Shaun Kelley

The Paycheck Protection Program (PPP) offered a lifeline to small businesses through forgivable loans that helped them retain workers and keep their doors open during the COVID-19 pandemic.

At Zions Bank, we are proud to have processed more than 3,100 Idaho loans that preserved payrolls for nearly 40,000 workers — a testament to the resilient spirit of the Gem State’s entrepreneurs.

Now, with a major economic rebound expected, and PPP funds largely exhausted, it’s wise for small business owners to educate themselves on the additional sources of capital available as they prepare to meet increased consumer demand.

SBA 7(a) Loans

The 7(a) loan is one of the most versatile options offered by the U.S. Small Business Administration (SBA), a federal agency that provides counseling, capital and contracting expertise to America’s small businesses. The SBA does not make direct 7(a) loans, but designates financial institutions to process applications. Because the SBA guarantees a portion of the loan, it mitigates some of the risk for lenders, allowing more early-stage businesses to qualify. This loan’s maximum amount is $5 million and is frequently used for business acquisitions, working capital, debt refinance or to purchase furniture, fixtures and supplies. With the boom in construction, many companies are also using 7(a) loans for equipment purchases.

Business line of credit

A business line of credit helps buffer your company from unexpected challenges or cashflow issues. You may withdraw funds up to your approved limit and you’re only charged interest for the withdrawn amount. After you make repayments, your funding becomes available again.

COVID-19 Economic Injury Disaster Loan (EIDL)

An EIDL is a direct loan through the SBA that helps businesses meet operating and other expenses. Funding is available for loans up to $500,000 and businesses may apply even if they already received a PPP loan. However, funds from both loans cannot be used for the same purpose.

Federal programs for specific industries

The SBA is administering two new programs aimed at industries that were heavily affected by the pandemic: The Restaurant Revitalization Fund and the Shuttered Venue Operators Grant program.

The Restaurant Revitalization Fund provides eligible businesses with funding equal to their pandemic-related revenue loss, up to $10 million. If recipients use the funds for eligible expenses — such as payroll and rent — before March 11, 2023, they will not be required to repay the funding. Businesses may apply at https://restaurants.sba.gov.

The Shuttered Venue Operators Grant program allocates $16 billion in funding for live venue businesses that had to close during the pandemic. Applicants may apply if they were in business as of Feb. 29, 2020, and funds may be used for expenses such as payroll, rent and production expenditures. Businesses may apply at https://www.svograntportal.sba.gov/s/.

Review the five Cs of credit

As you apply for funding, it’s important to remember that lenders make decisions based on the “Five Cs of credit,” which include character, capacity, capital, collateral and conditions:

  • Character refers to your industry experience and personal credit history, including a demonstrated willingness and ability to repay debts.
  • Capacity is your ability to generate positive cash flow and profit to cover business operations, including any debt service.
  • Capital is your cash or equity contribution to the business.
  • Collateral refers to tangible assets pledged against the loan amount.
  • Conditions are the local economic climate, your competitors, supplier relationships and industry trends that could impact your business.

Aligning your loan application with these criteria will make it easier to obtain approval. Additionally, it’s critical for small businesses to cultivate a strong relationship with a banker.

Your banker can help tell your story in the best possible light and serves as your advocate to underwriters. As your banker learns more about your business, they can help you meet credit requirements and successfully apply for capital.

It’s been a challenging time for many small businesses, but there is light at the end of the proverbial tunnel. The Conference Board Consumer Confidence Index recently surged in March to its highest reading in a year. As more people become fully vaccinated against COVID-19, consumer spending will also return to normal levels. Locking down your capital needs will help position your business for success in the post-pandemic economy.

Shaun Kelley is a business banking relationship manager for Zions Bank, a division of Zions Bancorporation, N.A. Member FDIC. Zions Bank is an Equal Housing Lender.