By Steven Davidson
Small business owners are not only fighting to keep their businesses alive, but their livelihood as well. With little to no revenue coming in, it is a struggle to pay personal expenses, let alone manage the cost of continuing to run a business. Many owners are already familiar with the grant and loan funding options available for their business, such as the PPP program and other loans through the Small Business Administration, which have provided some with adequate relief already. Those who have already exhausted their options for funding and still need more should now turn their attention to funding their business personally. Plenty of programs can provide individuals with personal loans and other relief options to help lift some of the burden. Below is a list of some of the top personal relief options business owners should consider.
Get a Personal Loan
Small business owners likely have already applied for loans through their businesses, but have not yet considered the options for personal loans. These can be easier or more difficult to acquire, depending on where that business stands credit wise. Owners that have better credit than their businesses may receive more money on a better interest rate. If you own a relatively new business or have yet to establish a solid line of credit yet, these are some programs that could really be of benefit:
LightStream (click HERE for more information)
LightStream is offering personal loans for debt consolidation to borrowers with a minimum credit score of 660. They range from $5,000 to $100,000 and have repayment periods between 24 and 84 months with longer terms requiring higher APR. The downside of these loans is the high APR rates, which can be as high as 20%. However, they will offer a rate .1% point lower than a competitor’s offered rate, provided you can show proof of the offer.
SoFi Credit Loan (click HERE)
SoFi is offering loans for up to $100,000 with APR rates between 6% and 18% and terms of 2-7 years. People who qualify for the lowest rate must be in excellent credit standing and meet other conditions, such as term of the loan, evaluation of creditworthiness, and verification of income. Loans can be used for any lawful personal, family, or household purposes.
US Bank Loan Programs (Current Members Only)
US Bank is offering two types of loan programs for current customers. There is no need to show proof that Coronavirus has caused a financial hardship.
The loan is for a small sum of money ranging between $100 to $1,000, borrowed in $100 increments. The bank has reduced the fee for each $100 borrowed from $12 to $6. To qualify for this loan, you must be a current US Bank customer and have been for at least six months and have your paychecks directly deposited into your bank account for three months.
Note that there are some cons for using this loan. It requires you to both be a current member of US Bank and have paychecks deposited into your account, so owners who do not pay themselves through their business cannot claim this. Besides the small amount, you cannot take another loan until 30 days after the first one is paid off. Also, there is a hard pull of your credit when you apply which can lower your credit score for a while.
This personal loan is for anywhere between $1,000-$25,000 with the usual 1% prepayment fee waived for loans under $5,000. The term is for up to 48 months with 2.99% APR. To qualify, you must have an excellent credit score and an open account for at least 120 days.
Emergency Grants (click HERE)
These grants will provide you with some money if you qualify and are accepted:
● RedRover is providing 2 grants to help pet owners care for their pets
● DoorDash Covid-19 Financial Assistance Program is giving grants to Door Dash delivery personnel that have been diagnosed with Covid-19. They must have been in the program for 2 months and completed at least 30 deliveries in the last 30 days.
● Bartender Emergency Assistance Program is offering grants to bartenders affected by the lockdown. Bar owners who also work at the bar should look to apply for this grant
● Freelancers Relief Fund gives grants of up to $1,000 to independent workers who have been doing primarily freelance work for over a year and experiencing financial hardship.
● Apron Inc. Emergency Fund gives restaurant workers who work for locally owned independent food service businesses a $500 grant.
Loan Alternatives (click HERE)
Loans can be helpful in these times, yet the risk of going into even more debt can be a serious problem. Most likely, business owners have already applied for loans through their small business and struggling to plan their payments as it is. Those in this situation would want to consider these alternatives to borrowing more money.
If you are not interested in taking on more debt, it could be a good idea to schedule a meeting with a debt management company. These companies do not offer loans, but work with your creditors to lower your monthly payments and expand the payment period. These are typically for unsecured debt, or debt that has no collateral backing for it. Remember that this may come with some consequences, like longer terms of debt and inability to apply for more credit. Here is a step by step process of a debt management plan:
● Prepare all of your financial obligations, including rent and utilities, credit card bills, and medical bills, along with your income for an interview with the management company. ● Your credit score will be checked, but it will not go down because of it. ● The advisor will offer ways to decrease spending by targeting less necessary spending areas, ways to increase income, as well as where to learn some of these techniques for free. ● If after all your income, debt, and expenses have been calculated and you are still in a financial hole, the counselor could advise using a debt management program to fix your situation ● After coming up with a plan that works for you, the program will give a budgeting proposal to your creditors who will either accept or counter. There must be a mutual agreement of payments, pay period, and fees for violations before it can be implemented ● Upon agreement to the terms, you will be sent the agreement to sign and the program begins. This takes 1 business day via email and 3-5 for a written confirmation. ● The counselor will collect your bank account information so that monthly payments come automatically from your account. The payment goes to the credit counseling agency, which then disburses money to the creditors under the agreed upon terms. ● You will receive monthly statements from both the creditor and the credit counseling agency. Be sure to check that these are the same each month so you are being credited properly. ● One debt being paid off will not change the payment amount per month.
Debt Consolidation Debt consolidation is the practice of taking multiple debts and combining them into one single debt. From there, you can either apply for a consolidation loan or set up manageable monthly payments. One method for doing this is by finding a low to zero-interest credit card with a high limit, apply for the card, then use that card to pay off all of your debts. Another way is to take out a loan from a credible lender for the full amount of your debt and pay all your other debt off. A loan option could make payments smaller, but could make the payment period longer.
Using this strategy correctly can help increase your credit score and more easily manage your debt. This will require planning a budget around the minimum monthly payments associated with the card, so be sure to have a plan before attempting this strategy. Debt Settlement “Debt settlement is an option for consumers who can't afford their current debt payments, and either can't or won't file for bankruptcy,” says Gerri Detweiler, credit expert and co-author of “Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.” Though it can cut your debt in half, it should only be used by those who have thoroughly researched the option. US News has compiled a list of the best debt settlement companies to ensure you get the best bargain. Here are the top four options:
● National Debt Relief: Best for secured debts ● Pacific Debt Inc: Best personal account managers ● Accredited Debt Relief: Best for unsecured debt ● DMB Financial: Best for high interest credit cards
Salary Finance Salary Finance is running a program with Equifax that gives loans to employees to help with their wages. This does not provide business owners with funding directly, but can help give more money to their employees. The loans are for between $1,000-$5,000, have terms between 6-36 months, and between 5.9% and 19.9% APR. Help With Payments Many banks and lenders are providing help making payments on debt by allowing deferment, waiving late fees, and giving assistance. NerdWallet has provided a list of some programs that might affect you:
● Discover is offering help and consultation on timing and late fees for personal loans. Just contact a discover agent for more details. ● HSBC is offering a deferment program for personal loans. The program delays payments for 120 days after one enrolls in their hardship program. After the 120 days, customers can either pay it all at once or agree to new terms extending the loan. ● Lending Club is offering a 2 month deferment program that stops all late fees and reporting late to credit bureaus. They have also launched a resource called the Member Center which provides payment options to help lenders return to their normal payments, manage money, and improve credit. ● Lightstream is offering a one-time deferment for personal loans which tacks those deferred payments onto the end of the loan, but comes with interest that occurs during the loan term. This option is not available for past due accounts over 90 days. ● Wells Fargo is waiving some fees and allowing deferment of payments for personal loan customers. HEROES Act Second Stimulus Check This option is tentative, but there is a strong possibility of the Act being passed in the near future. The Act includes within its 1,800 pages a second stimulus check for American households and individuals who are below the maximum income allowed. The new stimulus will cover a lot of the expenses missed by the CARES Act, including accounting for more dependents. So far, the Act still needs to be fully agreed upon by Congress and the Senate, but it is still important to note.
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