Small Business Riot Relief

Latest Riot-Related Small Business Loans and Grants

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Small businesses that have already struggled with the pandemic are now experiencing the fallout of rioting and looting that has taken place across the nation. The good news is, there’s help.  Here are some of the latest riot-related small business loans and grants.

And some small business encouragement to pull you through. 

$2M Loans Available for Illinois Small Businesses 

Illinois suffered greatly following George Floyd’s May 25th death while in Minneapolis police custody — $32 million in losses due to rioting have been recorded across the state. Everything from high-end shops to smaller, family-run businesses have been affected. 

To provide relief, the SBA has stepped in with low-interest, Economic Injury Disaster Loans. Qualifying Illinois businesses and private non-profits who suffered riot-related losses between May 26th and July 30th are eligible for up to $2 million in emergency loans for operational costs, payroll, PPE and more. The loan amount will be based on the actual economic injury of the business and its financial needs, regardless of whether the business endured any property damage. The deadline to return economic injury applications is July 13, 2021.

Kenosha Small Business Grants and COVID-19 Relief

Downtown Kenosha Inc. is offering $250,000 in grants to help Kenosha businesses recover from damages caused by rioting during protests in late August. Grant funds are geared toward bridging insurance coverage gaps and providing short-term rental assistance as well as covering clean-up costs associated with damages.   

“This is one step in helping people who have lost their very livelihood,” Kenosha Downtown Inc. executive director Alexandria Binanti said in a statement. “More than repairing buildings, we’re helping families who have committed to building their lives in Kenosha’s small business community. We owe all our Kenosha business families a chance to rebuild stronger.”

And for those Kenosha small businesses that are struggling with reduced revenue due to the COVID-19 pandemic, The Wisconsin Economic Development Corporation has launched a second round of “We’re All In” grants to help. The latest round of the grant program will provide $5,000 grants to 10,000 additional Wisconsin-based, for-profit businesses. Applications will open at 8 a.m. Oct. 19th and close at 11:59 p.m. Nov. 2nd. 

The St. Paul Midway Fund

The St. Paul Midway Fund will benefit the community around the Allianz Field soccer stadium in St. Paul, Minneapolis for riot-related small business relief, rebuilding and relocation. Two forms of “Small Business Economic Justice grants” are available at MidwayUnited.org.

A total of more than $340,000 will be available to 21 small businesses in need of damage relief. Eligible businesses can apply for up to $15,000 to assist with paying for smoke and water cleanup, glass replacement, replacement of stolen goods, lost inventory and any other damages caused by riots, looting and unrest.

An additional $500,000 will aid at least 10 businesses through a “Rebuild and Relocation” program. Qualifying businesses can apply for up to $50,000 to assist in rebuilding efforts, ranging from total fire loss to help with relocation costs due to loss of lease or eviction. Applications will be accepted through Dec. 20th, or until funds run out.

And There’s Hope…

Despite everything that’s been happening, small business owners are finding resilience. Daniel Johnson, a small business owner in Minneapolis, is a good example of this. Johnson’s flagship clothing store, House of Hoodies, burned to the ground during the riots following George Floyd’s death. However, instead of feeling sad for the business loss, he decided to rebuild by opening a new store in Rochester.

“It just lit a fire in me to just keep pushing and we have the younger generation that just watches us. We just wanted to be an inspiration to everyone and let them know and show resilience and if you fall down you have to get back up.” Johnson said.

This is just one of the many small businesses finding strength during this time, and it starts with having a positive outlook to move forward. 

 If you’re not in one of the mentioned areas, be sure to check within your community for any local riot-related small business loans and grants that can help you start to recover. 

Regional support for your business

Forget the Feds! Take advantage of Regional Support for Your Business

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If your business is looking for financing, especially during these times, there are various places you can turn. While many small business owners applied for Federal grants and loans, in the form of the Paycheck Protection Program (PPP) and the EIDL, some of these financing opportunities have come and gone.  But have you considered regional support for your business?

Today, many localities across the country have all sorts of support mechanisms and are ready to help small business owners looking for COVID-19 relief. All you need to do is know where to look to take advantage of them.

Here’s where you can start looking.

Small Business Administration Regional Offices

The SBA doesn’t just operate out of Washington, D.C., all across the country, you’ll find SBA District and Regional Offices set up to help local small businesses in that area.

Within these local offices, the SBA offers programs such as SCORE for free and low cost mentoring and counseling, Women’s and Veteran’s Business Centers to help small business owners create business plans, networking, and marketing help.

This summer, the SBA also introduced the Community Advantage Recovery Loan (CARL) Program, which provides funding for small business owners in underserved markets.

U.S. Chamber of Commerce

Virtually every community around the country has a branch of the Chamber of Commerce (CoC). It can be an excellent source for small business owners to network and get in touch with local funding programs.

Many local Chambers of Commerce are also offering free help and guidance during this time. Search your state or local CoC website. There, you might find a list of local member brands providing grants, training and other free services to small business owners in the region.

State, County and City Government

Many states and county governments are also offering small business loans and grants for COVID-19 relief. To find these, search for your local city, county and state’s economic development offices and small business programs, which tend to administer these programs.

Statewide programs vary in size and scale. However, many offer smaller grants and funding to businesses serving in front line work or operating culturally essential institution.  These new options are in addition to more traditional options. Many of these loans focus on keeping struggling small businesses afloat, offering funding to keep employees on the payroll to prevent staff reductions and cover the costs of sick workers.

Rents are also a continuing concern for small business owners. So, check your state, local, and city governments to see if they have enacted rent moratoriums or offer rent assistance.

Several state and county governments are also facilitating personal protective equipment (PPE) to small business owners for employees at no additional cost.

Business Improvement District Programs

Business Improvement Districts (BID) are geographical areas that are overseen by a non-profit organization that helps maintain, improve and promote the area.

An essential part of the growth and improvement of any BID is through its small local businesses. Many BIDs have economic development programs that offer loan and grant programs to qualifying small business owners, especially those who might be underserved in the community, such as women and people of color.

Private Local Groups and Entrepreneurs

Don’t forget to look to local groups and entrepreneurs as well. Many of these groups and individuals offer grants, loans and even microloans to qualifying local business owners in the area.

There are already thousands of groups and non-profit organizations that work regionally providing small business and SBA loans during so-called “normal” times. They are working to continue their efforts during COVID-19 by expanding current loan options and offering new loans and grants.

You Have Options

Even though your business might be struggling under the weight of everything happening in the world right now, know that there are funding options out there for you.

Once you’ve gone through your opportunities at the Federal level, look look a little closer to home and consider taking advantage of regional support for your business. More often than not, you’ll find people and other businesses who want to help you get through this tough time.

 

Life-saving measures for small businesses on the brink of closure

Life-Saving Measures for Small Businesses on the Brink of Closure

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No matter what part of the country you’re in, you have small business-owning neighbors struggling to keep the lights on. With erratic reopening plans, caseloads that still won’t decline, and the need for social distancing until there’s a widely-available vaccine, countless businesses have been hit hard.  But what can be done?  Are there any life-saving measures for small businesses on the brink of closure?

If you’re a business owner in this situation, you could find enough relief to keep your doors open and critical staff employed using one (or all) of the options below.

Review Your Expenses

While you might have already done this back in March, it might be time to review your expenses again.

Instead of eyeing luxury expenses this time around, put an eye toward ways to discontinue some low-margin services and supplies until traffic gets back to pre-pandemic levels again. This could mean paring-down your menu, hiring a delivery person instead of subcontracting to meal delivery services, liquidating inventory at a deep discount to reduce warehouse space, or even limiting workdays to the most profitable days and hours.

When evaluating expenses to cut, don’t think of these expenses as permanently on the chopping block. Instead, you can bring them back and build back up when life and revenue pick up speed once again.

Get Creative With Payment Arrangements

If you’re strapped for cash, your vendors may be as well. Reach out to your accounts payable and start a conversation about mutually-beneficial payment arrangements.

For example, if you can promise $X toward your invoice every two weeks, that’s better for your vendor than zero dollars. Your vendor gets a predictable cash flow, and you get a reasonable payment arrangement.

If you and a vendor do mutual business (they invoice you and you invoice them), set up a call for an invoice review. Explore creative options like applying their invoice for $1000 to your invoice for $800. You’ll still owe them $200, but it’s a lot better than $1000. This is a simple solution that often slips through the cracks because your AP and AR systems might not communicate with one another.

Explore SBA Loan Options

While the Paycheck Protection Program is no longer offered, there are three other SBA loan options you can explore for a much-needed cash infusion:

  • Economic Injury Disaster Loan (EIDL): If you’re experiencing a loss of revenue due to COVID-19, you could be eligible. Terms are 3.75% interest (fixed) for up to 30 years with no pre-payment penalty. You can even defer payments for up to one year (but interest will still accrue).
  • SBA Express Bridge Loan: If you have an existing relationship with an SBA lender, you may qualify for a loan up to $25,000. These loans can be regular term loans or bridge the gap between today and approval for your EIDL Loan. You just need to reach out to your existing SBA lender to inquire.
  • SBA Debt Relief: If you have an existing SBA loan and have trouble making payments due to COVID-related financial hardship, this program can bring you relief. Eligible loans include “7(a), 504, and Microloans in regular servicing status as well as new 7(a), 504, and Microloans disbursed prior to September 27, 2020” per the SBA. If you qualify, the SBA will pay any principal, interest, and fees on your loan for six months.

Have a Candid Conversation with Your Bank

Finally, it could pay to sit down and have a candid conversation with your bank. Your bank doesn’t want to lose your business or see you default on lines of credit or other loans. You could find they’re willing to work with you if they know your full financial picture.

There aren’t any guarantees that your bank could come through with funds or reprieves from payments due.  But, if you don’t start the conversation, you’ll never know what’s possible.

Have any other tips or advice on life-saving measures for small businesses?  Let us know.

Find Free Money: Coronavirus Relief Funds and Grants for Small Businesses

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Having difficulty finding COVID-19 relief aid to keep your business afloat during and after the pandemic? To jumpstart your search, here’s a list of some available coronavirus relief funds and grants for small businesses.

Hello Alice: Business for All Grant 

Small business owners affected by the COVID-19 pandemic can now submit applications for Hello Alice’s Business for All program. This program, with the support of Verizon, Silicon Valley Bank, Ebay Foundation, UBS, Visible and Stacy’s Rise Project, offers exclusive mentorship opportunities and grants of up to $50,000 to support long-term business growth. Applications are open through September 25th.

MDCalc Ad Grant

For organizations that support clinicians or treat COVID-19 patients, the MDCalc Ad Grant may be of interest. MDCalc is currently donating $1 million in advertising grants to businesses that are contributing to COVID-19 response efforts. Applications are reviewed and accepted on a rolling basis.  

National Association for the Self-Employed (NASE) Growth Grant

NASE members have the opportunity to secure NASE Growth Grants, worth up to $4,000 each, to help finance their small business needs. Small business owners can use their growth grants to help cover COVID-19 related activities, such as buying equipment, hiring part-time help, purchasing marketing materials and more. Annual members are allowed to apply immediately, and monthly members can apply ninety days after joining the NASE.

Urban Excellence Community Grant

The Caleb Brown Venture Capital and Consulting Project provides start-up, for-profit businesses and early staged businesses with grants of up to $1,000 to help rebuild local blocks, neighborhoods and communities. This can be especially beneficial for small business communities hit the hardest by COVID-19. The grant comes with 500 hours of complimentary business consulting for one year. For consideration, applications must be submitted by the 15th of every month.

Amber Grant

The Amber Grant program gives away $4,000 every month in grant money to female small business owners. The organization also expanded its grant-giving to include a year-end grant of $25,000. This is a great opportunity for female small business owners that are in need of extra funding during the pandemic. Applications are accepted at any time and award recipients are announced the first week of every month.
Local Initiatives Support Corporation (LISC) Grant
In response to the pandemic, LISC provides grants to support for-profit, small businesses. Priority will be given to business owners of color, women- and veteran-owned businesses and other businesses in historically under-served communities without access to affordable capital. The next round opening is August 31st. Prospective applicants are encouraged to register.

The Small Business Relief Fund

The Small Business Relief Fund will issue $500 matching grants to qualifying small businesses that raise at least $500 on GoFundMe. The purpose of this fund is to alleviate small business financial strain during these challenging times. Businesses will need to verify that they have been negatively impacted by a government mandate due to the COVID-19 pandemic to qualify.
Keep in mind that small business grants are also available through certain state and local programs and some nonprofit organizations. For federal assistance in response to COVID-19 pandemic, visit the Small Business Administration.  

Kapitus PPP Survey

Why Have So Few “Small” Businesses Gotten Relief from the SBA?

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The first round of SBA PPP small business financing has come and gone and the thousands of small businesses that make up the Kapitus client base have largely been left out in the cold.  While we eagerly await Congress’s approval of additional funds, we used this time to survey our customers to understand who was able to obtain funds from the first $349 billion in forgivable loans, who was not, and which financial institutions were most helpful in supporting small businesses.

What we found was a troubling dependency by small businesses on the largest financial institutions in the country (national and regional banks).  These large banks, as well as the SBA itself, seem to be leveraging a definition of small business that allows large companies to fit their subsidiaries into qualifying entities while independent business owners are overlooked.  The national banks appear to have systematically prioritized these large clients over their smaller constituents and in doing so, exhausted the first round of SBA funding faster than many anticipated.

Our survey was conducted between April 17th and 20th and targeted 26,536 small businesses that we have provided capital to over our 14-year history.  As of Monday morning, we had received 2,076 responses, 80% of which told us they had applied for SBA PPP funding before the money ran out.

Of those respondents, 1,206 answered the question “have you received funding from your PPP application” and 1,116 or 92.5% told us that unfortunately, they have not.  The 90 customers that have received funding provided tantalizing clues as to how small businesses are getting money from the SBA.  The most successful channel to date appears to be through community banks, where 18.8% of applicants have been successful and where customers are more likely to have a personal relationship with a decision-maker inside the bank.

Kapitus PPP Survey

Credit unions have also been moderately successful with 11.8% of applicants receiving funding but have a much lower penetration rate than other banking channels.  Regional banks follow at a 7.2%, followed by the SBA itself (2.7%) and non-bank lenders (1.4%).  Sadly, national banks (such as Wells Fargo, JP Morgan, Bank of America and Citigroup) which have the greatest penetration into the US small business community, have to date done the least to help small businesses in their time of need.  National banks only produced three successful loans in our survey out of 320 applications, a dismal 0.9% success rate.

Why is it that national banks have done so poorly serving the small business community?  Banks are economic animals with scarce resources just like any other company.  When a large number of clients request a scarce resource at the same time, they prioritize their largest, most profitable and riskiest clients first.  In our survey, community banks supplied small businesses with more lending products than any other bank segment.  This indicates that community banks have deeper ties and greater exposure to the plight of small businesses and as a result, during a crisis they work more diligently to ensure that their needs are met.  As seen in the table below, our clients utilize community banks and non-bank lenders more heavily than other types of credit institutions.

Kapitus PPP Survey

Another part of the answer lies in what the SBA, and in turn the nation’s largest banks, consider “small” when it comes to business.  On April 16th the SBA announced that they had distributed nearly 1.7 million loans representing $342 billion, indicating an average loan size of $206,022.  Assuming the average American worker was making $49,764 annually (or $4,147 per month) just before the crisis (Bureau of Labor Statistics) and considering that PPP loans are sized based on 2.5 times monthly payroll, this implies that the average company getting a PPP loan as of April 13th had 20 employees.  There are nearly 6 million companies with between 1 and 500 employees and the average company in this group has 10 employees (US Census Bureau).  This means that fewer than 28% of eligible small businesses were served in the first round of SBA funding, and those that were served were the largest companies in the range. This argument is supported anecdotally by the fact that companies like Ruth’s Chris, Potbelly and Fiesta Restaurant Group each received between $10 million and $20 million in PPP loans through JP Morgan.  Kapitus PPP Survey

This sequence of facts has been very frustrating to non-bank lenders such as Kapitus who are the only consistent source of financing available to most businesses with 10 or fewer employees.  We have been petitioning the SBA for a temporary license to allow us to lend the PPP product to our core client base (our average customer has 8 employees) since the program was announced.  Nearly two weeks into the program the SBA released an application for non-bank lenders, and we submitted our application within 12 hours of its being published.  Eleven days later we have heard nothing, although some of our larger competitors did receive temporary licenses just as the money in the first tranche was exhausted.

Undeterred, we are working with our clients to secure PPP loans in any way we can.  We have partnered with several community banks and non-bank lenders with SBA licenses to fund our clients and we are lining up additional capital to fund these loans ourselves when and if we are awarded a license.  In the meantime, we counsel or clients on their financing options and continue to provide innovative lending products as small businesses struggle to navigate the most challenging business environment any of us have ever seen.  America’s small businesses owners are some of the most creative and resilient leaders our country has.  We look forward to partnering with the SBA to offer small business owners the solutions they need to survive, rehire, rebuild and reopen as soon as it is safe to do so.

To receive the most recent updates on Paycheck Protection Program and other federal, state and local relief initiatives aimed at helping small businesses visit our COVID-19 Resource Center.

 

About the Author

About Kapitus - Ben Johnston

Ben joined Kapitus in 2014 as Chief Strategy Officer and became Chief Operating Officer in January 2017.  Prior to joining Kapitus, he was a Principal of Pine Brook Partners, a New York-based private equity firm where he invested in banks, insurance companies, asset managers and specialty finance companies.

business loans nc

Business Loans in NC: Your Ultimate Guide

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As a small business owner in the Tar Heel state, you focus on the future with your hands on the present. You have plans to take your business to the next level. Luckily as a North Carolina resident, there are many types of loans from a variety of organizations and institutions to support your business specifically. Depending on your needs and plans, you’re sure to find business loans in NC that fits the bill.

You want to expand your staff; increase your product offerings; ramp up your credit; grow your inventory; invest in an exciting new opportunity. But to realize those plans, you need some financial support from a lender who understands you and your business on a near-personal level. You want a small business loan made just for you. Today, we’ll explore the offerings available to North Carolina residents and businesses so you can make your next move expediently.

Carolina Small Business Development Fund Loans

If you’re looking for business loans in NC, a great place to start is the Carolina Small Business Development Fund–a nonprofit and Community Development Financial Institution that “lend[s] to start-ups and existing businesses across the state, with emphasis on businesses that have difficulty accessing financing through traditional loan sources.”

Carolina Small Business offers a variety of core loan products specific to businesses in the state. For example, if you live in Mecklenburg County, have an annual revenue of less than $1,000,000,000 and don’t have any unpaid judgments, open tax liens, or principal and business bankruptcy in the past five years, you may qualify for the Mecklenburg County Small Business Loan Program. This program offers up to $75,000.

Are you rebuilding your business in the wake of a natural disaster? Consider the Small Business Recovery Fund. It’s designed to “provide gap financing as a complement to Small Business Administration [SBA] and other disaster recovery programs.” This loan grants a minimum of $1,000 to small businesses with no maximum amount. Other disaster-based loan programs offered by Carolina Small Business include the Hurricane Florence Recovery Loan Program.

Carolina Small Business also offers Veterans Direct loans if they’re in-state veterans and/or their spouses are, and Healthy Carolina loans to established businesses and new entrepreneurs involved in the “production, processing, wholesale, distribution, and retail of healthy food products.” This is only possible as long as they’re located and selling healthy foods and food products in food deserts. In addition, Carolina Small Business’s African-American Loan Fund assists African-American entrepreneurs as they develop and expand their businesses.

Mountain BizWorks Loans

Live in Western North Carolina? If so, you may qualify for a loan with Mountain BizWorks. Mountain BizWorks offers loans as low as $1,000 to as high as $250,000 for small businesses in your area. Their model is unique. This means that they “consider non-traditional collateral, offer flexibility in the loan structure, and loan decisions and relationships are managed locally.” What’s more is, they’re willing to work with you to discuss out-of-the-ordinary circumstances that might have hurt a once-strong score. Interest rates vary based on your individual circumstance. However, they promise an answer within two to three weeks of your loan application.

Carolina Farm Credit

Carolina Farm Credit specifically applies to North Carolina’s farmers and rural residents. They offer farm and land loans for agribusinesses. As a farmer, you can seek support in funding for farm improvements, equipment, livestock and operations. Carolina Farm Credit offers farm land and acreage financial options. This is a good option if you’re hoping to expand physically or just get off the ground.

Local Banks and Credit Unions

When it comes to finding the right loan for your business, banks and credit unions can be particularly helpful. Local banks may provide additional tools and resources and leverage connections to help you get a loan that suits your needs and credit that a nationally recognized bank might not be able to do. In North Carolina, there are many banks that value small businesses and their contribution to the economic well-being of the state.

BB&T

With 285 branches in nearly 200 cities, BB&T is one of the biggest banks in the state. Its options for small business loans in NC are vast. Borrowing options include loans through BB&T, and benefits for members who utilize the SBA.

Self-Help Credit Union

Self-Help Credit Union, another major bank in North Carolina, offers small-business and commercial loans, as well as:

Truliant Federal Credit Union

Truliant Federal Credit Union has branches throughout the state. They offer tools to help you assess your business’s finances and secure the right loan for your needs. Loan options include SBA loans, USDA business and industry programs, construction and auto loans, equipment financing and others.

First Bank

First Bank, located throughout the Carolinas, is another fantastic option for business loans in NC. As a local bank, First Bank is intimately familiar with the markets your business touches. They can use that knowledge to support you in making financial decisions. First Bank’s small business loan offerings range from SBA loans to credit cards to lines of credit and beyond. They suit solopreneurs, entrepreneurs, and business owners with dreams to expand their business, to reconfigure financial structures, finance major investments, and beyond.

SBA Lenders

There’s a host of SBA lenders dedicated to supporting North Carolina small businesses in securing loans. According to the SBA North Carolina District Office, these include “SBA 7(a) Lenders, 504 Certified Development Companies, and SBA Microlenders.” For specific details and contact information, see the SBA North Carolina District Office’s official list.

As a small business owner based in North Carolina, you have lots of location-specific borrowing options. While this list contains some of the best and most diverse options for NC business loans, it certainly isn’t every single available option. In fact, depending on the nature of your business, your location and your needs, you might even be surprised to find a loan that’s “tailor-made” just for you.

Funding your next business endeavor can feel daunting, time-consuming, and confusing. If you find yourself feeling overwhelmed by choice and unsure where to start, utilize the resources offered by local banks (or local branches of major banks), the small business administration, or the Carolina Small Business Development Fund. Or, for fast, personalized service, unique expertise, and an answer guaranteed in as little as hours after you apply, consider finding your best financing solution through Kapitus. Once you’re approved, you can hit the ground running and make those pivotal moves that take your small business to the next level in 2020 and beyond.

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professional employer organization

What is a PEO? And How to Choose the Right One for Your Business

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You probably started your business because you enjoyed the work. Maybe you opened your ideal restaurant or started an electrical contracting business. That part was fun, but other responsibilities surfaced. Now, you have to deal with employees’ human resource issues, find ways to offer benefits and make sure all payroll taxes were filed and paid. Fortunately, small business owners don’t have to cope with these responsibilities by themselves. Professional employer organizations can lift those chores off of the owners’ shoulders. This helps business owners focus more on managerial tasks and growing their businesses. Now, what is a PEO, exactly?

What is a PEO?

A professional employer organization and a business enter into a shared relationship known as “co-employment.” Co-employment means that the PEO is the employer on record. They provide human resource support and handle payroll functions – while you, as the owner, keep the authority and responsibility. You’ll still manage your employees’ day-to-day activities.

Through the co-employment model, PEOs:

  • Are responsible for paying wages, managing employee compensation claims and overseeing other wage-related requirements
  • Assist with regulatory paperwork and compliance issues
  • Manage human resource issues and risk management functions
  • Provide employee benefits. Benefits include- but aren’t limited to – health insurance, unemployment insurance, Section 125 plans and other voluntary insurance products.

What are the Client’s Responsibilities?

The business owner is responsible for:

  • Managing employees’ daily activities
  • Maintaining a safe work environment
  • Keeping track of hours worked and reporting these figure to the PEO
  • Making sure payroll funds are paid in advance to the PEO

Advantages of a PEO

PEOs can take time-consuming HR tasks and responsibilities off your plate. A PEO:

  • Handles all human resource activities so you can focus on managing and growing your business
  • Provides competitive benefits and health insurance. A PEO has the purchasing power to negotiate better health insurance rates and more affordable benefits, such as a 401(k)plan, dental and vision coverage. Using the lower-cost benefits from a PEO enables small- and medium-size companies to compete with and attract employees from larger companies.
  • Stays up-to-date on regulations. As a business owner, you don’t have the time to read the latest regulations. A PEO does this for your and makes sure that you remain compliant.
  • Provides attorneys and HR professionals to handle employee-related issues. PEOs give advice on proper employee termination and disciplinary procedures.

Disadvantages of a PEO

Method of pricing

Sometimes, it can be difficult to determine how much you’re really paying. Many PEOs price their programs as a percentage of wage payroll, but this figure can vary monthly. So, sometimes it’s hard to figure out how much you’re actually paying. The other pricing method is the per-employee-per-month. This approach has add-ons for setup fees, administrative fees and costs for running some payroll reports.

Inflexible health plans

PEOs partner with certain insurance companies, and you don’t have a choice. If you like UnitedHealthCare, but the PEO promotes Aetna, you have to accept Aetna.

Customer service

PEOs handle large numbers of clients and employee issues. Customer service responses can sometimes seem rushed and indifferent.

How to Choose a PEO

Choosing the best PEO for your company requires doing your homework. Here’s a list of questions to help you get started.

  • Assess your company’s needs. What do you need help with -Payroll processing, HR issues, employee benefits? Define what you need before approaching a PEO.
  • Is the PEO a member of the National Association of Professional Employer Organizations? Membership in the industry’s trade organization indicates professionalism and respect.
  • Does the PEO have experience in your industry? You want a PEO that understands the daily lives of your employees and the risks they take on their jobs. How many employees do they represent in your industry?
  • Conduct a background check; ask for references to check; get first-hand feedback directly from the PEO’s clients.
  • Are the financial statements independently audited by a CPA? You want assurance that the PEO is legitimate.
  • Are their risk management practices certified by the Certification Institute?
  • Have their ethical practices been accredited by the Employer Services Assurances Corporation? ESAC audits PEOs annually to make certain each PEO has at least a $1 million surety bond.
  • Does the PEO have certification from the IRS? Check for accreditation such as the Certification Program for Professional Employer Organizations from the Internal Revenue Service.
  • Review the fine print in the contract. What guarantees does it provide? How can you terminate the contract if the relationship goes bad?

 

According to NAPEO, the U.S. has over 900 PEOs. While you have plenty of choices and setting up a co-employment agreement with a professional employer organization will relieve you of a ton of administrative tasks, you must thoroughly investigate each PEO candidate before signing on the dotted line. You don’t want any surprises.

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business loans for franchise

The Best Business Loans for Franchise Purchases and Improvements

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Are you exploring business loans for franchise purposes? You’re likely bringing some of your own money to the table to finance your dream. However, that doesn’t mean that you won’t need help with other startup costs, future expansion or ongoing funds. You might be surprised at how many options there are in the marketplace. This guide will help get you up to speed on the most popular franchise financing options according to two main objectives: buying a first/additional/multiple franchises and funding existing franchise operations.

Get ready to feel better about your financing options for the next chapter in your entrepreneurial careers. Your franchise ownership goals are within reach.

Buying Your First/Additional/Multiple Franchise Locations

Whether you’ve got your eye on owning your part of a franchise or ready to expand your franchise footprint, you’ll need one of the many flexible-use business loans for franchises.

The three most popular types of franchise financing are:

  • Traditional loans
  • Small Administration (SBA) loans
  • Franchisor financing

Look at how each of these financing options can fit the needs specific to someone purchasing an initial franchise.

Traditional loans

When considering the different business loans for franchises, traditional business loans top the list. Proceeds can help purchase or expand franchise holdings.

Traditional loans are smart financing options for small business owners confident that they have the financials and good credit to qualify. With generous loan limits, highly competitive interest rates, and flexible terms, these loans will likely offer some of the best rates in the market. You’ll need to come to the table equipped with solid financials. The rigorous underwriting process is one of the reasons these loans typically offer the most competitive terms. Traditional loans might be an attractive option. Show three years of tax returns, a strong personal financial history and a good credit score. The lender will verify fund source you’re using for your down payment.

With traditional loans, your franchise choice could play a significant role in the approvals process. Lenders like to see big brand names with proven track records in the market. Franchises with few locations might hurt your application. These franchises haven’t worked in multiple markets and various economies. Yet, if you’re a new franchise owner, a traditional loan can use your personal credit and financial history to launch your new venture.

SBA 7(a) loans

The SBA 7(a) loan program is hands-down the most popular loan program. It’s a reliable option for financing franchise startup and expansion costs. When you use these types of business loans for franchises, you’ll find competitive rates and virtually unlimited use of funds. Loan Limits are generous, and flexible terms are perfect for a franchise on the rise.

The first step to qualify for an SBA (7a) loan is to make sure your franchise is listed in the SBA Franchise Directory. If they don’t list your franchise type, you can apply for participation in the directory (note: the SBA will require additional documentation).

Loan limits are up to $5 million and terms range from 10 to 25 years. Interest rates are generally in the single digits (7% to 9.5% is a good range to consider). Prospective borrowers will usually have to be in business for at least two years. This makes the SBA 7(a) loan a better match for existing franchise owners, or those purchasing a franchise in an industry where they have a proven careers track record. Lenders will use your credit score and business financials for qualification. While the approvals process isn’t speedy, you’re rewarded with some of the best rates and terms, aside from traditional loans.

The only limit to an SBA 7(a) loan is borrowers can’t use the funds to finance franchise or royalty fees. If you choose to go the SBA 7(a) route, make sure you earmark other funds for these startup costs.

Franchisor financing

Many of the nation’s leading franchises offer direct financing to entrepreneurs. Of course, they want to make it simple for owners to get up and running. This one-stop-shop approach is potentially perfect for those looking to open their first location, adding a location, or purchasing multiple locations at once.

While the rates might not be as competitive as traditional loans or the SBA 7(a) loan, there’s something to be said for a streamlined process. As you consider all the options for business loans for franchises, it’s worth it to speak to the franchise and see what options are available. Be sure to have your attorney or accountant review any financing options offered by the franchise. Then you can compare the terms between a traditional loan, SBA 7(a) loan and the franchise’s direct financing side-by-side.

Funding Ongoing Franchise Operations

You may find times where you need a cash infusion to help fuel operations and growth. The best business loans for franchise needs in these cases is the one that matches:

  • The reason you need the funds
  • How long you need to repay the funds
  • How much you need to borrow

Here are three financing options franchises can use to keep operations running smoothly and make specific improvements.

Traditional business loans

If you know you need a fixed amount of cash for an upcoming franchise improvement or expansion expense, a traditional business loan can help. With fixed terms and rates, small business owners can fund franchise expenses with a predictable impact on their monthly budget.

Repayment terms are often flexible, including payment frequencies based on your current cash flow. Traditional loans have stringent qualification guidelines, and not all businesses can qualify with ease. You’ll need to have existing operations with a proven balance sheet, a plan, and your financials in order.

Lines of credit

If you’re looking for a more flexible way to access the cash your franchise needs, a line of credit might be the ideal tool.

Lines of credit can be used for nearly every purpose imaginable. You can draw as much or as little as needed–and only pay interest on the funds drawn. Once you pay it back, your credit line is once again fully available for use. There’s no need to go through the qualification process again.

For businesses that may not qualify for a traditional loan, lines of credit can fill that financing gap. Credit scores aren’t weighed as heavily in the approval process for most lines of credit, either. These features combined make lines of credit ideal to fund everything from cash flow gaps to seasonal inventory ramp-ups. The sky’s the limit.

SBA 504/CDC loans

While the SBA 7(a) loan is an ideal fit for initial or additional franchise purchases, you’ll need a different SBA loan type for funding ongoing business concerns.

The SBA 504/CDC loan has a narrow scope of use. Funds must be used for acquiring, renovating, or improving real estate or equipment. A borrower’s franchise location must also be U.S.-based. This type of loan can help fund making improvements to franchise real estate, buying real estate, or even upgrading heavy equipment to speed operations.

As with the SBA 7(a) loan, your franchise needs to be listed in the SBA Franchise Directory to be eligible. While these loans are slower to fund than traditional bank loans and lines of credit, you’ll likely be rewarded with some of the best interest rates. With all of the options for business loans for franchises, there’s one out there that makes perfect sense for your financials, credit and goals. And, if you’re still trying to determine the next steps in your franchise financing plans, you can always reach out to a loan officer to discuss.

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How to Recover from a Small Business Loan Rejection

How to Recover from a Small Business Loan Rejection

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Rejection always hurts, and when it’s from the bank on a small business loan, it can sting a little bit more than it did in high school. Loans are the lifeblood of most small businesses, and without them, the company could crash and burn. In fact, according to the Small Business Administration, 27% of the small businesses surveyed stated they weren’t able to receive the funding they needed to expand their businesses.

However, there is hope. Many businesses have been rejected only to recover and secure the financing they need on the next application. Here are our tips to help you recover from a rejection.

Determine the Reason

First thing’s first, you need to be able to pinpoint your misstep to correct it in the future. Most lenders will give you the reason that your application was denied and it is usually one of two issues:

  • Low FICO Score
  • Not enough revenue

Before lending to a small business, just like any loan, they want to ensure that you have a solid history of repaying your debts on time and in full. If your business and personal credit scores are less-than-stellar, lenders will perceive you as a risky investment.

Additionally, lenders want to know that borrowers can make the minimum monthly payments on the small business loan. This is where your business’ cash flow comes into effect – they’ll calculate your debt to income ratio to see how you would be able to handle the monthly payments.

Correct the Problem

There are both short-term and long-term solutions. You can’t fix your credit score in a week, but if you make it a priority, over time, you’ll be able to improve it. In the short-term, you can, first of all, ensure that your credit report is error-free. It happens more often than you would think as 23.17% of all complaints to the Consumer Financial Protection Bureau in 2016 were about credit report inaccuracies.

Also, to improve your credit rating, you can take steps to pay off your debts to improve your debt to income ratio which will make you look more favorable to lenders.

To improve your revenue streams and to show the lender that your business is bringing in enough money to cover expenses and the loan payments, you should do your best to reduce expenses while increasing your profit margins. Improving cash flow can be a challenge for some small businesses. However, many are finding success after putting all of their attention and efforts into the process.

Other Things to Consider

There are a few things you can do to improve your odds of securing a small business loan, and are intended to make you appear more trustworthy as a borrower.

You can make a sizeable down payment on the loan to show that you’re serious about repaying the loan. You can also get a cosigner with an excellent credit score to make you appear more trustworthy. However, the cosigner would be on the hook for the loan as well, so ensure that you can confidently make the payments.

If you have a low FICO Score, you should also look into alternative financiers that could provide you with financial options. Big banks aren’t the only lenders out there. Additionally, a low credit score won’t necessarily take you out of consideration with alternative lenders.

What to Do Before Re-Applying

Before potentially going through the frustration and wasted time of a loan rejection again, you need to take a look at yourself and your businesses from the lender’s point of view; are there any red flags?

We recommend taking a hard look at your credit report. Even asking a lender’s advice about any problems they see. It may seem scary to ask them to point out problems, but the issues might arise when you re-apply for the loan anyway. So, it’s better to know beforehand.

small-business-loan-application-checklist

Small Business Loan Application Checklist | Updated for 2020

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Building and running a small business is hard. It takes conviction, leadership, sound management and, every so often, a much-needed injection of financing. In both good and lean times businesses are often faced with the decision to pursue some type of financing. However, applying for and acquiring small business loans and alternate financing can often be daunting – even if you’ve done it before. And traditional lenders do not make that experience easy.

The good news is that getting financing doesn’t have to be this hard. We help thousands of small businesses everyday and want to share secrets of getting good financing options quickly. So, we have compiled a simple checklist of actions you can take to make the process fast, simple and easy.

However, as you get ready to apply for a small business loan, you should consider the following questions carefully to be sure you are not surprised by any unforeseen requests or adverse decisions from lenders.

Six questions every business must ask in 2020 before applying for a small business loan | Download PDF

1. Should you apply for a small business loan?

While a small business loan is a great way to reduce the pressure on cash flows, you could have viable alternatives for relieving cash flow crunch like selling debt owed to your business and renegotiating contracts to allow for longer payment terms. Also, make sure you have considered all alternate sources of financing including friends and family.

2. Is a small business loan good for your business?

Understand the effect of repayment of small business loan on your cash flow. A loan does not change the fundamental working of the business. It strengthens a fundamentally sound business and quickly breaks a business that is fundamentally unsound.

3. Can you qualify for a business grant?

Unlike loans, you don’t have to pay back grants. Before applying for a small business loan, see if you qualify for a federal or private small business grant. However, grants can be highly competitive and may not fit your financial time horizon.

 4. What types of small business loans are there?

There are over a dozen types of small business loans and alternative financing options for small business. The most popular options are government-backed SBA loans, revenue-based financing and factoring. Download this eGuide to learn more about different types of small business financing.

5. When should you apply for a small business loan?

Apply only once you have determined that a business loan will help strengthen your business, and you understand the different types of financing options like Small Business Loans, Revenue Based Financing, Factoring, and Equipment Financing. Each of these options have unique requirements so make sure you understand them well before speaking with a lender.

6. Should you work with a small business loan broker?

Brokers are a great resource to get offers from multiple lenders. However, many online marketplaces like Kapitus, will get you offers from multiple lenders without the additional broker fee which is borne by the borrower.

Small Business Loan Application Checklist| Download PDF

1. Run a quick cash flow analysis on your business account

Cash flows are one of the primary indicators that lenders use to understand the health of your business. Showing 3 to 6 months of positive cash flow can get you approved faster. It can even get you better financing terms for your small business loan. You can learn more about cash flows and ways to improve them in “How to Prepare Your Small Business for Cash Flow Needs.”

2. Collect at least 3 months of bank statements

Your business accounts are another good indicator of your company’s financial health. Generally, lenders want to see a positive daily balance on your bank statements. Remember, a well managed cash flow will directly improve your bank accounts.

3. Identify unusually large deposits to your bank accounts and gather supporting documents to help explain them

While presence of unusually large deposits can delay finalization of loans, they are not necessarily bad. Many businesses, like construction companies, can easily explain their presence on the bank statements. Some businesses understandably have large swings in deposits and credits to their account. If your business is like that, you can expedite your loan application process and get really good terms on your small business loan by providing a copy of your account receivables and future contracts.

4. Get a copy of your free credit report and make sure there are no red flags

A strong personal credit goes a long way to assure any lender about the fiscal responsibility of the person running the business. You can get a free copy of your credit report from annualcreditreport.com. If you find any incorrect information on your credit report, contact each credit reporting agency (Experian, Transunion and Equifax) immediately to correct the issue. Keep in mind that while small delinquencies are understandable, lenders are uncomfortable with statements that show delinquencies on child support or recently dismissed (not discharged) bankruptcies.

5. Reduce the number of lenders to whom you owe money

Too many lenders pulling money from the business can create severe strain on its cash flow. Lenders want to know that the money they provide will help grow your business and not put additional strain on its daily operations. You may want to wait to finish your current loan obligations before going back to the market to raise more capital.

6. Resolve any open tax liens

Unresolved open tax liens can hurt your ability to obtain financing. If possible, try to get a payment plan on any open tax lien. A payment plan on a tax lien is far better than an open unresolved tax lien.

7. Get three business references

Trade references help to establish authenticity and credibility of your business. If you rent commercial space for your business, make sure that the landlord is one of your references.

8. Have tax statements handy when applying for a large sum

Lastly, businesses contemplating borrowing large sums over $75,000 should get a copy of their last year tax statement and business financial statements.

Obtaining small business loans doesn’t have to be a daunting process. Use this checklist before applying for a business loan or alternate financing and get the funds your business deserves.

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