Navigating the pandemic-era funding options

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Covid-19 has hit us all hard and many business owners are wondering how to deal with future variants and lockdowns. With the severe impact on the economy, you may be wondering how to generate liquidity for your small business and stay strong through the pandemic.

Luckily, when you know your borrowing options, you have fantastic opportunities to borrow the money you need to grow your business. All you need is the knowledge to navigate your liquidity options and the resources to match you with the appropriate loan provider.

This article covers the most popular lending options for small business owners looking to generate cash during Covid-19. We’ll cover six options for accessing short- to mid-term capital and list the pros and cons of each.

Short Term Loans

Short term loans offer versatility and flexibility for small business owners. With this option, companies borrow money based on cash flow, which they plan to repay periodically with interest. Generally, short-term loans have three to 15 months to be repaid and range from $2,500 to $500,000.

As an unsecured loan, short-term loans require no collateral and offer small business owners many ways in which they can take advantage of their extra liquidity. However, because these loans are unsecured, they have higher interest rates, offer less money, and are more difficult to obtain from traditional banks.

On the one hand, short-term loans are low-risk for the borrower because they usually do not require collateral. In addition, these loans offer flexibility in issuing cash, e.g. B. for purchasing equipment, managing cash flow or paying off credit cards to improve creditworthiness. But on the other hand, higher interest rates and a short repayment time are the main compensations for the versatility of short-term loans. And traditional banks often avoid offering these loans to entrepreneurs because of their risk, though alternative lenders are less risk-averse.

Medium-term loans

Unlike short-term loans, medium-term loans are not as flexible, but allow for repayment over two to five years. Generally, these loans have a fixed interest rate with monthly payments, and the borrower must agree to the lender’s repayment terms before receiving the loan. While the interest rate is not as high as short-term loans, interest rates can vary from 5% to 30% depending on the length of the loan and the amount borrowed.

Medium-term loans are best for companies with good credit ratings that are established and ready to grow. The payback period and flexible interest rates offer small business owners looking to scale a unique opportunity to obtain the liquidity they need.

The positive aspect of this strategy is a flexible repayment period that allows for consistent repayment of the loan, and borrowers can repay the loan early without penalties. Additionally, fixed interest rates offer even more repayment consistency throughout the repayment period.

However, businesses generally need at least two years of uptime, a credit score above 650, and annual sales of $250,000, and banks aren’t rushing to offer these products to businesses either.

line of credit

Business Lines of Credit (LOC) offer the most flexibility in terms of liquidity. Instead of taking out a loan at a fixed rate, borrowers have a pool of capital to draw on and repay when needed. You can access the money at any time and only have to pay back what you borrowed at the agreed interest rate.

Due to the unforeseen toll that Covid-19 has taken on businesses, access to LOCs makes it a desirable option for entrepreneurs – and LOCs are easier to qualify for than traditional loans. Unfortunately, LOCs offer higher interest rates, lower cash levels, and higher risk for the lender.

You also need good credit and annual sales or collateral to qualify, and they may charge setup fees and ongoing paperwork to ensure your business has a good reputation.

Personal loans for your business

Similar to LOCs, personal loans are a great option for covering short-term expenses and liquidity needs in an emergency. The main difference is that they are fixed-rate loans with a repayment schedule. Because personal loans are unsecured and require no collateral, they are more difficult to qualify for and have higher interest rates than longer-term loans.

Despite this, as long as you qualify, you can receive the funds in a matter of days and have the flexibility to use your liquidity for all your business needs. However, these loans require a credit score above 700 and a personal annual income of at least $50,000, and the interest rates are higher because they pose more risk to the lender.

equipment financing

For businesses that use a lot of devices and frequently upgrade and replace those devices, device financing is a great way to add much-needed liquidity. These loans are specially designed for essential equipment such as vehicles, printers or restaurant ovens.

Device financing involves taking out a loan for the device in question and using the device as collateral for the loan. For example, if you are approved for 75% of the equipment cost, you can buy the equipment at 25% value and pay back the amount you borrowed with interest and principal.

With this strategy, business owners can obtain loans up to 100% of device value with low interest rates and be funded within 48 hours, and borrowers can repay device financing for up to 10 years or more. Note, however, that failure to pay the loan will result in repossession of this equipment, and these loans often require a minimum credit rating and outstanding earnings for two or more years.

Stacks of 0% business credit cards

Stacking business cards can be an excellent way to access and move liquidity, depending on your credit rating. Instead of acquiring a sizable unsecured line of credit, apply for several 0% interest credit cards and then put your business expenses on those cards where you can repay them with no interest. With this method, you can even pay off high-interest loans early and build up your credit quickly.

This strategy allows the borrower to flexibly move your money around to pay off multiple expenses. And it can be an effective way for savvy business owners to build credit and pay off larger loans without interest.

There is one major downside: Stacking credit cards can temporarily lower your credit score while multiple lines are open, and if left unpaid can result in a significant drop in score.

Jake Labate is President and Michael C. Davies is creative copywriter at, a Westport-based marketing solutions company. A previous version appeared on the BitX Funding blog.

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