When the Small Business Administration released applications for its Payment Protection Program (PPP) on April 3, 2020, funds ran dry within 10 days. A second round of funding was released April 27. Both, however, were riddled with technical issues and confusion from the outset. Many small businesses are still struggling—and wondering why large, publicly traded companies are receiving millions in assistance with the help of well-paid legal teams while mom and pop operations are often left to navigate the system on their own.  

This two-part series will address some of these issues and offer solutions that can help small businesses, particularly those in the natural products arena, access capital. We’ll also explore ways other than the federally funded COVID-19 response programs that can offer relief that isn’t tied to health pandemics or other disasters. The second part will address nontraditional ways of accessing funds.

Look beyond the PPP

The PPP is designed to provide funding to help businesses retain their employees at full pay through the crisis. Among other regulations, employers must use at least 75% of the funds for payroll. The problem is, under the Federal Pandemic Unemployment Compensation program (FPUC), which provides an additional $600 per week, many workers will make more money on unemployment. Some businesses report that employees are choosing to stay home and collect unemployment rather than risk infection in essential workplaces, leaving employers at risk for violating loan terms through no fault of their own. They also must allot time to complete a mountain of administrative paperwork.

Related:7 tips for managing cash flow in the time of COVID-19

“The PPP is incredibly confusing for business owners, and the government hasn’t done them any favors in terms of navigating it,” says Victor Rodriguez, co-founder of New Jersey-based L3 Funding. If you do apply for a PPP loan, make sure you understand and stick very closely with its guidelines to make sure the loan is forgiven. “In the realm of finance, it’s an incredibly cheap loan,” says Rodriguez, “but if the government is willing to forgive it, there’s no need to pay it back if you don’t have to.”

Rodriguez also suggests looking into the SBA’s flagship 7(a) loan program, which specializes in expansion, real estate purchases and debt consolidation. (For example, if you’d like to buy out a competitor or purchase the building your business operates from.)  Terms are 10-30 years at 5.75–6% interest rates, and the SBA makes the first six months of payments. It’s easier than most people think to qualify, and while it hasn’t been made official, Rodriguez believes the government has relaxed guidelines for the 7(a) program as he is seeing an increase in approvals. “It takes a little longer to get these loans, but for anyone who qualifies, it is unequivocally the program we recommend.”

Related:Alternative ways to access business funds during COVID-19 recovery—and beyond

AR and commercial refinancing

Another vehicle is Accounts Receivable (AR) financing. In this scenario, a bank looks at invoicing to determine how much a company is owed, then loans a portion or all of that amount. Now, instead of paying the company, vendors owe the lender. Though AR financing is popular and widely used, it’s something some business owners may not know about if they haven’t done it before. “It’s a very common product,” says Rodriguez. “A lot of vendors are familiar with AR situations.”  

If you own the commercially zoned property that your business currently operates from, commercial refinancing is another option to access capital on the fly. It’s fairly easy to refinance in favor of a lower interest rate, and if you’ve built equity, you can utilize the cash-out option.

Build your business credit

This tip may not help in the midst of an emergency, but it’s something business owners in all stages of planning and development should think carefully about: Business credit is not the same as business funding.

“This is something a lot of people don’t understand,” says Kendra Lewis, Fortune 500 strategist turned small business funding expert. “Business credit is a process—business funding is the goal.”

At her Atlanta-based consulting practice The Boss Architect, Lewis teaches small business owners the same tips and tricks that large companies use to build business credit.

“The traditional funding method teaches people to go into a bank and apply for a loan,” she says. “But banks are risk managers and one of the easiest ways to manage risk is to tie a business loan to someone’s personal credit. We’ve been taught this is the way to obtain funding, but I assure you: CEOs of major companies don’t go into a bank and get funding based on their personal credit. So why should small and medium-sized companies do that?”

Lewis’s program teaches small business owners how to build up their business credit in stages, beginning with what she calls “keeping your story straight online and offline.” When establishing your business presence, ask these questions:

Once you’re set up online, it’s time to start building your business credit, which starts with attaining microfunding. “This is where you negotiate with your vendors and suppliers to allow you to get credit terms like net 30/60/90 in order to give you some cash flow relief,” says Lewis. “Business credit is not always in the form of a loan.”

The next step in the credit journey is attaining revolving credit accounts at stores such as Amazon, Costco and Sam’s Club.

“You can buy things in bulk—like masks for your team—or items that you can resell,” says Lewis. You can also get creative with promotions and marketing at this level. For example, Lewis recently ran a promotion where anyone who paid for a consulting package in full received a free Dell laptop. Using her Dell credit card, she purchased $3,000 worth of laptops and sold $10,000 in services during the promotion—a $7,000 profit.

“People say, ‘I don’t need Amazon, Dell, Apple, etc.,' but businesses need to think outside the box and discover how to leverage these tools in order to generate revenue for the company.”

The mature stages of business credit building involves opening accounts with major credit card companies. You can use those cards to support cash flow and open up advanced lending options such as auto loans and commercial leases in your business name. For example, businesses could purchase a fleet of branded vehicles; some savvy business owners even use high-limit credit cards to buy real estate.

Lewis advises small business owners to remember that building business credit is a marathon, not a sprint. “Building business credit is not a one-time thing, it’s a funding strategy. It’s all about creating sustainable businesses and using microfunding to achieve your macrofunding goals.”