If you are a business owner, you know that overnight, financial situations can change. Now more than ever businesses are aware that financing options are often necessary to get restaurants through tough times such as slow seasons, a recession, or global events like the recent pandemic.

Whatever the case may be, looking into restaurant business loans and having a plan in place is always a good idea. Below, we will cover tips for people wondering how to qualify for a restaurant loan, and we will discuss various financing options to help you better decide what is best for your business.

4 Tips To Help You Qualify

If your restaurant business is struggling, it can be challenging to qualify for a restaurant loan. Each business situation is different, and each loan has its own requirements. Below are four tips to help you get started if you are wondering how to qualify for a restaurant loan when business is slow.

1. Check Your History

You will need to provide a complete history of your operating practices and your finances for your restaurant. Having adequate experience and documented revenue, spending, etc., will increase your likelihood of receiving a loan.

2. Work on Your Credit

Having a good personal credit score and business credit score will enhance your likelihood of getting any loan you might apply for. Work on your credit score to ensure it is high enough to qualify for the loan you need. However, there are options available for those that have less than stellar credit.

3. Have a Business Plan

Before you apply for a loan, you need to have a business plan that shows the lender how you plan to be successful and how you plan to repay it.  Business plans are required when applying for business loans through a traditional bank. Most alternative lenders do not require a business plan to obtain financing.

4. Make Sure You Apply for the Correct Loans for Your Business

Do not apply for a loan that is not right for your needs. Once you take out a loan, it may affect your credit and influence if you can get loans in the future. Be wise with your loans now and only take out what you need.

How To Get Financing For Your Restaurant

The first step to financing is deciding what you need, how much you need, how long you want your loan to be, and what you need to use it for. Once you have determined whether or not you might qualify for a loan, you need to apply. You can either submit an online application or chat with a Business Financing Advisor at ROK Financial.

You will need to provide information about your restaurant, including proof of your operating history, revenue and profits, business credit, personal credit, and assets you have as collateral.

Once you have provided documentation and have confirmed your legitimacy, you will either be approved or denied for the loan.

The Types of Financing You May Qualify For

There are many different types of restaurant loans available for businesses. You will want to thoroughly consider all of your options to decide which one is best for your business. Below are some possible loans to consider.

1. Working Capital Loans

These loans are the best overall financing option for most restaurant owners. They are short-term loans that can be used towards any of your expenses and operating costs. The maximum amount is usually $250,000, so they are best for restaurants looking for a fast loan that is relatively small.

2. Lines of Credit

Another financing option for restaurateurs is opening a line of credit. It is flexible and offers you access to funding whenever you need it.  You can use it for any type of expense. Additionally, you only pay interest on the credit that you use rather than on a full loan amount.

3. Small Business Administration Loans for Restaurants

SBA’s are small business loans for restaurants that typically are $50,000 or less. An SBA loan is ideal for a business just starting that has small capital requirements. SBA loan applications often require a lot to qualify for and may take months to receive your funding.

4. Financing for Inventory

Inventory financing comes in many different available options and can be used to cover your company’s food costs. It comes in a line of credit, a short-term loan, or a medium-term load. You are limited to purchasing only inventory with this type of loan, but as long as you follow the rules, you can use it how you please.

5. Financing for Equipment

Similar to Inventory financing is equipment financing. This is perfect for people, remodeling a location, upgrading their current equipment, or replacing equipment. Equipment loans provide you with the capital you need to upgrade your kitchen equipment. You can finance the total cost of your new equipment, and the equipment itself is used as collateral, so your assets are not at risk. There also may be tax benefits when using equipment financing (consult with your accountant).

Getting Financing When You Have Bad Credit

Qualifying for restaurant business loans with bad credit is possible. The trick is to know where to ask. Banks have to adhere to strict guidelines to lessen risk and protect their customers’ money. With a bad credit score, a bank likely will not lend to you.

If a bank denies you a loan, look to a marketplace business funder or an online business lender to find alternatives. Some of the best loan options for restaurant owners with low credit scores are business cash advances, short-term business loans, merchant cash advances, and business lines of credit. They usually require a minimum credit score of 500, which is poor.

If your looking to obtain financing for your restaurant, you can apply directly with ROK Financial to discuss your options with a Business Financing Advisor.

Small business loans can serve as a critical engine to get your venture up off the ground. Whether you are expanding your operations, acquiring a physical space, or making an investment in working capital, there are many rates and lending options available for your business.

While the average interest rates of small business loans vary depending on the type of lending and loan you are looking for, it’s essential to know the available options for you before committing to one.

What Are Average Small Business Loan Rates?

To get the most out of your funding for your business, knowing the ins and outs of various small business loan types and rates is essential.

Loan rates will be dependent upon the type of loan for which you are applying. There is also some variation depending on the amount you need and the specific terms.

The truth is that small business loan rates from alternative lenders can also be higher than traditional bank loans. However, there’s a tradeoff: while some business owners may not qualify for financing through a traditional lender, an alternative lender can fill that gap.

Alternative lending can also offer more convenience and flexibility in terms. Plus, recent data shows that as of January 2021, alternative lenders had a significantly higher approval rate for small business loan applications. If you’re in need of a loan right away, an online lender could be the perfect solution.

While it’s always crucial to read the terms thoroughly, it’s easier than ever to secure an excellent business loan rate with an alternative lender.

Average Small Business Loan Rates

The average small business loan involves an interest rate somewhere between 2 percent and 13 percent. An SBA 7(a) loan has a bit narrower range; from 5.5 percent to just over 11 percent.

Average Small Business Loan Rates from Alternative Lenders

A rate under 13 percent sounds doable for many businesses. But how do those rates compare to average small business loan rates from alternative lenders? It’s possible to take out a loan via an alternative lender for as little as 7 percent interest. Rates can also range up to as much as 100 percent in some cases, though.

Finding the best rate involves knowing your terms, understanding the rate and other fees, and choosing the right lender. Rates can vary between 5.99 to 35.99 percent depending on the lender.

To get the best possible deal, it’s worth connecting with a lender you can trust and building a working relationship with them. Determining how much you may qualify for, as well as whether you meet the lender’s qualification criteria in the first place, is an excellent first step toward securing the financing you need.

Using a Small Business Loan Calculator

Utilizing a small business loan calculator enables you to outline a clear strategy for incoming funds. You can gain access to different types of these tools online, including SBA loan rate calculators. Once you define your budget and how much you are willing to pay per month or year, you can use the small business loan rates calculator.

You will need to input these three crucial elements:

• Annual interest rate
• Loan term in months or years
• Loan amount

The result will display the number of your monthly payments, including the interest paid on the principal loan. Many calculators will also outline a detailed amortization schedule, which shows a full monthly payment schedule leading to the last day when the loan gets paid off.

Do I Qualify for a Small Business Loan?

The process required to qualify for a small business loan can present many challenges. There are five components that traditional banks will examine closely to evaluate your eligibility.

• Capital – making sure you have enough for a quality down payment is critical for gaining approval.
• Current income – your business’s cash flow or income is a determining factor in your ability to repay any borrowed funds.
• Credit history – much like other forms of financing, your credit history and score will play a key role in your acceptance rate with your application.
• Collateral – it is important to note that your personal property may become collateral for the loan approval process.

However, alternative lenders tend to have less restrictions when it comes to applying for a small business loan. Down payments are rarely required, credit score isn’t typically a factor and there programs that do not require collateral or a personal guarantee.

Where to Apply for a Small Business Loan

When you start searching for places to apply for a small business loan and rates, you will find a wide range of financial institutions from which to select. The first place to start is an online lender; you can access financing options almost immediately.

Online lending has more lenient lending options than your local financing institutions, and are typically faster in their approval and funding process. They also require less paperwork.

Small Business Loans are also available at:

• Local banks
• National banks
• Online lenders
• Credit unions

Your business provides value to the world, and it deserves the funding to take it to the next level. If you are looking for the best solutions for business loan options?  Apply today and start your journey to finding the best small business loan rates today for your business.

For all small business owners, the Coronavirus pandemic has hit hard. Now that tax season is right around the corner; you might have a flurry of questions about your PPP loan and what PPP taxes you are obligated to pay.

This is probably especially true because the “rules” have been changed multiple times for the Covid-19 relief packages.

If you aren’t sure you know what kinds of PPP tax implications or PPP tax deductions you will have for your small business this year, we are here to clear things up.

Business Owners Are Concerned About Tax Implications from PPP Loans

The big question on every small business owner’s mind: Is PPP taxable? A crucial piece of information to know is that there are ways to avoid paying taxes on your small business’s PPP loan. The best way to avoid being taxed is to obtain PPP loan forgiveness, which means spending your loan funds on pre-approved expenses.

Can You Deduct Expenses Paid with Funds from Your PPP Loan?

The short answer is, yes, you can deduct expenses paid with funds from a PPP loan. Business expenses are deductible, just like they would normally be, when obtained with loan funds.

What this means for tax filing is that your loan won’t bring up expenses or tax fees in your standard filing. However, state tax deductions may vary because federal and state laws diverge. Consulting a local tax pro is an excellent way to address your location-specific needs.

Self-Employed Tax Deductions

Because sole proprietors, independent contractors, and self-employed folks are eligible for PPP, a relevant question is, is PPP taxable income for self-employed people? The answer is somewhat complicated, because it depends on whether you apply for and receive loan forgiveness.

If you receive loan forgiveness, that converts the loan into a tax-free grant (much like the EIDL Advance program). This means you don’t owe tax on any forgiven amount of the loan.

A related question is, is PPP taxable income for employees? According to the SBA, the answer is yes; employees receive their standard paychecks with federal taxes withheld as usual. For the employer’s side, however, the payroll cost is counted as the full amount, pre-tax.

Tax Breaks for Getting a PPP Loan

When it comes to PPP tax, there are a lot of questions on small business owner’s minds. Are there tax breaks for PPP loans? Well, the bulk of this depends on what amount of your PPP loan is eligible for forgiveness.

You can apply for PPP loan forgiveness once you’ve spent all the funds from your loan. A handful of rules apply, but the primary qualifier is that you maintain employee and compensation levels, spend at least 60 percent of your proceeds on payroll expenses, and that your other purchases were also eligible expenses.

If you want to know more about what kinds of financial help you can get, you can find information about what types of SBA loans your small business qualifies for here.

Are Paycheck Protection Program Loans Taxable?

Not with loan forgiveness. Dealing with PPP loan expenses and worrying about PPP loan tax implications can be stressful, but the availability of loan forgiveness can ease some of those concerns.

If you still have questions, seek PPP loan forgiveness tax guidance to ensure you are getting the most out of the COVID relief bill.

PPP tax can be complicated to grasp. This tax season may feel a lot more complicated, much like the year as a whole. However, you can feel confident knowing that aid like the Covid-19 Relief Bill and the PPP Tax Deduction Bill is there to help your small business continue through these difficult times.

If you’ve ever looked into obtaining a small business loan, you know that the options can sometimes get overwhelming. Luckily, you can narrow your search to find the best small business loan option for you and your small business.

Whether you want something small and short-term or a larger amount and long-term, you can get the money you need to grow your business.

Keep reading to learn about the best small business loan options for your business.

How Does a Small Business Loan Work?

A small business loan works a little differently depending on the type of loan, but any of them can help you fund your business. Consider a few small business loan small business loan options and learn †how they work.

Small Business Term Loans

These small business loans have a set term, so you will get the full loan amount upfront. Then, you will make monthly payments over a certain period. Throughout the term, you will pay back the loan amount plus interest, and the term can be as short as a year, or it could last up to ten years.

Business Line of Credit

In some cases, the best way to get business funding is to opt for a  business line of credit. You use it the same way you would use a credit card. The credit line will have a maximum amount, and you will have to pay back what you spend from the credit line.

Merchant Cash Advance

If you have credit card sales, you can get a cash advance on future sales. You will use a percentage of your credit card sales to pay the advance back to your lender.

Requirements to Apply for a Small Business Loan

All business financing options have requirements in order for you to qualify and apply for a loan. Be sure to keep in mind some of the documents you need to apply for small business loans for Coronavirus relief or other types of government aid.

Income Statements & Bank Statements

An income statement shows how much money your business has earned. It can show lenders that you have revenue coming in and that you are able to pay the loan back. This can be provided in the form of a business bank statement, a bank statement may be required in addition to an income statement.

Balance Sheet

Your balance sheet reports your business’s liabilities and assets. If you have investors or shareholders, the balance sheet will include their equity. A balance sheet can help lenders better determine the financial status of your business. This is not always required, but may be requested depending on the level of risk involved.

Tax Returns

It’s great to have these documents handy, but it may not be required if sufficient bank statements are provided. The tax returns can show how much you earned from the business as personal income. It can also show how much you and your business have paid in income tax.

Personal ID

Lenders may also ask for a copy of your driver’s license or another personal ID. The ID can prove you own the business and are who you say. Then, you can get the best small business loan rates for your business.

Articles of Incorporation

If you have an LLC, S-corp, or C-corp, you will need to submit a copy of your articles of incorporation to show when you started the business.

How Do I Obtain a Small Business Loan?

Before you apply for a small business loan, you should consider what you plan to use the money for. You should also know if you have a good credit score or if you’ll need to look at the best options for small businesses with bad credit.

After that, gather all of your business documents to help you apply. Keep track of these documents in case you don’t get approved for your first loan so that you can make future applications easier.

Next, choose the type of loan you want, such as a term loan or a business line of credit. Once you choose your loan, you can apply online or talk to the lender on the phone or in person. ROK Financial helps with this process by finding the best lender that would fit your needs, and work on your behalf to get your best financing offer.

Best Options When You Have Poor Credit

Unfortunately, it can be hard to get a small business loan when you don’t have good credit. The good news is that there are many options if you do have bad credit.

One of the best small business loans for business owners with bad credit is a business line of credit. This loan can be flexible, and you only need to pay the amount that you use from the credit line.

If you just need a short-term credit line, it shouldn’t be too hard to qualify, even with a bad credit score. You can also save money in interest if you only need money for a few months.

A long-term credit line is another excellent option if you need money for more than a year or so. It can be hard to qualify for a credit line, but they usually have better interest rates than short-term credit lines.

Where to Apply for a Small Business Loan

Whether you’re looking for a small business loan for COVID-19 relief, or you need the best long-term small business loans, you should consider where to apply. Fortunately, you have many options for where to apply for a loan. Consider a few of them.

Speak With a ROK Business Financing Advisor

If you want to make your application the best it can be, work with a Business Financing Advisor at ROK Financial. Your Advisor can walk you through the process and help you organize everything. Then, you can give yourself the best chance of getting the best small business loans for minorities or in general.

Your Bank

If you want a small business term loan, you can go to your bank to get the funding. You can work with a loan specialist to apply, and you can have them deposit the money right into your account.

The SBA

The SBA has multiple loan programs to help small business owners. You can apply for loans specifically for COVID-19 relief, such as the Paycheck Protection Program (PPP). Still, the SBA also has loans that you can apply for at any time, so you can compare the best loans for you.

The Best Small Business Loans

Whether you have bad credit or not, you should consider where to get the best small business loans for you. If your business has struggled financially, a loan can help. But make sure you consider your options so that you can choose a loan that meets your needs without adding extra stress.

The COVID-19 pandemic has hit few industries as hard as it has hit the restaurant industry. With shutdowns starting in March 2020, bars and restaurants struggled to keep their doors open and pay their employees. As a result, this industry is in desperate need of financing, and here’s why.

The Challenges Bars & Restaurants Are Facing

Despite the CARES act and other state measures to help provide emergency funding, the National Restaurant Association estimated that COVID-19 would put 110,000 restaurants out of business. That amounts to almost 17 percent of the industry.

It has also drastically affected the national unemployment rate. Restaurant closures nationwide have put 2.1 million people out of work, according to official numbers; however, there is widespread speculation that this estimation is only a fraction of the real number. For these reasons, there have been several attempts to provide financial relief for businesses in the food industry.

COVID-19 Funding Resources for Bars and Restaurants

The initial CARES Act rolled out last year but unfortunately did not provide the relief that lawmakers hoped it would. Now another restaurant relief bill, the RESTAURANTS Act, has struggled to pass in the Senate despite initial success in the House.

Meanwhile, the Federal Government also introduced the Paycheck Protection Program in 2020. This plan helped fund small businesses, including bars and restaurants, with some limited success.

The RESTAURANTS Act promises to provide $120 billion to restaurants around the country. The first businesses in line for relief would be those with less than $1.5 million in yearly revenue. It would also prioritize female-, minority-, and veteran-owned companies.

Since national financing has been too slow for a lot of business owners, other regional resources have surfaced for bars and restaurants around the country. Some of these are intended for restaurant workers, while others are for restaurants owned by people of color. Others are available to any restaurant or bar owner who applies.

Some examples of restaurant financing companies providing aid during the pandemic include:

• The Food and Beverage Industry Relief Fund for Black and Indigenous Americans
• Facebook’s Small Business Grant Program
• The Restaurant Workers’ Community Foundation’s COVID-19 Emergency Relief Fund

Additionally, restaurant and bar owners may qualify for tax deductions under the Employee Retention Tax Credit, which they can claim through their payroll taxes.

What Business Owners Are Using Stimulus Funds For

Business owners have to allocate their stimulus funds carefully to keep their company afloat. Some prioritize payroll to ensure that their employees receive everything they earn, especially if their employer owes them back pay.

Other business owners are using their stimulus payments to catch up on their rent. Like anyone else, they need to pay for the space they occupy. They can only fall behind so far before losing their license and their right to continue conducting business on the property.

Lastly, some business owners are using the stimulus funds to buy restaurant equipment. This ensures that they can still keep their business running even under COVID-19 guidelines.

Restaurants Are Hopeful For Loan Forgiveness

The Paycheck Protection Program, introduced in 2020, was intended to provide restaurant relief and recovery. It offered small business loans for restaurants as well as businesses in various other industries.

Restaurants and bars that were eligible received loans, but the terms of the loan were complex. Specifically, they mandated that restaurants use the money they received within eight weeks to qualify for loan forgiveness. This meant that restaurants spent the funds quickly, some still under lockdown.

In June 2020, Congress altered the original terms of the bill. Restaurants now had 24 weeks to use the funds. Sadly, it was too late for some businesses, many of which opted to continue paying their employees even while closed under state or federal mandates.

Now, many restaurant owners are depending on qualifying for loan forgiveness in the future. Others are looking for the best banks for restaurant loans in a last-ditch attempt to find a way to keep their business afloat.

What Does The Forecast Look Like For Bars And Restaurants?

It is difficult to predict what the future will look like for bars and restaurants. The COVID-19 pandemic is unprecedented, and scientists, politicians, and economists can only speculate what will occur. There are, however, some guesses at what the next few years will look like for the restaurant industry.

It is already evident that the future will hold some changes. More than 70,000 bars and restaurants have shut down under the weight of the pandemic. Many others have radically altered their operations, prioritizing curbside pickup and delivery over dine-in options.

Experts predict that many restaurants will have to implement new menus. This is because the pandemic has radically affected the national food chain, making it a challenge for restaurants to source ingredients as they usually would.

There is also likely to be continuing emphasis on health and safety measures. Customers are also expected to continue to demand takeout and pickup options and outdoor dining.

Recovering From The Pandemic

Pandemic recovery will be a long road for bars and restaurants around the country. But there are a few helpful tips that business owners may want to consider moving forward.

First, consider applying for an SBA Disaster Loan. This plan incorporates PPP loan and other loans for restaurants COVID but is also appropriate for disasters of different kinds. These restaurant loan rates are low. An SBA loan intended to protect your business in the event of a large scale disaster or crisis. It may take a while to receive funding, but it is still a worthwhile investment. In the interim many restaurant owners are applying for small business loans to keep them afloat during these difficult times.

Many bars and restaurant owners are also reflecting on whether they can genuinely survive a recession. This is an important thing to ask oneself. Remember that the follow-up of the COVID-19 pandemic will probably last for many years to come, especially in its effects on the economy. For this reason, restaurant owners should be as prepared as possible to weather the storm and, with any luck, come out the other side unscathed.

The short answer is: yes. Every time you apply for a business (or personal) loan, lenders will conduct a thorough credit check. This can knock a few points off your FICO score – usually less than 5.

That said, most online lenders run what’s called a soft credit check that does not affect your credit score, using a simple online application. The lender can get a feel for your qualifications without affecting your credit score.

To sum it up, soft credit pulls will not affect your credit score…and hard credit pulls will. Be sure to check with your Financing Advisor to check if you need a soft or hard credit pull – so you shouldn’t go crazy with those applications. But once you qualify for a loan and pay it off on time, your personal and business credit score will improve.

Most small business owners need loans to get their business off the ground. But applying for multiple small business loans can be nerve-wracking – how can you improve your chances of getting accepted? And how will those applications affect your credit score?

If you’re stressed about the effect multiple small business loan applications will have on your credit score, this post is for you. We’ll tell you everything you need to know about applying for a small business loan so that you can move forward with confidence.

Steps To Apply For A Small Business Loan

Let’s start with the basics. How do you start a small business loan application?

It’s easier than you might think. As long as you do your research and make sure you’re 100% prepared, your small business loan application will be a breeze.

Here’s a step-by-step guide through the process:

1. Find The Type Of Loan You Need

Believe it or not, there is more than one type of small business loan. The type of loan you qualify for will depend on your needs.

For example, if your business already has a year or more of experience and proven revenue, you might qualify for a government-backed loan. If you need financing to manage your day-to-day expenses, you could apply for a term loan.

Talk to a financial professional about your business’s needs before you start the application process. That way, you’ll know what type of loan you’re applying for.

2. Look Into Different Lenders

3 different types of lenders supply small business loans: banks, online lenders, and government programs.

So, how do you know where to apply for a small business loan? Do your research and compare your options. Every small business has different needs. For example, bank loans are great for an established business, but banks requirements can be difficult to meet. This is where an online lender would be a great choice to submit an application as their restrictions are much less stringent than a traditional bank and credit score usually isn’t a factor.

If you’re interested in small business loans for coronavirus, you might want to fill out an SBA loan application. The US Small Business Association (SBA) is accepting applications for small business loans during COVID-19 to help businesses stay open through the pandemic and lockdowns.

3. Find Out If You Qualify

Unfortunately, not every small business owner will qualify for a loan. It can be difficult to secure funding when you apply for a small business loan with bad credit – but it is possible. You can improve your chances by doing your research and going to the right lender.

Talk to your financial advisor or read through your favorite finance blogs for tips on how to qualify for the small business loan you need.

4. Gather Your Documents And Apply

Before you apply for your loan, make sure you have all the required documents. That includes:

• Tax returns
• Bank statements
• Financial statements

If you’re not sure whether or not you’ll need a certain document, keep it accessible anyway. It’s always better to be overprepared!

Requirements To Apply For A Small Business Loan

Now that you have an overview of how to apply for a small business loan let’s talk about the requirements.

Not every lender has the same requirements. However, there are some basic things you will need before you apply for any small business loan. Here are a few essentials:

1. Financial Records (Annual Sales)

Whether your business is established or just getting started, most lenders will require proof of income to pay back the loan.

You will typically need to provide bank account statements that show frequent deposits. This, of course, depends on the type of financing you are applying for.

Most importantly – can your business income support daily, weekly or monthly payments on the loan?

2. Time In Business

Getting a loan for a brand-new startup is virtually impossible. To show lenders that you have the skills and experience to grow your business, it’s important to have at least 6 months of business time under your belt.

Business owners are best qualified for a loan when they have been successfully earning revenue for a year or more.

3. A Good Personal Credit Score

Even though the loan is for your business, lenders want to know that you are capable of managing your personal finances.

Business owners with a bad credit score will have a difficult time qualifying for a loan at a traditional bank.

Should You Apply For A Small Business Loan?

Times are tough, especially for small business owners. Whether your business is brand new or established, you might need a financial boost to keep your head above water.

Fortunately, that’s what small business loans are there for. As long as you pick the right lender and qualify for a loan with great rates, you’ll be able to maintain your business growth through these challenging times.

If you’re looking for more tips, check out our small business loan cost guide. We put together a list of the pros and cons, plus information on how to apply for a small business loan.

Here’s the bottom line: as long as you are starting with good credit and don’t apply for too many small business loans at once, your loan applications shouldn’t damage your credit score. The right loan will make a difference for your business – so don’t hesitate to apply.

Your small business means everything, especially during these uncertain economic times.

This is why it is essential for your business to obtain the best type of Small Business Loan to keep your business thriving, whether it is a variable or fixed rate loan.

If you are a new business owner looking to apply for a business loan, you may have wondered if small business loans are fixed or variable. We’re here to answer that for you!

Both fixed and variable have their advantages, here are two popular types of small business loans to help you make your decision.

Know Your Options When Securing Business Funding

When submitting your application for a small business loan, you choose between two options: variable or fixed rate.

Variable rates start at a slow rate but change over time due to market fluctuations in the future.

For example, if a recession were to occur, small business loan interest rates may lower, giving you an advantage. On the other hand, if the economy is thriving and interest rates are increasing, your small business loan rate may also increase. (Interest rates follow the Certificate of Deposit Rate or Bank Bill Swap Rate index.)

Fixed rates tend to be more popular, due to the fact that the current rate is locked in today and will carry a constant rate throughout your pay period, no matter the condition of the economy. Fixed rates are typically from 10 to 50 years, with the most common term being 30 years. If interest rates do increase, you will not be affected, but you also will not benefit if the rates become lower.

Whether it is  Small Business Loan or Asset-Based, interest rates affect how you do business right now and in the future. As a business owner, there are certain expenses you cannot control, like utilities and healthcare. However, you can manage your interest rate expense over the period you choose.

Variable Rate Advantages

When choosing a variable rate on your small business loan application, the initial interest rate presented is lower than the market interest on fixed rate loans.

In the short-term, your payments may be less than the average loan, which gives you an advantage. Especially if you are applying for a small business start-up loan.

Variable rate loans may also allow you to borrow money despite having a less than stellar credit score.

Business owners willing to risk more in a short amount of time may benefit the most with variable rate loans. Keep in mind, there is the chance of rising interest rates in the future, if the economy thrives. If interest rates increase, your small business loan’s interest rate will also increase.

During times of uncertainty in the economy with rising unemployment, like during the Great Recession or Covid-19 Pandemic, interest rates decreased as economic distress occurred. Opportunities for low-interest rate loans, such as the  Paycheck Protection Program (PPP) became available to business owners in immediate need of financing. The interest rate for the PPP loan was 1%, lower than the average small business loan interest rate.

Overall, small business loans with a variable rate have their advantages. These advantages depend on the economic climate, risks involved, and the loan term period.

Fixed Rate Advantages

There is a reason most small business loans come with a fixed rate. The fixed rate gives business owners peace of mind when it comes to their payments, knowing they will not change over time.

When you apply for a small business loan and choose a fixed rate, the lender will give you an interest rate based on your criteria and the market rate. The payments will remain the same for the period you select.

Business owners are able to keep track and know exactly how much they will be paying, allowing flexibility with their future cash flow.

If the economy is booming and interest rates are increasing, you will not have to worry about fluctuations in your payments. If the economy is not doing well and interest rates are lower, you will not be able to take advantage of these interest rates and may pay higher than the average interest rate at that given time.

Due to high payments, small business loans with fixed rates may be harder to obtain depending on your qualifications.

Having the ability to plan for other financial commitments due to a fixed rate and consistent monthly payments is beneficial for business owners who take their budget into high consideration.

Is There an Average Interest Rate?

The average small business loan rate is between 5.5% and 7.5%. Depending on your finances, credit score, and other factors, it may be higher.

The Small Business Administration (SBA) determines the rates along with the Federal Reserve and the lender. Whether your business loan has a fixed rate or variable will be determined by your negotiations with the lender.

Consider using a small business loan calculator to estimate monthly payments by entering rates and the amount borrowed.

How Do I Know Which Option I Qualify For?

Who qualifies for a small business loan?

Lenders may require several documents to determine your qualifications, such as:

• Balance Sheet
• Income Statements
• All bank statements (business and personal)
• Leases for operations under the business
• Articles of Incorporation
• Tax returns (business and personal)

One requirement that can affect your small business loan immensely is your credit score.

Your credit score, paired with your current finances, will determine if a variable or fixed rate small business loan is right for you. Your lender may also vary and offer different rates.

Someone with a lower credit score who wants to get their business started as soon as possible, may choose a variable rate to jumpstart their endeavors. They would rather take the risk now with lower rates and worry about possible consequences later.

If you’re more prepared, have your finances in order, and do not want to worry about future payment changes, a fixed rate may be the best financing option for you.

Need Help Applying for a Variable or Fixed Rate Loan?

If you aren’t sure about choosing a fixed or variable small business loan, apply using our 15 Second Application to speak with a financing advisor within minutes.  Our financing advisors are ready to help you find the best financing option for you and answer any questions you may have along the way.

Many small business owners may need additional financial support to keep their companies functioning during the pandemic. Many look to government small business loans or alternative lenders for assistance. Fortunately, applying for a small business loan isn’t as complicated as one may think. Of course, there are some things to avoid during the application process.

Small Business Loan Application Basics: What to Do

When taking out small business loans during the pandemic (or any time for that matter), you should have all of your updated and completed financial documentation readily available. The lending institution will ask for your most recent bank accounts statements to prove your monthly income. Having this information readily available speeds up the process of obtaining the financing you need for your business.

You should also have a clear idea of what you are utilizing the funds you receive for. This allows for you to fully explain your situation and why you need the funds. This can sometimes help when speaking with the underwriting team. If you are applying for a government loan, it’s imperative that you fully understand the utilization of the funds as this will be a question that is asked.

Examples of different types of government small business loans for COVID-19 include EIDL loans, SBA loans, and PPP loans.

Business Loans Do’s & Don’ts

When applying online for a small business loan due to the COVID-19 pandemic, make sure to do your research, and keep these do’s and don’ts in mind.

Do Compare Your Options

Make sure to thoroughly go through all of your loan options. By comparing lenders, you can determine which one has the best offers and terms. In most cases, business loans with online approval are the quickest and most convenient.

Don’t Exceed Your Limits

If your business doesn’t require much overhead, now may not be the time to take out a large loan for new equipment.

You should also consider only borrowing one loan at a time. Be mindful of how much income you bring in and whether the payment guidelines are manageable over the long term.

Don’t Stress Out

As difficult as it may be in these trying times, try to remain calm and avoid stress. Business finances can be challenging during even the best economic times. The good news is that expert financial advice can help you navigate this phase of business ownership. When you’re a business owner, stress management is extremely important for your wellbeing.

Don’t Stop at One Program

While taking out multiple loans is not always the best option, especially considering varying interest rates. Various programs can help support your financial goals, if they are needed. Many government grant programs, for example, may not require repayment. Be sure to consult with an expert to find out all your options before settling on a loan that may not best suit your needs.

What To Do Before You Apply

Before you are able to qualify for a small business loan and apply online, you’ll need to get your documents in order. Some examples of these financial documents include:

• Personal and business loan returns
• Personal and business bank statements
• Balance sheet

You will also need to know your credit history, the amount you want to borrow for the loan, and your collateral capacity (if any). Other important information to have is your business start date and your annual sales. With the proper preparation, you can apply for business financing in a few painless steps.

Need Business Financing Help?

If you’re ready to reach out to a financial advisor to start your application process, don’t hesitate. The sooner you apply, the sooner you can start your business recovery phase and stop worry about the future of your organization. Get your business back to business!

Small businesses can look forward to relief from a renewed PPP loan program. This new round of funding will give struggling small businesses the chance to stay afloat during one of the most volatile economic periods of our time. The new PPP loan forgiveness simplification rules for $150K or less are listed below:

If You Borrowed Under $150K

For anyone applying for less than $150,000, you will have to fill out an application for forgiveness via a one-page attestation.

As with the previous PPP program, you will not be eligible for PPP loan forgiveness if your loan doesn’t meet the following criteria.

Use of PPP Funds

Terms and conditions of loan amounts are based on a business’s monthly payroll cost. Businesses can use the loans for the following:

• Payroll

Wage, salary, parental, medical, family, vacation, sick leave, health benefits

• Mortgage Interest

As long as lease agreements meet specific criteria (not yet established)

• Rent

Same as above, this must meet specific criteria

• Utilities

As long as service began before a date that’s still to be determined

The SBA still guarantees 100% of these instruments with no collateral or personal guarantee required. The maturity of these loans is five years with a 1% interest on a non-adjustable, non-compounding rate. Use a forgiveness calculator to fine-tune your estimates. (This one uses a worksheet Excel.)

Every application is going to be processed by lenders under delegated authorities. Lender verification of borrower certifications will determine borrower eligibility.

Second Draw

One of the most exciting aspects of the new PPP loans is that the Economic Aid Act allows any business that’s already applied for PPP another application. They are calling these second draw loans.

The application deadline for second draw loans is March 31, 2021. While many of the original PPP program’s terms and conditions apply, the second draw contains stricter eligibility requirements and lower limits on amounts.

Other qualifications for second draw loans include the following:

• The full amount of the first PPP loan should or will be used by the expected date of disbursement for the second PPP loan.
• Borrower must have spent the first PPP loan’s full amount on eligible expenses.
• Borrower will need to prove a reduction in revenue of 25% or more as of 2020 compared to 2019. (Calculate gross receipts in any 2020 quarter with the applicable quarter in 2019, or present copies of annual tax forms showing reductions in receipts in loss of 25% comparing 2020 with 2019.)

Second draws will go through community financiers in low- to moderate-income neighborhoods. Funds set aside for these second draw loans require the business to have a max of 10 employees or the loans to be for $250,000 or less.

PPP and Small Business

SBA released a paper that hopes to rectify disparity in the previous PPP program. The “Guidance on Accessing Capital for Minority, Underserved, Veteran, and Women-Owned Business Concerns” addresses a commitment to serving women- and minority-owned businesses, sectors considered underserved during 2020’s application process.

Like any SBA loan, financial instruments come with conditions. The new forgiveness program:

• Broadens PPP forgivable and allowable expenses to cover several ‎technology expenses, costs of property damage, costs to the supplier (certain vendor/‎supplier expenses which are essential to operations, such as perishable goods), and expenditures used to cover worker ‎protection (expenses for worker safety).
• Gives borrowers the ability to select a loan forgiveness period that covers between eight and six months.‎
• It delineates payroll costs to specific insurance group payments. That includes vision, group life, ‎dental, or disability insurance.‎
• Revokes a CARES Act provision requiring PPP customers to deduct Economic Injury Disaster Loan amounts from their PPP forgiveness amount. ‎
• Changes several of the December 31, 2020, timelines‎
• Highlights collaboration between Employee Retention Tax Credit and the PPP.
• Modifies and extends Employee Retention Tax Credits. ‎

Tax Deductibility Clarification

In December 2020, the Office of Advocacy met to discuss state and federal tax matters surrounding the PPP. These representatives agreed the original PPP loans were issued with stringent IRS guidance regarding expense deductibility and, in essence, undercut the purpose of forgiveness.

The meeting ended in a request for a fix sent to the House and Senate Small Business Committees. Without a fix developed and implemented, restaurant owners, laundromats, and any other entity was looking at 2020 tax increases of up to almost 40%.

Fortunately, the Senate did step in. To help businesses survive the recession with tax relief, the governing body determined that they will apply the 1986 Internal Revenue Code to allow forgiveness of PPP funds used for business expenses. This is a significant breakthrough for small businesses on the verge of financial collapse due to COVID-19.

What is the Deadline for PPP Loan Forgiveness?

Whether you’re borrowing under $50k or it’s your first or second draw, deadlines for applying for PPP end on March 31, 2021. Here are a few application instructions to take into account.

• On January 11, 2021, financial institutions began submitting first draw loan applicants.
• On January 13, 2021, they were accepting second draw applications.
• Women- and minority-owned businesses will have an exclusive two-day period to apply for reserved funds. While they have not released specific dates yet, the SBA wants to ensure that they don’t neglect underserved businesses.

Interim Final Rule

The interim final rule is used to simplify the review and forgiveness of PPP loans under $50k and other PPP loans. The application will ensure responsible review of borrower documentation regarding forgiveness-eligible costs in excess of the borrower’s PPP amount.

Despite the SBA’s attempt to simplify the PPP loan process, they advise you not to take on any business loan until you speak with your tax consultant. Also, take note that borrowers awaiting PPP loan forgiveness could see delays in their second draw application. Otherwise, small businesses looking for financial relief from the new PPP loan forgiveness simplification rules for $150k or less.

The Paycheck Protection Program has been crucial for small businesses weathering the coronavirus pandemic. Given its importance, of this program and the next round of funding it’s important for business owners to understand what has changed this time around for the PPP.

January 2021 PPP Update Highlights

The Department of the Treasury, partnering with the Small Business Administration, decided to open the second round of the PPP loan during the week of January 11th. Along with the announcement of the second round, new rules were announced to promote access to capital. This is a significant update from the initial round of PPP funding.

These updates include the following changes:

• Businesses can have a variable covered period for the loan, ranging from 8 to 24 weeks. This is to help meet the unique needs of different companies.
• The additional funding from this round can cover new and additional expenses. Covered expenses for this round include operations expenditures, supplier costs, property damage, and worker protection costs.
• More companies are eligible for this funding round, including some destination marketing organizations, housing cooperatives, and 501(c)(6) setups.
• More flexibility is available for handling seasonal employees.
• Some existing borrowers can modify previous loans or apply for new stimulus loan help.

Note that disaster loans (EIDL) can have different rules compared to regular loan options. PPP loan round two payments can go to various companies but expect the Small Business Administration to ask for collateral. You may be able to use these loans to pay for things that you may not be able to use other loans for, including some other bills or accounts payable.

What are the changes in the Rules For Eligibility?

The eligibility rules vary depending on whether you’re applying for a first draw or a second draw. For first draws, the changes are primarily in which businesses are able to apply for them. If you couldn’t apply for a loan before, you may be able to do so now if you’re part of the expanded eligibility coverage.

For a second draw application, you need to meet additional criteria, as described below. Loans may be essential for your business to survive a recession caused by the coronavirus pandemic.

Can I Apply For Additional Funding?

You may be able to apply for additional funding if you meet the following criteria:

1. You previously received the first loan and you will, or have already, used the full amount exclusively for authorized uses. Expect them to ask for receipts or other proof that you’ve spent the money entirely in accordance with the rules.
2. Your company has no more than 300 employees. Any companies larger than this are not eligible for SBA loans under the PPP. Restaurant owners usually don’t have to worry about this, but if you run several stores in one chain, it may be an issue.
3. Your company has a reduction of at least 25% in gross receipts compared to a similar time period in 2019 and 2020. Essentially, this means you need to show that the pandemic is legitimately harming your business and that you need the financial assistance. If your company is not struggling financially, you will not be eligible for the additional financial assistance.

Do SBA Loans Have To Be Paid Back?

Normally, yes. While the exact repayment terms may vary depending on the loan, you usually need to repay  your loan within two years. The SBA does not typically forgive debts for businesses that are still operating.

In regards to small business loans,  coronavirus forgiveness programs may change this. Despite this, you should not rely on that help absent further legislation or agreements. If you’re unsure about your ability to repay SBA loans, talk with your lender or accountant for more information.

How To Submit an Application

Follow these steps to submit a PPP application.

1. Access your PPP application. This usually happens online on the Small Business Administration website, but if you’re doing it through a partner, you might do it with them instead.
2. Check your business information. Add, update, or confirm the information on your application as needed. Make sure you fill in every section and double-check the accuracy of all sections. You should ask for exactly 2.5 times your average monthly payroll costs.
3. Add the new information. The PPP now requires information on your business start date and your industry. This is mainly a fraud prevention measure. The business start date needs to match the information on the business filing with your Secretary of State.
4. Confirm your ownership percentage. This is for your ownership of the business, and it must be an amount greater than 0. You can apply for the program if you own less than 100% of the business.
5. Add Additional Owner Information. In this section, you’ll need to report information for any people that own at least 20% of the business. You’ll need copies of their driver’s licenses, including both front and back, so prepare those now if you don’t already have them.
6. Upload any necessary documents. You must submit all relevant documents, including driver’s licenses (or an equivalent of identification) for applicable owners, business account bank statements, proof of payroll expenses, and 941 quarterly tax filings (or IRS 1040 Schedule C, for independent contractors or self-employed workers).
7. Check for additional instructions. Your partner or lender may require additional steps before you can access your funds. They may also ask for information like receipts to help demonstrate your compliance with the loan terms. Remember that the SBA.com website does not lend directly; loans typically go through financing partners.

Is Round 3 In The Works?

It is likely that there will be a third round of PPP small business loans. Although, it is not yet certain if businesses will be able to apply for a third loan when that happens. The second round of the PPP loan is just beginning, with various start times depending on the type of company you have.

If round three does occur, your status and eligibility may change to reflect new guidance or legislation. This is why you should continue to check for changes with each round of stimulus loans, even if you already received money during a previous loan period. You may also see benefits from a new CARES act or other business support during the 2021 meeting of the U.S. Congress.