Business loan

Emergency Business Loan Options and Covid-19 Relief – NerdWallet


Government emergency business loans

The federal government offers emergency business loans to small business owners who have been affected by disasters, including the pandemic:

SBA Disaster Loans: Businesses struggling with disasters such as tornadoes, floods, or droughts may be eligible for SBA disaster loans of up to $ 2 million.
For small business owners in need of COVID-19 help, the SBA is offering COVID-19 economic disaster loans of up to $ 500,000 through December 31, 2021.
PPP loans: The Paycheck Protection Program has provided repayable relief loans to businesses, independent contractors and self-employed workers hard hit by the pandemic. These loans are no longer available.

Advantages of online loans

Online lenders can be a great option for an emergency business loan. They offer the speed and convenience that the big banks and credit unions often don’t.

Most online lender websites disclose how quickly applications can be filled and how long it takes to fund a loan, making it easy to compare options based on speed. Applications can usually be completed in just a few minutes, and many lenders offer same-day business loans.

Other factors to compare include origination fees, annual percentage rates (the interest rate plus any fees associated with the loan), and the loan repayment term.

You can use a business loan calculator to estimate your monthly payments and total interest charges to determine the affordability of the loan.

Types of emergency business loans

Here are the main types of emergency business loans and how to choose the one that’s right for you.

Term loans: A term loan provides a lump sum of cash, repayable weekly or monthly with interest over a predetermined period. This is an option when you need to fund a large one-time emergency expense, like replacing a broken piece of equipment or broken pipes.

Business lines of credit: This type of financing provides 24/7 access to capital, so it may be a good idea to cover costs in a crisis. You get a borrowing limit (up to $ 250,000) that you can continue to reuse and pay off, as long as you make timely payments and don’t go over your credit limit.

Invoice factoring: If you have customers who owe you money but have not yet paid, these unpaid invoices can be sold to a factoring company for a fee. However, this type of financing can be expensive, and the factoring company can deal directly with your customers to collect unpaid invoices.

Avoid predatory loans

Small businesses can be the target of abusive lending practices, such as not listing fees and interest rates as annual percentage rates, imposing prepayment penalties, and offering loans with payment terms that are not fixed.

Cash advances to traders are a type of business loan that is often viewed as predatory and should be viewed as an option of last resort. MCA loan payments are either automatically deducted from your credit card sales or taken daily or weekly from a bank account.

MCAs typically carry three-digit APRs. High costs and frequent payments can strain your cash flow and lead to a debt trap, where you have to withdraw more money just to stay afloat.

Compare small business loans

NerdWallet has put together a list of the best small business loans to meet your needs and goals. We evaluated lender reliability and user experience, among other factors, and categorized lenders that include your income and how long you’ve been in business.