The Impact of Coronavirus (COVID-19) on Business Loans
Updated: Jul 22
On the Bright Side - It's an Investment
Often times, companies may need to purchase extra equipment, inventory, maintaining cash flow, or even expanding the business. However, not all companies may have the additional money to make up for all those expenses. This is where small business loans come sweeping in to help. A business loan is a debt that the company is obligated to repay according to the loan's terms and conditions (Chron). It's understandable that taking on a loan may feel like you are signing yourself up for debt, but with a carefully thought out solid plan and good data (along with judgment) to back it up - a loan a really make or break your company!
How COVID-19 is Impacting Business Loans in 2020
Flash forward to the present year 2020 and how the world has not been the same ever since anymore. There are many things that have been affected because of the pandemic. So, how are business loans being impacted by coronavirus? Lenders are becoming more cautious and questioning, which is reasonable during this time. Here are a couple of points that might need more confirmation to help them feel at ease:
Time in Business
It's not surprising that lenders want to peek the history of your time in business. So, when they see a longer track record, they may be less hesitant.
Now, certain industries may be harder to give loans out to due to the crisis. Here are just some restricted industries that have been hit harder and recently deprived: restaurants, automotive, gas stations, dentist, hospitality, daycare, gyms/sports clubs, entertainment businesses, education, bricks and mortar retail, night clubs and bars, wireless stores (Score). Looking at this list, we can understand why, due to the pandemic, all these industries include people in public spaces together. Even some of the biggest events have been hit pause, hopefully they will make a comeback after the crisis.
Many small businesses have taken a huge hit from this experience. It makes sense that lenders want to make sure that you will at the end of the day be able to keep your word. Looking at the cash flow is just a confirmation that the business will be able to successfully give those periodic payments.
Again, this is of course mandatory already - but some that have great credit history may not even be accepted. However, make sure you go into the situation knowing your credit score and can understand it.
Are Businesses Getting Help Due to COVID-19?
With a pandemic like this, businesses should get some kind of help, right? Of course, we all turn to the government in a situation like this. Well, for starters, Congress wanted to help small businesses to get through this crisis, and that program is on the brink of being basically out of cash. With a $350 billion Paycheck Protection Program processing more than 1.6 million loans, no wonder Congress is unsure how to provide more aid to businesses.
The Small Business Administration (SBA) also started to accept new Economic Injury Disaster Loan (EIDL) AND EIDL Advance applications from qualified small businesses and U.S. agricultural businesses (SBA). This loan aids businesses that may be going through economic hardships and loss in revenue therefore, this loan does not have to be repaid. This was again, of course, a first come first serve situation.
Here you can apply for the relief and disaster loan options online.
Long Story, Short
At the end of the day, this is a critical sensitive time. It is harder to even get more than two cases of water per purchase. Comparing that to loans, lenders are not going to go lenient when giving out loans. We've seen that it is harder to go out and try to act like everything is normal when it really isn't yet. Who knows when this will be all over - but we know not anytime soon. So, remember to stay home and wash your hands in order to keep others safe too!
Here's a quick video on when you should get a business loan.
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