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Financing Options Worth Considering During Covid-19

The economic resources every company in crisis should consider during Covid-19.

Coronavirus (Covid-19) may have shutdown business activity, but the bills are still piling up. Whether paying rent or employees, even large companies across all industries are struggling to cope. So what can a small business do to curb the disastrous economic effects? A few things! As each day brings a host of new issues and restrictions, it’s good to know your options. Let’s take a look.

If you need: Your accounts receivable paid, stat!

Consider: Invoice Factoring (aka Invoice Discounting)

How it works: A third-party factoring company takes your unpaid invoices as collateral in exchange for an immediate payout (minus a small fee). When your client’s deadline arrives, the factoring service will collect payment directly. For a deep dive into the process, click here.

Why it’s worth it: Selling your invoices is an easy way to get cash on your books. Plus, since your invoices serve as collateral, you’re not technically borrowing money or hurting your debt ratio. 

 

If you need: To cash in unpaid invoices ASAP without alerting customers

Consider: Invoice Financing 

How it works: Very similar to the factoring process, invoice financing turns unpaid invoices into working capital. The key differences? You work with a lender, rather than a factoring company, and remain responsible to chase down your client’s payment. Check out our guide for more details.

Why it’s worth it: Unlike factoring, this route is confidential, making it a good alternative if you want to keep your invoice selling on the DL.

 

If you need: Help after taking a major economic hit from COVID-19

Consider: An Economic Injury Disaster Loan

How it works: The U.S. Small Business Administration wants to help you to keep the lights on until operations are back to normal. Federal disaster loans can cover bills—including fixed debts, payroll, and accounts payable—that would otherwise go unpaid as a result of virus-related revenue losses. Interested? You can apply here.

Why it’s worth it: The unprecedented nature of the coronavirus has pushed the SBA to waive collateral requirements and to consider a broader range of businesses. The loan includes a low-interest rate of 3.75% and can provide SMBs with working capital of up to $2 million. 

 

If you need: Flexibility from your credit card issuers

Consider: Taking advantage of new assistance offers

How it works: It depends on your bank, but Chase, Bank of America, American Express, Goldman Sachs-backed Apple Card, Capital One, Citi, Discover, and Wells Fargo are all offering support. Many are waiving interest and late payment fees, deferring loan payments, and increasing credit lines. Amex even has a Financial Hardship program

Why it’s worth it: Every opportunity for relief is crucial. Even if you have a different need, most issuers are willing to discuss options. All you have to do is reach out and ask. 

 

If you need: Cash on demand 

Consider: Opening a line of credit

How it works: Also called a revolving line of credit, this flexible loan option gives SMBs access to capital through a lender if they meet specific requirements (e.g., current cash flow, credit rating, etc.). It mirrors the way you use a credit card in that there’s a maximum credit amount, you repay it, and can borrow again. 

Why it’s worth it: There are a few good reasons. A line of credit is a low-cost option for covering short-term needs. It’s more flexible than a loan. You need only repay principal or interest when you decide to tap into the line. 

 

 

 

By Natalia Garduño

March 27, 2020

Share this article

Blog

Financing Options Worth Considering During Covid-19

The economic resources every company in crisis should consider during Covid-19.

Coronavirus (Covid-19) may have shutdown business activity, but the bills are still piling up. Whether paying rent or employees, even large companies across all industries are struggling to cope. So what can a small business do to curb the disastrous economic effects? A few things! As each day brings a host of new issues and restrictions, it’s good to know your options. Let’s take a look.

If you need: Your accounts receivable paid, stat!

Consider: Invoice Factoring (aka Invoice Discounting)

How it works: A third-party factoring company takes your unpaid invoices as collateral in exchange for an immediate payout (minus a small fee). When your client’s deadline arrives, the factoring service will collect payment directly. For a deep dive into the process, click here.

Why it’s worth it: Selling your invoices is an easy way to get cash on your books. Plus, since your invoices serve as collateral, you’re not technically borrowing money or hurting your debt ratio. 

 

If you need: To cash in unpaid invoices ASAP without alerting customers

Consider: Invoice Financing 

How it works: Very similar to the factoring process, invoice financing turns unpaid invoices into working capital. The key differences? You work with a lender, rather than a factoring company, and remain responsible to chase down your client’s payment. Check out our guide for more details.

Why it’s worth it: Unlike factoring, this route is confidential, making it a good alternative if you want to keep your invoice selling on the DL.

 

If you need: Help after taking a major economic hit from COVID-19

Consider: An Economic Injury Disaster Loan

How it works: The U.S. Small Business Administration wants to help you to keep the lights on until operations are back to normal. Federal disaster loans can cover bills—including fixed debts, payroll, and accounts payable—that would otherwise go unpaid as a result of virus-related revenue losses. Interested? You can apply here.

Why it’s worth it: The unprecedented nature of the coronavirus has pushed the SBA to waive collateral requirements and to consider a broader range of businesses. The loan includes a low-interest rate of 3.75% and can provide SMBs with working capital of up to $2 million. 

 

If you need: Flexibility from your credit card issuers

Consider: Taking advantage of new assistance offers

How it works: It depends on your bank, but Chase, Bank of America, American Express, Goldman Sachs-backed Apple Card, Capital One, Citi, Discover, and Wells Fargo are all offering support. Many are waiving interest and late payment fees, deferring loan payments, and increasing credit lines. Amex even has a Financial Hardship program

Why it’s worth it: Every opportunity for relief is crucial. Even if you have a different need, most issuers are willing to discuss options. All you have to do is reach out and ask. 

 

If you need: Cash on demand 

Consider: Opening a line of credit

How it works: Also called a revolving line of credit, this flexible loan option gives SMBs access to capital through a lender if they meet specific requirements (e.g., current cash flow, credit rating, etc.). It mirrors the way you use a credit card in that there’s a maximum credit amount, you repay it, and can borrow again. 

Why it’s worth it: There are a few good reasons. A line of credit is a low-cost option for covering short-term needs. It’s more flexible than a loan. You need only repay principal or interest when you decide to tap into the line. 

 

 

 

By Natalia Garduño

March 27, 2020

Share this article