The Paycheck Protection Program recently offered incentives for companies to keep their workers on the payroll during the coronavirus pandemic and ensuing economic crisis. But for many businesses, a PPP loan wasn’t enough.

As the local and global financial outlooks remain challenging, banks will not have the ability to provide a private, small business loan with the same favorable terms of the government initiative. Regardless of whether a PPP loan can be forgiven, many companies will require additional capital to stay afloat.

What options are available for owners, managers, and overseers to continue supporting their employees and furthering their business goals? Factoring, or sometimes referred to as invoice factoring, is an option many are considering. Let’s explore what happened with PPP loans and what options you may have going forward.

When PPP Loans Fall Short

Thanks to PPP loans, many companies were able to rehire their employees. However, to continue to meet payroll demands, it’s necessary to have the same operating capital as before the pandemic. Most business owners have not seen cash flow return to normal.

An approved PPP loan also may or may not be eligible to be forgiven. It will be necessary to maintain or quickly rehire employees. If the number of full-time employees decreases, it is less likely that full forgiveness is possible. That’s why so many CEOs are looking for alternative financial support.

Unfortunately, bank loans may not have the same terms as were available pre-pandemic. This can create additional hardships on businesses. As the effects of stay-at-home orders, reduced capacity orders and general reduced demand from COVID fears stretch on, even owners who thought their PPP loan was sufficient are discovering they are unable to cover operating expenses and keep their employees’ retained.

Other Financing Options Available

Traditional, small business loans are increasingly difficult to receive due to the economic concerns facing businesses operating locally and globally. While business owners should continue to approach lenders regarding such financial options as SBA 7(a), SBA Express, SBA 504, and SBA Microloans, more may be needed to bridge the gap.

Some business owners may benefit from crowdsourcing or searching for additional investors. Others may consider a business line of credit or traditional loan from a bank. These options can provide companies with funds quickly, but often the process takes a substantial amount of time, are very restrictive, and typically don’t offer near the working capital necessary.

One of the best options for needed capital is a process known as invoice factoring. It is common among startups and large corporations in industries such as oil and gas services, construction, staffing, IT services, and other B2B services. 

By partnering with a factoring company, your clients, and the amount of work you provide to them, determine the amount of working capital you are approved for, not your personal credit score or business history. With this in mind, your growth potential is limitless with invoice factoring as you can grow as quickly or slowly as you choose. 

Questions? We Can Help.

Understanding the different financial options is important for any business’s long-term success, especially during these challenging times. At TXP Capital we can help answer questions regarding the factoring process and more.

We also offer asset-based loans that can allow companies to capitalize on low-cost equipment to benefit their business once the market rebounds. Contact us today to learn more.

Ryan Curry

Author Ryan Curry

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