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PPP Funding Important or Critical for Nearly All Businesses
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Small businesses continue to struggle financially, relying on the Paycheck Protection Program (PPP) to stay afloat, according to an early 2021 survey from management solutions firm Paychex as we continue in Year Two of the coronavirus pandemic.
Of the companies surveyed by Paychex, 56% with 50 to 500 employees said PPP funds are crucial to keeping their business running, up 33% from a year prior when that figure was 42%. Whether PPP funding is important or critical is a key differentiation, according to the results.
PPP funding important for more than 6 in 10
Breaking it down, almost all businesses surveyed said this round of PPP funding is important or critical to their operation:
- 61% said it’s important but they would survive without it
- 37% said it’s critical and that they wouldn’t be able to remain open without it
- 3% said they’ll be fine without PPP money
The survey revealed that some of the biggest hurdles that small businesses face are financial instability, developing a COVID-19 vaccine policy and having employees return to the office.
Lending options for small businesses if PPP isn’t right choice
This latest round of PPP funding will end May 31, 2021. If your small business isn’t eligible or you’ve been denied funds, there are other options:
- Business loans from banks or online lenders
- Financial help from friends or family
- Business lines of credit
- U.S. Small Business Administration (SBA)-backed loans; the SBA also administers other loans besides the PPP, including Economic Injury Disaster Loans (EIDLs)
No matter the route you take, make sure to gather the necessary documents. Each lender will have different requirements, so do your homework to figure out what information and documents you’ll need. This might include a business plan, financial reports and projections, bank statements and business licenses.
How to build credit as a small business
Having solid personal and business credit scores can help you secure more favorable terms for business financing. Here are some tips:
- Work toward improving your credit score. The golden rule in improving your credit with your personal score applies to your business credit as well: make on-time payments, monitor your credit and receive free credit reports weekly through April 2022.
- Get a federal employer identification number (EIN). You can apply for a federal tax ID for your small business online through the IRS.
- Open business bank accounts and credit cards. This not only helps you build credit for your business, but it can separate your business and personal expenses. It also makes it easier to keep clean records for tax season.
- Establish good relationships with vendors and suppliers. Make it a priority to establish lines of credit with suppliers and vendors in your industry. If you have lines of credit with vendors or suppliers that report to the credit bureaus, that can help you establish solid business credit.
The three major business credit bureaus are:
- Dun & Bradstreet
- Experian Business
- Equifax Small Business
Whatever your business funding needs, understanding how much you need and what kind of financing is the best fit for you will help you make a solid choice.
Methodology: Rochester, N.Y.-based Paychex polled 300 principals of small businesses in the U.S. with two to 500 employees. The survey, administered online by Bredin, was conducted Jan. 27-Feb. 2, 2021.