The Best Small Business Loans of 2020

The RingCentral team

It’s no secret that 2020 has been a difficult time for many small businesses. Everyone is facing a new normal in the wake of the COVID-19 situation, but American small businesses have been hit particularly hard. 

Whether your business was forced to close, adapt, or slow down, there’s no doubt that many businesses are looking for help recovering from the economic impact of COVID-19. 

In this post, we’re going to go through your loan options as a small business:

For continuing payroll: PPP loans

Loan amount: Two months of average monthly payroll, plus 25% on top of that

Interest rate: 1%

Term: 2 years, forgiveness available with proper documentation

On April 24, Congress approved a new law that included $310 billion in additional funding for the Paycheck Protection Program (PPP). One of the intentions with this second round of funding was to direct more funds to the small and rural businesses that may have missed out the first time, including those in rural areas and those without established connections to big banks.

Wondering if a PPP loan is right for you? If you run a business with fewer than 500 employees, and require support to keep those employees on payroll due to COVID-19, it’s something to look into. 

This loan is also a good option for sole proprietors, independent contractors, and people who are self-employed.

Pro-tip: The Small Business Administration (SBA) will forgive these loans(!) as long as you can prove that at least 75% of the funds you receive are used on payroll. The rest can be used for rent, mortgage interest, and utilities.

Learn more about the terms of this loan through the SBA here.

Applying for PPP loans

In order to apply for a PPP loan, you’ll need to work with a bank or a lender that’s approved by the SBA. Check to see if your business’s bank is approved by the SBA, but you can also work with a non-bank lender. 

Your lender will guide you through the application process, and some folks may find that working through your bank can make the process a little smoother since they already have your information on file. 

Still, be ready to answer questions about your business and have last year’s taxes in front of you while you apply, so you can easily answer the questions on the application form. 

The information you’ll need to prepare includes: 

  1. Contact and business information
  2. Average payroll costs and number of full-time employees
  3. Tax forms for 2019 and Q1 2020 if applicable
  4. Proof of mortgage or rent, mortgage interest, and utilities
  5. Verification of business ownership, and for each 20%+ owner, identification, contact information, and TIN, EIN, or SSN
  6. Direct deposit information

Your lender will walk you through the SBA PPP application form and collect the supporting documents to prove that your reported information is accurate. 

They will then submit your application and update you if and when the status changes. If your application is approved, just sign the final agreement!

When you’ll receive payment depends on the lender you worked with, but most are coming within a week of final approval, and some banks are even delivering funds the same day.

For comparison shopping: Lendio

Loan amount: Up to $2 million

Interest rate: As low as 6%

Term: One to five years

In this uncertain time, everyone’s looking for a business loan with the lowest possible interest rate. The best way to find that great rate? Comparison shopping! 

But if you’re not interested in quite that much leg work, let Lendio do it for you. Lendio isn’t actually a lender, but an aggregator that compares 75 different kinds of lenders from across the country:

With loan options varying from a line of credit to equipment financing and even credit cards, you’ll have a good chance at finding the right option to help finance your business needs this year.

The perk here is that you’re only filling out one application instead of going through pages and pages of paperwork for each individual loan, Lendio matches you with loan options from their nationwide network, allowing you to prioritize the lowest interest rate, the longest term, or whatever is the most important factor to your business success. 

Plus, we love that you can get the capital you need in as little as 24 hours. Time is always of the essence when it comes to small businesses—now more than ever. 

For newer businesses: Kabbage

Loan amount: $2,000–$250,000

Interest rate: 24%

Term: 6, 12, or 18 months

If you’re operating a young business, it can be particularly frustrating to find a lender to work with. You know your stuff and you’re running an awesome business—but without a longer operating history, lenders might not take you seriously. 

Not true with Kabbage. With Kabbage, you can get a line of credit of up to $250,000 approved with only one year in business and $50,000 in revenue:

Sure, there are loans out there with better rates and longer repayment terms, but if you’re running a newer business and looking to avoid taking out a personal loan to get through this tough time, it can be a solid option.

Kabbage also gets you paid ASAP, with a quick online application process and options to deposit into your PayPal or business checking account, or use a Kabbage credit card.

Plus, if you’re the type of person who likes to keep everything in one place (like many RingCentral customers!), you’ll love that Kabbage also has a payment processing platform. 

For lines of credit: BlueVine

Loan amount: Up to $250,000

Interest rate: As low as 4.8%

Term: 6 or 12 months

If you’re just looking for a quick option for securing some cash so you can keep moving forward, a line of credit can be a good option. And, with their quick approval process, BlueVine is a great option to consider:

The great thing about a BlueVine line of credit is that it’s a revolving line, so as you pay off the money you’ve drawn, it replenishes the amount available for the future. If you regularly need to invest in equipment, that can be a really helpful option.

The BlueVine interest repayment terms can be a bit restrictive, requiring weekly or monthly payments on terms of 6 or 12 months, but, depending on your needs, that drawback might be offset by their quick turnaround times. 

Their 24-hour approval timeline is much faster than a traditional bank, and when you need to draw funds, you can expect the cash in your bank account in just a few hours.

For invoice factoring: Breakout Capital

Loan amount: Up to $500,000

Interest rate: 1.25% per month

Term: Up to 24 months

If you have outstanding invoices and you just want to get paid faster, invoice factoring might be for you. 

What’s invoice factoring? Invoice factoring is a system where a lender gives you an advance on invoices due in 30 or 60 days—minus an interest fee that they keep.

Basically, if you’re waiting for payments to come in before you can invest in, say, an important new tool for your business, invoice factoring can help you get it now instead of waiting for your 30- or 60-day invoice terms.

Invoice factoring isn’t technically a loan because you don’t pay back the lender—your client does. But it does function somewhat like a loan against your invoices.

An option like FactorAdvantage from Breakout Capital can help you get your money faster, so you can invest in the tools and systems you need to keep your business going right now. 

FactorAdvantage actually combines traditional small business loans with invoice factoring, so you get the best of both worlds. 

That means you can take a normal lump sum loan, while keeping your options open for invoice factoring down the road. 

We also love their transparent pricing—no hidden fees or charges at any time. Plus, if they don’t have the right loan option for you, they’ll happily refer you to another lender. And couldn’t we all use a little extra kindness right now?

Take advantage of business loans to keep moving forward

Obviously, most small business owners are eager to get back to doing the work they love. Who knew business as usual could sound so good? Nobody asked for this extended break, and, for most business owners, it’s proving to be anything but a vacation. 

Until we can all get back into a normal rhythm, though, small business loans offer options that can help your employees keep receiving a paycheck and help your business survive.

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