a degree in International Business and Economics from Boston University's Questrom School of Business. Prior to Funding Circle, Michael was the Head of Content for Bond Street, a venture-backed FinTech company specializing in small business loans. He has written extensively about small business loans, entrepreneurship, and marketing.