How to Get a Business Loan for Reopening Costs
Even if you’ve already reopened in some capacity, a pandemic recovery loan can help you pay off debt, re-hire employees, renovate your facility, or implement safety measures. Here’s what you need to know if you’re interested in a business loan for reopening costs.
Understand the Financial Impact of COVID-19 on Your Business
Before you apply for a pandemic recovery assistance program or loan, you should determine how the pandemic has affected your small business’s finances. To do this, we suggest reviewing:
- Your profit and loss
- Current revenue compared to how it was in previous years
- Current cash flow
- How many employees you’ve laid off or let go
- How COVID-19 has impacted your industry
Once you look closer into your finances and the pandemic, you’ll have a better idea of how much capital you’ll need to reopen successfully.
Research Various Business Loan Programs
Fortunately, there are several types of pandemic recovery loans available to small business owners. Be sure to familiarize yourself with all your relief program and loan options so you can make the best decision for your unique business and reopening needs.
Let’s take a closer look at several of the different types of business loans that can be used for disaster recovery:
1. SBA Economic Injury Disaster Loan
Offered by the Small Business Administration (SBA), the SBA Economic Injury Disaster Loan offers up to $2 million in assistance. You’ll pay back the loan with a 3.75% interest rate if you’re a for-profit and 2.75% interest rate if you’re a non-profit. Loan terms go up to 30 years and you don’t have to worry about any upfront fees or prepayment penalties.
2. SBA Paycheck Protection Program
Also administered by the SBA, the Paycheck Protection Program is designed to help small businesses cover the costs of payroll, mortgage or rent, utilities, and some debt obligations. As long as you meet certain criteria, 100% of the loan may be forgiven. This program may be a good choice if you need funds to hire new employees or pay for your commercial property.
3. Business Lines of Credit
While they aren’t backed by a government agency like the SBA, business lines of credit can be very useful if you’re seeking funds to reopen your business. They work a lot like a credit card and allow you to borrow as much or as little as you’d like up to a set credit limit. If you’re unsure of how much you’ll need to cover your reopening expenses, a business line of credit may be the way to go.
4. Merchant Cash Advance
With a merchant cash advance, you’ll receive a loan in exchange for a percentage of your income, typically credit card transactions. As you generate credit card sales, you’ll repay the loan automatically on a daily basis with a factor rate, which is a lot like interest. You can complete an application fairly quickly and receive the funds immediately.
5. Business Credit Card
If you only need a couple hundred or thousand dollars to pay for your reopening, you may want to go with a business credit card. As long as you make timely, full payments, you can build your credit and earn credit card rewards like cash back and travel points. If possible, look for a card with a 0% introductory interest period so you can save cash on interest.
Common Uses for Pandemic Recovery Loans
A business loan for reopening is versatile, meaning you can use it on virtually any expense to help you reopen your business or alter it to fit the new needs of your employees and customers. A few of the most common uses for pandemic recovery funds:
1. Safety Measures
Depending on the nature of your business, there are certain safety measures you may want to put in place to ensure employees and customers feel comfortable on your premises. You may want to purchase hand sanitizer, plexiglass barriers, and masks. It might also be wise to invest in professional sanitation and cleaning services.
The unfortunate reality is that your customers may not be as loyal as they were before COVID-19. Therefore, you may need to increase or enhance your marketing efforts. You can host a grand opening event with prizes and incentives, take advantage of digital marketing like paid ads and social media marketing, or hire a professional marketing consultant to help you design the ideal marketing plan.
3. Employee Modifications
Whether you hire new employees or bring back former ones, it’s important to accommodate their new needs and desires. If you allow them to work from home a few days a week, for example, you may have to invest in certain technology or work at home tools. You might also purchase a larger space to ensure your employees are well spread out.
Conclusion: Move Forward From COVID-19 with a Pandemic Recovery Loan
If you’re ready to reopen your business and succeed despite the pandemic, a business loan for reopening should be on your radar. It can provide you with the funds you need to cover a wide array of reopening costs and make the process a bit less daunting.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.