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With PPP Depleted and Stimulus Uncertain, Small Businesses Seek Out Other Funding Sources

  • Small businesses face an uncertain winter as COVID-19 pandemic wears on
  • The expiration of the Paycheck Protection Program removes a key resource, but other funding options are available
  • Entrepreneurs turn to loans, grants, debt relief, and other sources

As small businesses head into an uncertain winter, many are looking for funding sources to stay afloat. With the expiration of the Paycheck Protection Program and no replacement yet approved by Congress, business owners have been looking for alternatives.

The PPP program, which expired in August, allowed small businesses to essentially convert loans to grants if they used the money for approved purposes, such as maintaining payroll. The Small Business Administration has sought to accommodate businesses through actions like extending the timeframe on when funds must be used and simplifying the forgiveness process for smaller loans.

The program was one of the more popular aspects of the CARES Act, a large COVID-19 relief package passed at the start of the pandemic. However, partisan disagreements have hindered efforts to pass new economic stimulus, including an effort to revive PPP funding as a standalone bill. Concerns about fraud and doubts about the effectiveness of the program could also affect its funding level if it is revived.

Many businesses have been able to reopen in some capacity, but they have often enacted reduced hours, temporary closures, or other cost-saving measures as they continue to struggle with diminished revenues. Many traditional lenders, such as government programs and private organizations, have also suspended their programs or shut them down during the pandemic.

Another SBA offering, the Economic Injury Disaster Loan program, provides low-interest loans to cover six months of working capital. The SBA also provides bridge loans and a debt relief program.

The Federal Reserve’s Main Street Lending Program was also set up to assist small and medium-sized businesses. The Fed has taken steps to make it more accessible to borrowers, such as lowering the minimum loan amount from $250,000 to $100,000. However, it has seen little uptake and is set to expire at the end of the year.

States, and even some large cities, have sometimes used CARES money to set up grant programs. In Connecticut, the CT Cares Small Business Grant program set up a $50 million pool to offer $5,000 grants to qualifying businesses.

The U.S. Chamber of Commerce has set up a Save Small Business Initiative, a directory of available federal, state, and private funding resources. Some businesses have also launched crowdfunding efforts, with some platforms setting up micro-grants to assist entrepreneurs.

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