Lending Library

There are multiple financing options for your business. You can seek out short term loans and microloans if you need a small influx of cash quickly, or you can take out large-scale loans to expand and scale your business. Each loan option comes with its own terms and restrictions on the money. 

Another loan option that is particularly popular in real estate is the hard money loan.

What is a hard money loan?

Hard money loans are short-term loans where lenders use collateral like property to back the loan. If the borrower is unable to repay the lender, they can seize and sell the collateral.

You can work with money lenders to secure the funds you need with a short-term payback period. Learn more about these loans and the lenders who issue them. 

Hard money loans are based on collateral.

Hard money lenders don’t look at the credit of the applicant. Instead, they are more interested in the property the applicant is borrowing against. The financial provider wants to ensure the collateral is worth the risk of lending before they approve the loan.

If the borrower can’t pay back the loan, the lender can seize the property. For example, in real estate investments, if a property is built over a sinkhole or lacks any real value, then the lender is unlikely to issue the loan.

Hard money loans are most frequently used by home flippers who want to take worn or damaged property and improve it for a profit. In this case, the land has potential and maybe even a structure built on it.

The home flipper will renovate the property and resell it—typically within a year or two. This is what makes the risk of the hard money loan worth it: the borrower gets the loan to purchase and flip the property while netting the difference when they resell it, and the lender knows that they’ll retain the property if the loan is not repaid.

You can also find people in need of hard money loans outside of the real estate field. These are often considered short-term bridge loans and require substantial collateral to secure the loan.

Do hard money lenders require a down payment?

Hard money lenders typically require a small down payment. This up-front payment is considered their “buy-in” to the loan and ensures they have personal financial assets at stake, too. The down payment or buy-in adds more accountability to the borrower and helps mitigate loan delinquency, which lowers the risk to lenders. 

For example, lenders may require real estate investors to put in 10% to 50% of the property value for a down payment. The amount required will typically depend on the riskiness of the property. 

Some hard money lenders will issue a loan without a down payment, but they might charge other fees or have stricter restrictions to ensure borrowers pay the money back. 

What do hard money lenders charge?

Hard money loans are considered riskier than traditional loans, which is why they are more expensive. Borrowers can expect to pay interest rates of 10–15%, depending on the lender.

The interest rate might also depend on how much your hard money lender is willing to give you. Most lenders look at the loan-to-value ratio (LTV) when issuing funds. They will typically issue 65–75% of a property’s current value. This limit is another reason why borrowers need to be ready for a down payment: lenders won’t cover the full cost of the property. 

Some hard money lenders don’t use the LTV model and instead look at the after-repair value (ARV). This number is the estimated value of the property after it has been flipped. If your lender calculates your loan based on ARV, you will likely get more money. However, this loan is riskier. There is no guarantee that the home will have that market value when the renovations are complete. As a result, these interest rates are typically much higher, close to 18% with extra points added. 

For example, let’s say a flipper wants to buy a property that is listed at $200,000. Using the LTV model, their loan would be around $150,000, which means the flipper needs to bring in $50,000 of their own money plus funds for renovations.

If the lender uses the ARV model, they might place the flipped value of the house at $300,000. This method brings the loan up to $225,000. The borrower now has more money to work with but must cover these extra funds through the resale.

Who are hard money lenders?

Banks typically don’t offer hard money services, which means real estate professionals and other entrepreneurs who need hard money loans will need to turn to private investors. Hard money lenders are often individuals who support business owners or private companies specializing in hard money lending. 

Hard money loans are known for being fast. While it might take up to 30 days to get a traditional loan through a bank, hard money loans can get approved within a few days. This speed allows real estate investors to move quickly when a property hits the market. Traditional banks don’t have enough time to evaluate the level of risk that comes with a property, which is why they don’t get involved in hard money systems. 

Are hard money loans worth it? 

Working with a hard money lender may be your best bet if you run your business in a competitive real estate market. If you have a solid down payment already, you can take steps to build it up and flip it. However, if this is your first foray into real estate, a hard money loan might be too expensive or risky for your needs. 

Shop around to understand the costs of different hard money lenders that you want to work with. This can help you set an investment and renovation budget to start flipping homes for profit. 

Consider other loan options before you borrow.

While a hard money loan might seem like a strong real estate option, other funding options are available if you operate in another industry. At Lendio, we match borrowers with all kinds of loan types, from startup funding to large-scale loans. Visit our online lending center to learn more and to find a financial provider that can help you. 

Trade credit, sometimes called trade finance or supplier financing, is an extremely common form of exchange between businesses. Famously, Walmart relies heavily on trade credit. But it isn’t only large corporations that utilize this form of agreement between suppliers and buyers—trade credits are extremely common for small businesses, as well.

In fact, according to the World Trade Organization (WTO), an astounding 80% to 90% of all global trade relies on trade finance.

Therefore, trade credits will likely be involved in some way regarding your small business, and you should understand how this system works.

What is trade credit?

A trade credit is a business-to-business exchange where one business provides goods on credit to another, i.e. no cash is paid up front. In turn, the recipient of the goods promises to pay for the goods on a predetermined time frame.

Trade credits operate on the same basic idea as running up a tab at a bar or grocery store over time, which was common in years gone by. Importantly, though, a trade credit is a very formalized agreement between businesses, not a business and a customer.

In essence, trade credits are like financing with 0% interest—the buyer’s assets increase without the initial expenditure of capital. Depending on the size of your operation and your suppliers, a trade credit agreement might look a lot like a financing application from a bank, but they are often more informal. Typically, trade credit repayments take the form of invoices.

Trade credit definition.

A trade credit is the loan of goods or services from a supplier business to a buyer business. The buyer agrees to pay for the goods or services at a later date.

Trade credits in the international supply chain.

Trade credits are essential for businesses across the globe. Even if your business doesn’t have trade credit agreements, some organizations in your supply chain most likely do.

“International supply chain arrangements have globalized trade finance along with production,” the WTO notes. “Sophisticated supply-chain financing operations—including for small- and medium-size companies—have become crucial to trade.”

What is a trade credit example?

Trade credits have been hyped as one of the secrets to the success of Walmart, which continues to vie with Amazon for the title of world’s biggest retailer. Many of the products available on the shelves of your local Walmart store are procured without money up front.

“Walmart is no different from other large retailers,” points out financing expert Marco Terry. “Most large retailers are known for paying invoices in 30 to 90 days. Large companies operate this way during the course of their normal business.”

Walmart, which would have no problem getting financing in any form, must see a lot of intrinsic value in trade credits—the corporation uses up to 4 times more in trade credits than any short-term external financing.  

What are the advantages and disadvantages of trade credit?

Walmart probably sees a lot of benefit in trade credits because trade credits heavily advantage the buyer. This favorable condition exists because trade credits basically function as an interest-free loan. Walmart (or any other retailer chain) can start selling products before it has to pay for them.

Small businesses can take advantage of this, too. If you can work out a trade agreement with a supplier, you can begin making sales before spending money on inventory.

A disadvantage of trade credit is the risk involved—even though you don’t have to pay upfront, your business will still have to pay the supplier at some point. If you don’t have the money when the invoice is due, your company could face a dangerous cash crunch. If you don’t pay, you risk ruining your supplier relationship; not paying off trade credits can also damage your business’ credit score.

If you are on the supplier side of a trade credit, an advantage is that trade credits encourage repeat business. Trade credits allow you to do business with companies that might not have the up-front capital to buy from you before making sales.

If you offer trade credit, you basically become a lender, which involves inherent risks. This is why the supplier is at less of an advantage in a trade credit agreement than a buyer.

Make an educated assessment of the situation before offering trade credits. For example, is it worth waiting 30 days for payment if it means your product is placed on the shelves of a popular retailer? 

What are the types of trade credit?

The different types of trade credits are defined by invoice periods. On your invoice, it will typically say “net,” followed by the number of days when payment is due after the invoice date. The most common trade credit type is “net 30,” meaning repayment is due 30 days after the invoice date.

Trade agreements also occur with 45-day, 60-day, 90-day, and even 120-day payment periods. You should typically expect to repay in 30 to 45 days, though.  

What is bank credit and trade credit?

Bank credit and trade credit are different ways to understand financing available to your business. Bank credit is the total amount of money a business or individual can borrow from a bank. Bank credit includes credit cards, mortgages, and business lines of credit.

The value of trade credit, on the other hand, is connected to the value of goods or services being offered from a supplier to a buyer. Additionally, trade credit is available from suppliers instead of a bank.

Seller credit

A seller credit, or owner financing, is related to the sale of a business. The seller of a business can opt to sell all or some of a business like a trade credit—the new owner of the business can get started immediately and then repay the credit back over time. For the seller, it can allow you to get an overall better price for your business, but you assume the risk of the buyer defaulting. Seller credits are also common in home sales and function similarly to seller credits in the sale of a business. 

What makes a lending marketplace different from applying through a bank or a single lender? Excellent question. There’s a lot to love about lending marketplaces and the way they’re changing the borrowing experience. Here are 5 things every business owner should know about a business lending marketplace. 

1. You Can Compare Options

You would never book a flight by visiting one airline’s website and saying, “I guess this must be the going rate to Orlando.” Comparing options is a vital part of the process and ensures that you can find a flight that matches the price you want to pay and your scheduling needs. 

A lending marketplace works the same way… but for business loans. The idea that you should have to pick a single lender and roll the dice on the terms you qualify for is, quite frankly, a little outdated. And it doesn’t usually work in the borrower’s favor. With a lending marketplace, you can compare multiple loan offers to ensure you’re choosing the right loan option for your needs. Through a lending marketplace, you can compare the interest rates, loan terms, loan size, and speed of capital of different offers to ensure you feel confident when you apply for a specific loan. 

2. It Gives You Flexibility

When you have multiple financing options, it can open up new ways to attack a specific problem. If you’re looking for financing to cover a large inventory order, for example, you may want a short term loan that gives you the capital fast so you can quickly repay the loan and move onto the next opportunity. Or you may find that opening a line of credit will allow you to make repeated inventory purchases. 

Being able to compare financing opportunities gives you the flexibility to tackle your business challenges in different ways so you can find the strategic path with the highest payoff. 

3. It Saves You Time and Effort

With a loan marketplace, you apply via a single application to compare multiple offers. That’s a heck of a lot better than the typical 25-hour bank application that only gives you a shot at… one loan option. 

What’s more, loan marketplaces typically prioritize your time and make that application short and sweet. We can only speak for ourselves here, but we’ve edited the process down to a single 15-minute application that can unlock offers from 75+ lenders. If you average that out, it means you spend about 12 seconds/lender on the application.

4. You Can Rely on Expert Guidance

When you apply through Lendio, we pair you with a team of experts to guide your application through the process. These experts can answer your questions, help you understand the pros and cons of different loan types, and be there to guide you through each step— from putting your documents together to submitting them for underwriting.

5. You Can Find Funding That Matches the Speed You Need

For some business owners, their first question is, “How fast can I get a loan?” For others, it’s, “How big of a loan can I get?” The beauty of a lending marketplace is that you can choose the option that best fits what matters to you. Need financing in 24 hours? Yup, there’s an option for that. Don’t mind waiting if it means you can secure a lower interest rate? We have an option for you, too. 

A lending marketplace puts you in the driver's seat for your financing experience. Ready for an experience that’s tailored just to you? Apply now. 

Not sure how to choose the right lending marketplace? Check out our tips.

UPDATE: The PPP loan application period ended May 31, 2021. Apply for the Employee Retention Credit today through Lendio.

Over the past year, the SBA has rolled out a series of updates and adjustments to better serve the self-employed who need/want a Paycheck Protection Program (PPP) loan. Here’s everything you need to know: 

How Can You Apply for PPP If You’re Self-Employed?

You can apply for PPP via any lender participating in PPP whether or not they are your primary bank. Online applications make it easy and accessible, in addition to limiting exposure with an in-person application. To apply for a PPP loan online, you’ll need to calculate your payroll costs and gather the required documentation to complete the application successfully. 

For full instructions for how to apply online, consult our Step-by-Step Guide to Applying for a PPP loan. 

Who Can Qualify for a Self-Employed PPP Loan?

To qualify for a PPP loan, self-employed individuals must meet the following criteria: 

• You were in operation as of February 15, 2020
• You are an independent contractor, sole proprietor, or other qualifying business classification with self-employment income
• In 2020, you filed a Schedule C or Form 1040
• Your primary place of residence is the United States
• You meet other program requirements 

How Much Money Can You Get?

You can qualify for 2.5 times your monthly payroll costs— based on either your net profit or gross income during the calculation period. 

In March 2021, the SBA released new guidance allowing the self-employed to choose whether they want to calculate their PPP loans based on net profit or gross income. Previously, calculations were limited to net profit, which limited the funds you could access if you’re in the habit of maximizing tax deductions. 

If you have additional employees on your payroll, their payroll can be used to calculate payroll numbers. You cannot include 1099 workers in your payroll calculations, as they are entitled to apply for their own PPP loans. 

How Can You Calculate Payroll Expenses If You’re Self-Employed?

There are 2 different methods for calculating your PPP loan depending on whether you employ other people. 

How to Calculate a PPP Loan If You’re Self-Employed and Have No Employees

• Retrieve your Schedule C from either 2019 or 2020. If you’re using 2020 to calculate your payroll costs and have not yet filed your 2020 return, you can fill out your 2020 Schedule C and calculate the value.
• Choose the number you’ll use to calculate payroll. This will either be gross income (found on line 7 of the Schedule C) or net profit (found on line 31 of the Schedule C). If the amount is greater than $100,000/year, reduce to $100,000/year. If neither number is greater than $0, you do not qualify for a PPP loan. 
• Take that number and divide by 12 to calculate your monthly payroll costs. 
• Multiply the monthly total by 2.5.

How to Calculate a PPP Loan if You’re Self-Employed and Have Additional Employees

• Choose whether you will use net profit (line 31) or gross income (line 7) on your Schedule C from 2019 or 2020—depending on which period you’re using to calculate payroll. 
  • You will then subtract the following from your net profit or gross income total. Add employee payroll from: line 14—employee benefit programs, line 19—pension and profit-sharing plans, and line 26—wage (less employee credits).
  • The maximum total for this step is $100,000/year. If greater than $100,000/year, reduce to $100,000. If the number is less than $0, set the amount to $0. 
• Calculate your gross wages and tips paid to employees who live principally in the US (line 5c, column 1). If the total for any employee is in excess of $100,000/year, reduce to $100,000. Add this number to the total from the previous step. If you have employees who live primarily outside of the US, subtract their wages.
• Add employer contributions from 2019 or 2020 to employee group insurance (line 14), retirement (line 19), and state/local taxes on employee compensation. 
• Divide the total amount by 12. 
• Multiply that number by 2.5.

If You Have an EIDL That Will Be Financed By the Loan

Whether or not you have employees, you must take an additional step of adding the outstanding amount of any Economic Injury Disaster Loan (EIDL) awarded between January 31, 2020, and April 3, 2020, which must be refinanced into your PPP loan, although if you only received an EIDL advance, you will not need to refinance the advance amount into your PPP loan. 

What Documents Do You Need to Apply for PPP If You’re Self-Employed?

To complete your PPP application, you will need the following documentation. We recommend gathering this information prior to starting the application. 

• • Copy of government-issued ID for all owners with 20%+ share in the business
  • Proof that you were in business as of February 15, 2020:
    • If you have W2 employees: IRS Form 941 from Q1 2020 or a third-party processing report from February 2020. 
    • If you do not have W2 employees: February 2020 bank statement or a customer invoice from February 2020
  • Tax documentation: 
    • Form 1040 with a Schedule C, or:
    • 1099

• If you have employees, you’ll need to provide proof of payroll costs. Choose one:

• • W2s and W3 for your employees
  • IRS Form 944
  • IRS Form 941 (all 4 quarters)
  • 3rd-Party Payroll Processing Report

Can You Use a PPP Loan to Pay Yourself?

Yes, you can use your PPP loan for payroll-related expenses, including paying yourself. To qualify for loan forgiveness, individual payroll amounts cannot exceed the calculation limits, meaning you can pay yourself a maximum of $8,333/month ($100,000/year) to be eligible for forgiveness. 

What Can You Use PPP For?

The allowed uses for PPP loans have been expanded. Due to high demands for the loan, it’s expected that you will still need to spend 60% of loan funds on payroll-related expenses, but you can now use the other 40% on a variety of uses. 

Payroll Costs

• Compensation in the form of salaries, wages, commissions or similar compensation up to $100,000
• Payment of cash tips or equivalent
• Payment for vacation, parental, family, medical, or sick leave
• Allowance for dismissal or separation
• Payment of retirement benefits
• Group vision, dental, disability, or life insurance
• Payment of state or local taxes assessed on the compensation of employees

Other PPP Uses for the Self-Employed

• Healthcare costs related to the continuation of group healthcare benefits during periods of sick, medical, or family leave, as well as insurance premiums
• Mortgage interest payments (but not prepayment or payment of the mortgage principal)
• Rent
• Utilities
• Interest on any other debt obligations incurred before February 15, 2020
• Refinancing an SBA EIDL received between January 31, 2020, and April 3, 2020
• Covered expenditures such as business software or cloud computing services that facilitate: business operations; product or service delivery; the processing, payment or tracking or payroll expenses, human resources, sales, and billing functions; accounting or tracking of supplies, inventory, records, or expenses
• Covered property damage costs
• Covered supplier costs
• Covered worker protection expenditures

What Documents Do the Self-Employed Need to Apply for a PPP Loan?

• 1040 Schedule C for 2019
• Your birth date
• A color copy of your Driver’s License (front and back)
• 1099-MISC, if you have them
• A voided check for your business bank account
• If you have 941 Quarterly Tax Filings (2019, 2020 Q1) or 944 Annual Tax Filings (2019), they should be submitted

You can visit our step-by-step guide on completing the PPP application for full instructions. 

Can You Get a PPP Second Draw?

Self-employed individuals can apply for a Second Draw on their PPP loan if you’ve experienced a revenue reduction of 25%+ due to the pandemic and you meet the other Second Draw qualifications. Learn more about how to qualify and apply for a PPP Second Draw. 

How Much Can a Self-Employed Individual Claim for Payroll Expenses?

The maximum amount for a PPP loan is 2.5 times your average monthly payroll costs. Income listed on a Schedule C in your personal tax return is the only payroll that can be used to calculate your PPP loan amount. If you’ve hired 1099 workers, they cannot be included in your PPP loan calculation and may apply for their own PPP loans. 

Do You Need to Take the Full Amount You Qualify For?

No, you may apply for a PPP loan that is smaller than the maximum you qualify for (2.5 times your monthly payroll costs). 

How Can You Get Your PPP Loan Forgiven?

The SBA has simplified loan forgiveness applications for PPP loans less than $50,000. This provision was specifically designed to support independent contractors and the self-employed. Loans that meet this threshold will not have to meet the employee retention requirements of larger loans, 

If your First Draw loan is $50,000 or less, you can not apply for forgiveness using the simplified Form 3508S. 

The SBA has not yet indicated whether or not this guidance will apply to PPP Second Draw loans. 

What If Your PPP Loan Is Not Forgiven?

If your loan forgiveness application is denied, you will be required to repay the loan. PPP comes with a 1% interest rate and a maximum loan term of 5 years. 

Is Loan Forgiveness Automatic?

No, you must apply for loan forgiveness through your lender. 

As you look to secure funding for your business, you may come across the concept of a lien. A lien gives creditors the legal right to claim your property if you fail to pay them back for a loan or purchase. Liens are most commonly found in mortgages, where lenders can take your house if you fail to meet your monthly payments. 

A lien isn’t necessarily a bad thing, but it can impact your credit and financing opportunities. Let’s dig deeper into a lien’s definition and what it means for your business.  

Is a lien bad?

A lien isn’t necessarily a bad thing to have. Many people take out voluntary liens when they accept mortgages or business loans. If you keep making payments related to this lien—proving to your lender that they will get their money back—then a lien isn’t something you need to worry about. 

However, there are instances when a lien can be bad. An outstanding lien can mean that you hold unpaid debts to various creditors or vendors. When this condition applies to a property, it could relate to your mortgage lender or the local government that collects property taxes. If you fail to pay these obligations, then your creditors have the right to seize your property or take legal action against you.  

What happens when you have a lien against you?

If you have an unpaid lien against you—or if you stop making payments on it—then the lienholder can step in and reclaim their assets. The person who issues the lien is known as a lienholder. For example, your bank might be your lienholder when issuing your mortgage.  

In theory, the bank or financial service provider can seize your business if you have outstanding liens. They can evict you and sell your property at auction. This action allows your lender to reclaim some of their lost funds, even if they sell your property below market value. 

However, not every lien against you can lead to foreclosure or seizure. Lenders often do whatever they can to get business owners to meet their financial goals. They will also take business owners to court in hopes of recouping the lost funds in cash rather than spending time selling off assets. Navigating the seizure of assets and the resale process is time-consuming for lienholders and can severely damage the credit of loan recipients.  

How do you get a lien removed?

You have a few options if you need a lien removed from a property or asset. First, you can pay off the debt. This option is the best if you took out a loan and created the lien. You might also need your lienholder to submit a release-of-lien form if you paid the lien holder before the lien was placed. This document needs to be notarized and will protect your accounts from going to collections. 

Most entrepreneurs have liens related to their business assets. If you make regular payments against your debt, you can grow your credit and keep your lienholders happy. The best way to avoid bad liens is to keep up with your repayment schedule as best as you can.

UPDATE: The PPP loan application period ended May 31, 2021. Learn about financing options available for small businesses today at Lendio.com

FAQs About the Paycheck Protection Program (PPP)

As was the case with the initial round of PPP, details for the program weren’t fully ironed out until after the bill had passed. As a result, many small business owners were left scratching their heads as to how PPP works. We know how vital this financial lifeline is for many small business owners. Here are answers to some of the most common questions small businesses have asked us about PPP. You can also find primary details regarding the loan (like how to calculate your payroll costs and what the loan can be used for) on our PPP page. 

When will the PPP extension end?

We recommend you apply for PPP early to ensure that your application has enough time to move through processing by the lender and be submitted to the SBA prior to the May 31, 2021, deadline.

How much is available in the new round of PPP?

How large of a loan can a business qualify for through PPP?

The program also includes the following caps:

• Maximum total loan amount: $10 million (aggregate total for First and Second Draws)
• Maximum loan amount for a Second Draw: $2 million
• Maximum loan total for businesses within a corporate group: $20 million

What protections have been added to PPP?

• Restaurants, hotels, or live venues that fall under a NAICS code starting with "72" can apply for 3.5 times their monthly payroll costs on their Second Draw. 
• Live event and production companies that have been forced to close may be eligible for a special grant.
• $12 billion have been specifically earmarked for BIPOC-owned businesses.  

What Is Your NAICS Code Used For?

By having a unified system for companies to identify themselves, regulatory bodies and other organizations can protect business owners and ensure America has a balanced economy.

NAICS Codes and the Paycheck Protection Program (PPP)

Additionally, this code helps ensure that companies applying for specific loans (like those related to hospitality) fall firmly within the field. That way, a company with a code related to advertising that had hospitality clients wouldn’t take from an actual hotel or restaurant—as an example.

Keeping your NAICS code on hand before applying for PPP assistance can make the process go faster and help you apply with confidence.

What is needed to qualify for a First Draw on a PPP loan?

• Your business was operating as of February 15, 2020. 
• You own a small business with associated payroll costs, you run a nonprofit with associated payroll costs, or you’re a sole proprietor/freelancer.
• You certify that your business has sustained economic damage due to the COVID-19 pandemic. 
• You have 500 or fewer employees. 
• You’re an independent contractor, sole proprietor, self-employed individual, or a business partner (For limited partnerships, only one PPP application can be submitted per partnership.)
• You have employed for whom you paid salaries and payroll taxes. 

Will you be able to get another PPP loan if you received one during a previous round?

What will the requirements be for a Second Draw on a PPP loan?

• Your business has fewer than 300 employees. 
• You can show a 25% revenue reduction during the first, second, third, or fourth quarter of 2020 (relative to the same quarter in 2019). 

How much can you qualify for in a Second Draw?

The maximum loan amount for Second Draws is $2 million. The maximum aggregate total for First and Second Draws is $10 million (if you happened to receive $9 million in your first draw, you would only be able to receive $1 million in the second draw). The maximum that can be borrowed by businesses within a corporate group is $20 million. 

What additional businesses are now eligible for a PPP loan?

• News organizations
• Some hospitals owned by government entities
• Businesses that receive legal gaming revenue (if they meet applicable requirements)
• Electric, telephone, and housing cooperatives
• 501(c)(6) organizations and 501(c)(19) tax-exempt veterans organizations
• Tribal businesses
• Destination marketing organizations (if they meet applicable requirements)
• Certain faith-based organizations

Is Lendio a PPP lender?

If not a lender, what is Lendio’s role with PPP?

What is the lender’s role with PPP?

Does the lender actually underwrite each file?

How long does the SBA take to process the application once submitted by a lender?

What is a PLP Number?

Is there a difference between a PLP number and an SBA loan number?

Can a borrower be denied a PPP loan after being issued an SBA loan number?

Is it possible to cancel my SBA loan number with my lender?

Why am I being asked for a credit check?

How long will it take the lender to fund the loan?

If a lender is unable to issue funds due to a borrower-caused delay, like missing paperwork, the SBA allows 20 days for funds to be disbursed. If the lender still has not received the necessary information at the end of that 20-day period, the lender is required to cancel the loan.

Why was I denied? Do I need to resubmit somewhere else?

If your application is flagged by E-Tran due to one of these issues, it may still be possible to fix the issue. Once you fix the issue, you can reapply for the loan, and we’ll do our best to get you resubmitted through a different lender. Additionally, to increase your odds of approval and funding, we recommend you apply at as many places as possible. 

Another common reason for denial is that there is already an SBA loan number under that Taxpayer Identification Number (TIN), which often happens when a business owner who owns multiple businesses applies for a loan. 

How will the SBA review borrowers’ required good-faith certification concerning the necessity of their loan requests?

Borrowers with loans greater than $2 million may still have made the certification in good faith. All loans greater than $2 million, and other loans as appropriate, will be subject to SBA review. Borrowers that did not have a basis to make the certification (concerning the necessity of the PPP loan request) will have to repay outstanding PPP loan balances and will not be eligible for loan forgiveness.

If the borrower repays the loan, the SBA will not pursue administrative enforcement. Any borrower that repaid a PPP loan in full by May 18, 2020, will be deemed by the SBA to have made the required certification concerning the necessity of the loan request in good faith.

Are employees of foreign affiliates included for purposes of determining whether a PPP borrower has more than 500 employees?

According to the interim final rule, borrowers must count non-US employees toward the 500 limit, but these employees are excluded for average payroll and loan calculations.

Are PPP loans taxable?

Initially, there was uncertainty as to whether a business or nonprofit could deduct expenses paid for with PPP loan funds. The Economic Aid Act has clarified that these expenses are now tax-deductible. More guidance from the IRS is needed on just how this process will work. 

However, some states are currently taxing these funds, so you should check with your local accountant about how your state is handling this issue.

For more details on how to approach your taxes and potential deductions in relation to PPP, you can consult our post, “Are Business Expenses Paid With PPP Loans Deductible?”

How long does PPP last?

How long will the Paycheck Protection Program last?

Will there be another PPP loan round?

If you’re considering applying for a PPP loan, we strongly encourage you to do so sooner rather than later. There is no guarantee that funds will remain available through May 31, 2021, or that there will be another round of PPP loans.

Apply for your PPP loan now through Lendio's online application.

Lendio strives to provide you with the most current information as it relates to the Paycheck Protection Program, related SBA programs, and relevant regulations. The rules and regulations governing these programs are being regularly clarified by the SBA, and other agencies. In some cases, the provided guidance may directly conflict with other competing guidance, laws, rules, or regulations. Due to these changes, Lendio cannot guarantee that the information contained in this page reflects new changes or updates.

Lendio advises you to review the SBA guidelines and regulations on your own and determine your Company’s best approach to receiving SBA loans. Lendio urges you to consult your own attorneys, lawyers, and consultants to make the best decision possible. The information contained herein should not be construed as legal or tax advice, and should not be relied upon as such.

The words “flexible” and “financing” don’t seem like they should be in a sentence together. When you think of financing, you may think of a stuffy banker stamping rejections on loan applications. Maybe you think about how your business is stalled in growth because you’ve reached the end of your credit line. It is not often that you think about financing options that are flexible to your needs. They do exist, however. Here are some flexible financing options for your small business.

Does your financing plan account for unexpected losses?

As we have all seen, life is unpredictable. Your business could be performing well, but then revenue may drop off a cliff for outside reasons. Here is where that flexibility will come in handy. The pandemic has been awful to small business owners, and it has also shed light on some huge holes in small business finances. Many small business owners turn to personal funds to keep their businesses afloat because they lack cash reserves. If you want to avoid this scenario in the future, have a financing plan that is flexible and can accommodate unforeseen challenges.

Flexible financing options.

Many business owners found they were at risk of breaching their banking covenants with the sudden revenue loss. Some business owners were struggling to meet payroll. Others had to close altogether. To keep the lights on for your business, you either need a large cash reserve or flexibility in your financing. If you have maxed out a bank line of credit, do you have access to working capital from somewhere else? Is your bank willing to extend your credit limit?

Equipment financing

It is worth considering some supplemental financing options to round out your financing plan. Equipment financing is a great option that can unlock working capital to support your business growth. Equipment financing is a loan that you can use for specific reasons, like buying manufacturing gear or any other equipment you need for your business. If you are looking to upgrade your cybersecurity and tools because you have moved mostly remote, equipment financing can cover those costs. This type of financing will be a loan that probably has strict repayment terms, but you can use the money pretty flexibly for your business’s needs. 

Accounts receivable financing.

Accounts receivable financing can help you meet payroll while waiting to collect on your receivables. In simpler terms, the amount of capital you can access is based on the amount of capital you are waiting to collect from your customers. With accounts receivable financing, you can add to your team without the stress of adding to your overhead. Since it’s based on your outstanding invoices, it does not require a high credit score or lengthy time in business, which makes the approval requirements very flexible. This type of financing is similar to a line of credit, but the limit will not be as rigid. Typically, the higher your accounts receivable, the more capital you can access.

Line of credit.

A line of credit gives you some flexibility in drawing capital and repaying it. You don’t have to use all the money, and you only pay interest on the amount you use. Online lenders and traditional banks offer lines of credit, and it’s a great tool to have available if you want a more flexible financing plan.

Business cash advance.

A cash advance is basically a lump sum of cash that is repaid through daily or weekly withdrawals based on your future earnings. These are typically costly because the interest rates are high. Make sure you read your contract carefully before taking out a cash advance.

Which Flexible Funding Option Is Right for You?

Most of these financing options can work together to round out your financial plan. For example, you can use accounts receivable financing to cover your payroll and also take out an equipment loan to cover your production tools. You could use a cash advance alongside a line of credit. It is crucial to consider your business and your industry when signing up with a new lender. It’s best to choose a lender that knows your industry and can offer solutions to your unique financing challenges. Ultimately, your financing plan should include some flexibility to account for sudden gains or sudden losses.

Becoming an entrepreneur is an exciting venture that can often be the fulfillment of a life-long dream. But business owners also face a variety of challenges, and POC business owners face additional and unique challenges. New entrepreneurs wading into unchartered territory can often learn from the advice—and mistakes—of others. We asked a handful of POC business owners for their best advice to help fellow POC entrepreneurs entering the small business world.

1. Get a Minority-Owned Certification

As soon as you can, Mary Angela Munez, owner of GoLucky Studios, recommends working toward getting certified as a minority-owned business. “This makes you visible and able to accept government contracts that are set aside to provide opportunities to minority business owners,” she explains. “Right now, 5% of all federal money has been allocated to businesses that hold this designation.” State and city-level certifications can also provide access to bids on local contracts.

2. Plan for Success

You probably want to hit the ground running, but Elisabeth Jackson, a small business owner of 3 years with over 8 years of experience in the small business world, warns against rushing the process and says you should instead focus on getting your systems right. “Black women are the fastest-growing entrepreneurs but are significantly absent when it comes to long-term profitable businesses,” she notes.

“Document everything you do, and create procedures and systems that can replace your workload for you as you grow,” Jackson says. “Also, I recommend having a strong product suite that increases your client retention so you aren't relying on one product to make all your money.” In addition to not relying on one product, she advises against relying on one person—namely, yourself.  “Don't get caught up trying to do everything because that’s not sustainable in the long run.”

3. Hire Well

And since you can’t do everything yourself, Nerissa Zhang, CEO of The Bright App, recommends you hire help as soon as you can. However, she says it’s important to hire good people, and it’s equally as important to let those people go when it becomes clear that they’re not a good fit. “The reality is that there are many people in this world who will not respect the leadership of people of color, particularly if you’re also a woman,” Zhang explains. “As soon as you see any signs of disrespect from someone you’re paying, do not hesitate for a second—fire them immediately.”

4. Put Your Business Online

COVID-19 has severely hampered brick-and-mortar businesses. But even in a post-pandemic world, Ray Blakney, CEO and cofounder of LiveLingua.com, recommends putting your business online.  "In addition to the standard benefits of online business—such as lower startup costs and overhead, global reach, etc.—there are some unique benefits for POC.” 

For example, he says that since there aren’t a lot of online businesses run by POC (comparatively speaking), this is an opportunity to stand out.  “Not only can the unique point of view be shown on the website itself—it can also be used in marketing, as many journalists, podcast hosts, and websites are looking to include more voices from people of color, and they have a hard time finding people who can speak to this,” Blakney explains.

5. Be Yourself—and Be Sharp

To Tasha Booth, CEO and founder of The Launch Guild, being an entrepreneur is an opportunity to be your “authentic” self.  “Especially as a person of color, you will always be ‘too much,’ ‘too loud,’ or ‘too something’ for someone in whatever industry you’re in, and that’s okay.” But the beauty of being a small business owner is that you get to make the decisions and run the operation as you see fit. “Don’t think you have to fit a specific mold or cater to certain people to succeed and feel good about the business you’re building,” Booth says.   

Michelle Diamond, CEO and founder of Elevate Diamond Strategy, agrees. “Understand the value and uniqueness you bring as a POC,” she says. “But at the same time, unless your small business is focused on your ethnicity or heritage, lead with your skill sets and the value of your products and services only.”

6. Embrace Those Who Embrace You

You may have a target audience, but Booth recommends embracing the community that embraces you.  “When I first started running Facebook ads for my business 2.5 years ago, I noticed that the women responding to the ads and signing up for my services were primarily Black women.”

Initially, she says she was bothered that non-POC were not responding and believed it was only because she was a Black woman.  “But now, I celebrate the fact that other Black women see my success and see what the possibility can be for them,” Booth says. “Rather than thinking of it as a detriment, I see it as one of my superpowers and something that sets me apart from all other entrepreneurs in the online business/virtual support industries, so embrace the people who are embracing you.”

7. Invest in Your Professional Development

Learning is a lifelong process – especially when you’re a small business owner. And according to LaKesha Womack, a leadership development specialist, it’s important to invest in your professional education. “No, I don't mean getting another graduate degree: however, working with a business coach or consultant to help you develop a plan for your business and to hold you accountable will be one of the best decisions that you can make.”

While many entrepreneurs are great at what they do – she says being a successful business owner entails more than providing a service or product. “Working with a professional who has experience with business operations, human resource management, branding, and marketing can help your business to not only survive, even in turbulent economic environments, but they can also help to prepare you for growth.” Mentors for POC can also provide valuable support and advice to take your business to the next level and perhaps point you toward funding sources for business owners of color. 

8. Focus on the Positives

Being a POC entering the small business world will involve challenges, but that shouldn’t be your focus. “Oftentimes, POC may assume that they will encounter racism or bias, and while that does happen sometimes, the truth is if you have that mindset, you will attract more of the same,” says Diamond. However, she believes that the majority of people care more about your ability to add value to their lives than the color of your skin. “Focus on succeeding and having a great business; there is no limit to the success you can achieve for yourself, family, and community."