Cash Flow and COVID
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As of May 28, 2021, the Paycheck Protection Program has run out of funding. You can learn more about the PPP with our COVID-19 resource hub.

Starting a new business can be challenging but a great idea or concept that can push the barriers. Due to the Coronavirus (COVID-19) pandemic, small businesses have been greatly impacted as work from home orders, implementing new social distancing rules, and the operations costs without a consistent cash flow. Despite the pandemic, there are some entrepreneurs still opening businesses in order to bring their ideas to life. Nevertheless, it is important to be prepared and might require additional funding from outside sources.

The article is split into three sections. The first section focuses on the business plan. Before evaluating small business loan options, it is important to evaluate the company’s business model. It will require to look at expenses, real estate, assets, etc. In addition, it should take into account human capital. The second section will focus on determining business needs. Lastly, the third section will focus on the different types of loans and refinancing.

Creating and Evaluating Your Business Plan

The first and most important step is to determine what type of loan you will need is to look at your business. Reviewing your start up business encompasses a couple of areas: the business model, financial history, short- and long-term business goals. The combination of everyday business operations balancing against the future goals and plans that involve growth or expansion is a difficult balance.

Creating a business model will assist in the process. It helps evaluate your strengths and weaknesses. It is combination of strategic planning, business operations, and financial health. Simply how successful is the company at conducting business against its costs under its market capacity. These three elements are important to building and growing your company as they impact each other. For example, decrease in sales and profits can impact ongoing or future growth and expansion.

The business model is key to determining results. From a strategic point of view, it should take stock of its assets, expenses, equipment, capital, etc. the business model should encompass essential information that tackles different areas. The business model should include This consists of the product or service that your company is offering, addressing your target audience, and how does this product differ from others in the same field? Do you have professional experience or a strong team that is specific to your company? Does your product do you offer more than others within the market? In addition, what equipment, technology, inventory, and office supplies will you need for your business. In addition, repeated expenses, like rent, utilities, and other expenses should also be considered in order to measure your options with cash flow.

Another part of the plan should include certificates. Does this company own real estate, or does it pay rent for a space? Has the company registered with local and federal government services so it can conduct business? Most importantly, depending on the company’s products and market it is in, does it require special permits or licenses from local, state, and federal agencies. For example, in dealing with volatile chemicals to make new products, the company might need certain safety requirements from the local fire department or services. Preparing the correct paperwork, finances, and goals will help illustrate a clearer picture for lenders.

Lastly, for those starting a business during COVID, it is important to understand what this pandemic has had on small businesses. These are irregular times as many small businesses have had to temporarily shut down, get loans through the Small Business Administration, or even closed its doors. The most important factor to keep in mind is how long this pandemic will last. As we enter the eighth month of this pandemic where work from home policies have mandated, the search for a vaccine, and a slow business market, there is no certainty to when things will get back to normal. Thus, it is important to consider this factor when incorporating into the business model as it will make lenders more open that you have this incorporated into your short term and long-term plans.

Determinants that will Impact Your Loan Options

Every business has different needs and there isn’t one solution that fits everyone. Every company has overlapping struggles, but the main takeaway is that you can find solutions to stop these issues from the start. Loans can be helpful in ameliorating these issues that can be associated with cash flow, opening your business further, etc. The following criteria is important toward evaluating your loan options: credit score, time in business, annual revenue, and cash flow.

A credit score ranges from 300-850. The credit score report is to determine how much a consumer can be awarded credit based on their credit history. Are they capable of paying off their debt, repayment history, and other factors? A good credit score ranges from the 600s up. Generally anything below 580 is considered bad credit to mild. Most startups don’t have a credit history because they are just starting to

Traditional banks provide a lot of services and tools for businesses. They can act as small business lenders. Establishing a bank account early on for the business is always essential. Business credit cards are useful because it helps provide business needs and build up credit. Although in the early stage’s startup businesses don’t have a business credit score to start but can accumulate credit over time as the company continues to grow in the early stages. Utilizing credit cards against one individual’s personal credit can help as you grow the business. Over time, as the company grows, it will be able to have revenue and understand its cash flow issues, the company can work toward the next stage and apply for loans.

Traditional and Alternatives to Acquiring Loans

Once you have consolidated your business model, you can start researching what type of loans you will need toward that will help achieve certain goals. Understanding the different type of loans should be easy to figure out once you know your needs. The question is. Then what type of loan will your company require in order to achieve its goals? There are a number of financing options such as equipment financing, microloans, personal loans, short-term loans, business line of credits, etc. What are your business needs?

Primarily, there are two main options as a way to fund your company: borrow money or selling equity to cover startup costs. Alternatively, for funding options, the company can switch rely upon a variety of loans such as traditional loans, personal loans, and other means in order to acquire funds from small business lenders.

Banks and credit unions are traditional lending institutions that provide loans to individuals or companies through a menu of options. For example, lines of credit give borrowers a borrowing limit to what they can be used at any time until the money is repaid. Essentially, it is a never-ending cycle as long as the borrower can spend the money, repay it, and can continue to repeat in this cycle. This can be helpful for company’s cash flow in the short run depending on the company’s needs. The loan amount, interest rate, and other rules are established by the lender, in this case a bank. Despite an open line of credit flexibility, there are some downsides if the borrower can’t pay the money such as rising interest rates, late payments, etc. It is important to establish repayment terms in order to get the most out of these business lines of credit. Depending on your bank, credit union, or other financial institutions, you can check their rates and requirements online.

Crowdfunding is an alternative lenders area. Typically, these are small donations made by many investors. In addition, there is a limit to how much these investors can pay for. Two popular sites that focus on crowdfunding source are GoFundMe and Kickstarter and can be used for such purposes. However, this is entirely dependent on your company’s product or services and preferences toward exploring this route. Lenders give money in exchange for equity, to be used donation, for debt that the borrower will repay in the future, or for a reward depending on the amount they donated.

Invoice financing or invoice factoring is useful way for businesses to borrow money against what they are owed from their customers or accounts receivable. Invoice financing is useful because it improves cash flow allowing the company to their employees, reinvest in operations, or pay off expense. In invoice financing, your business collects the remaining money that is owed. Fundbox and BlueVine are two popular resources known for invoice financing.

The U.S. Small Business Administration loans are processed by lenders. These are low interest loans that help business owners expand. SBA 7 loans are designed to help grow your business and provide working capital to expand. The limit to borrowing is up to $5 million. SBA microloans can be used to help with purchasing supplies, equipment, or furniture. Interest rates always vary between 8% and 13%. Lastly, an SBA disaster loan offers up to $2 million in loans. Disaster loans provide assistance to small businesses that have been impacted by major disasters. These loans comprise of physical damage, mitigation assistance, economic injury disaster loans, or military reservist loans

There is not a minimum credit score to apply for business loans for the the US Small Business Administration, or the SBA. There are certain online applications that you can fill out online via the SBA website. The Paycheck Protection Program has been helping small businesses continue to cover some of their payroll costs. The amount of money for these PPP loans can vary based on the business’ needs. Recently, the SBA announced a new forgiveness application for borrowers who had taken $50,000 loans or less.


There are a many upfront costs to starting a new business, but it is an opportunity for entrepreneurs to engage in the market and to bring their product or dreams to life. It is essential to develop and incorporate a business plan that encompasses startup costs, company’s finances, credit history, plans for short- and long-term growth. By completing this essential step, small business owners can determine their route to how they can refinance their business in a way for them to continue to grow and expand.

Preparing a business plan is essential and will prepare you for what challenges you will need to face. The business plan must include a list of the company’s finances including and not limited to sales, profits, income, cash flow, and other financial details. In addition, it should include the startup company’s short-term and long-term business goals, your posturing in the market, and even plans for the future as you grow the company. It is important to provide the lender or lending institution with a clear picture and will make things easier to determine what finances you will need moving forward in order to maintain profitability.

This article has briefly covered the numerous ways for different loan options. The best small business loans are the options that work for you and conducting research on traditional lending institutions such as banks and credit unions to alternative lending institutions through crowdfunding, or through the US Small Business Administration as it also offers a menu of options for companies to pursue. Small business owners’ eligibility is dependent on their credit report, finances, and other mechanisms. Just because you are eligible for a loan doesn’t mean you should always take it and strategically plan how these funds will help the company’s goals.

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