The "new normal" post-pandemic life is upon us. Many states across the U.S are relaxing stay-at-home restrictions, and businesses are reopening in waves. While social distancing and face masks still prevail, most Americans are crawling out of their homes to a brand-new way of life.
For small business owners, it's a nervous, confusing world. Supply chains have been disrupted, cash flow has come to a screeching halt, and the future is uncertain.
You're likely consumed with unanswered questions:
- How long will this new normal last?
- Will we ever go back to the old normal?
- What do you do to survive and thrive in this fast-changing economy?
We don't have all the answers, but regardless of what's around the corner, one thing is for certain—your small business will need capital to survive and thrive.
However, SBA loans are drying up, and commercial mortgages are off the table. To get the working capital your business needs, you'll need to turn to other financing options at your disposal. Below, we'll break down the four best small business financing options in the new normal.
Get the Financial Safety Net You Need With a Business Line of Credit
A business line of credit is a must-have financing tool for the good times and the bad. Think of a line of credit as a financial safety net for your business. It offers flexible working capital that you can use to finance just about any business expense: purchasing equipment, hiring staff, renovating your store, paying the bills, and more.
A line of credit is there when you need it, but you're never obligated to use it, which makes it a handy-dandy asset to keep in your back pocket—just in case. If you use it, you only pay interest on the funds you borrow, not the full amount.
No one knows what to expect of the economy in the coming weeks, months, or years. That's why it's important to keep flexible capital on hand to make business adaptations, put out fires, and supplement your volatile cash flow.
Specific qualifications will vary from lender to lender, but here are a few general requirements:
- 6 or more months in business
- 560 or higher credit score
- At least $50k in annual revenue
- Some lenders may require a personal guarantee, such as a house, car, or bank account
Expand Your Working Capital with a Business Credit Card
A business credit card is similar to a line of credit, but there are a few subtle (yet important) nuances. Unlike with a line of credit, using a business credit card helps you earn points, cashback, and other nifty rewards. Some cards grant elite flight or hotel perks while others provide lengthy 0% intro APR periods and enticing signup bonuses.
Regardless of your industry, it's always helpful to have extra capital to expand your cash flow. Whether you need to make payroll, restock your inventory, or pay for an emergency fix on a piece of vital equipment, a business credit card is always there when you need it.
Plus, credit cards are revolving credit, which means you don't have to keep applying for more cash. Use what you need, repay the funds, and then get access to the capital again—easy as that.
Business credit cards are great for startups or businesses with little or poor credit because requirements are more lenient. Also, using your card responsibly will help you build your credit score so you can qualify for bigger loans down the road:
- 680 or higher credit score
- Since eligibility is based on your personal credit, you can qualify for a business credit card with a brand-new business
Fund Your Tools and Resources with Equipment Financing
If your business is adapting to accommodate social-distancing regulations, you may need to invest in some new equipment. Equipment financing can cover just about any business doodad or doohickey you can imagine:
- Point-of-sale payment processing software and hardware
- Grills, ovens, fryers, and even food trucks
- Furniture and fixtures like cubicles and lighting
- Software like video conferencing tools, CRMs, accounting programs, and more
- Appliances like refrigerators, blenders, coffee makers, and more
Many businesses will need to make several operational changes to reopen doors in the new normal—and operational changes aren't usually cheap. Equipment financing is an affordable way to cover the up-front costs of tools and resources so that you can start making money.
Since the equipment you’re financing can also act as collateral, it's usually easier than you'd think to get approved:
- 650 or higher credit score
- 12 months or more in business
- At least $50k in annual revenue
Finance Projects Big and Small with a Term Loan
If you're looking for a simple, predictable way to finance a project, look no further than a term loan. These loans provide a lump sum that you'll pay back in regular increments over an agreed-upon borrowing period.
You can use a term loan for pretty much any business need—finance renovations, buy new equipment, hire additional help, and more. With the volatility of the market, it's nice to have financing that's stable but flexible.
Term loans are a bit harder to qualify for than a business line of credit or equipment financing. You'll generally need:
- 680 or higher credit score
- At least $300k in annual revenue
- 3 or more years in business
- Collateral is usually required
Embrace the New Normal
We don't know how long the new normal will last, or if it will become the only normal. Your business can't afford to wait to see how things play out—you'll need to take action now to capitalize on the present.
Secure the capital you need before you need it to hit the ground running with any necessary strategy shifts or operational changes. With the world economy in an unpredictable state, it's now (more than ever) imperative that you have working capital you can rely on.
Written by Jesse Sumrak Jesse Sumrak is a Social Media Manager for SendGrid, a leading digital communication platform. He's created and managed content for startups, growth-stage companies, and publicly-traded businesses. Jesse has spent almost a decade writing about small business and entrepreneurship topics, having built and sold his own post-apocalyptic fitness bootstrapped startup. When he's not dabbling in digital marketing, you'll find him ultrarunning in the Rocky Mountains of Colorado. Jesse studied Public Relations at Brigham Young University.