The small business economy is changing. COVID-19 vaccinations are rampant and local governments across the country are easing shutdown restrictions. This is a far cry from the early days of the pandemic in 2020. Small business owners have been forced to shut down operations or spend more money on social distancing measures. Many businesses did not survive, and those that did needed government help and loans to be successful.
The government responded with the CARES Act, providing business owners with forgivable loans through PPP. Those funds quickly ran out and months later, at the end of December, Congress approved another round. With Biden in power and the pandemic raging, a new round of stimulus was enacted in March.
In 2021, small business owners who have taken advantage of the P3 will need advice on how to get a discount on their loans and whether they will face a tax impact as a result.
With the economy recovering and businesses thinking about growth again, small business owners will continue to look to banks, credit unions, the SBA, and alternative lenders for cash in 2021. banks and credit card issuers have been less willing to lend to small businesses during the pandemic and will likely maintain strict requirements. Online and alternative lenders have stepped in to fill this void. In 2020, the Federal Reserve cut interest rates almost to zero, and they are not expected to rise significantly in 2021, despite the pandemic gradually resuming.
Not only will business owners using online and alternative lenders in 2021 receive low interest rates, advancements in technology could improve the process, with artificial intelligence and machine learning reducing wait times for loan approval. Credit scores still matter, but lenders are increasingly looking at other aspects of business owners’ finances to check their creditworthiness. All in all, these changes should make it easier and faster to obtain a small business loan in 2021.
As in 2020, the number of businesses offering online and mobile loans is expected to increase in 2021. As digital options offer many funding opportunities and faster approval, they are expected to become increasingly popular choices by compared to traditional banks and credit unions.
September 2021: The Consumer Financial Protection Bureau (CFPB) wants to increase transparency between lenders and small business borrowers, proposing a new rule that, if finalized, would require lenders to collect more information on borrowers, including demographics. , the prices and the reasons why they were refused a loan. . The goal is to get a clearer idea of how easy or difficult it is to get funding and what barriers prevent them from getting funding.
August 2021: The Small Business Administration has opened an online portal to make it easier to apply for a pardon for businesses benefiting from the Paycheck Protection Program. The tool is only for loans of $ 150,000 or less. It allows borrowers to apply directly to the SBA. Previously, borrowers had to go through the bank to get approval. With this tool, borrowers can easily upload receipts and payroll details for 2019 and 2020. Once everything is uploaded and properly submitted, the SBA will review to determine the remittance status.
July 2021: The Small Business Administration no longer requires borrowers with PPP loans of $ 2 million or more to provide financial documentation proving the loan was necessary. Borrowers with small loans still had to self-certify the need and now borrowers with larger loans will be able to do so as well. By eliminating this requirement for all borrowers, the SBA speeds up the time it takes to approve a PPP loan cancellation. The SBA plans to publish an FAQ on the change soon.
June 2021: The paycheck protection program expired at the end of May, ending the hugely popular loan program adopted during the coronavirus pandemic. The program, although it provided a lifeline for many small business owners, was also riddled with fraudulent claims and faced criticism that it did not help businesses that could benefit the most. of these loans. The SBA issued a total of 11.8 million PPP loans, worth $ 799.8 billion. Now that the program is over, we anticipate that small businesses in need of financing will turn to traditional lending options, for example banks and online lenders.