Best PPP Alternatives for Small Businesses

The paycheck protection program, established in 2020, offered small businesses a layer of security in case of closures, cash flow issues, low business or supply chain delays related to the pandemic. While the paycheck protection program finished on May 31, 2021, alternatives offer similar benefits to float businesses and protect cash flow. Read on to find PPP alternatives for your company. 

What is the Paycheck Protection Program (PPP)?

The Paycheck Protection Program (PPP) was created by the U.S. Small Business Administration (SBA) in 2020 to provide small business owners with needed resources to maintain their payroll costs, hire back employees laid off and cover applicable overhead. In addition to small businesses, nonprofit organizations, veterans organizations, tribal businesses, self-employed individuals and independent contractors could be eligible if they met program size standards.

While the PPP ended on May 31, 2021, it offered valuable support to keep businesses afloat during the pandemic. But the pandemic isn't the only time when businesses can face cash flow issues. The programs below continue to help small businesses. 

11 Best PPP Loan Alternatives

If you're looking for PPP alternative funding options, the loans and alternative sources here can infuse needed cash into your small business, funding needs from payroll to expansion. 

1. SBA 7(a) Loan

The most direct PPP alternative, a 7(a) Loan Program, offered by the SBA, gives financial help to small businesses with special requirements. It can be used for payroll coverage or business expansion. These 7(a) loans can be used for:

• Short-term working capital
• Long-term working capital
• Refinancing current business debt
• Purchasing real estate
• Purchasing and installing machinery or equipment
• Purchasing furniture, fixtures or supplies 

2. SBA Microloan

The SBA offers microloans of up to $50,000 provided by SBA funding intermediaries. These loans can be used to expand your business and gain needed working capital or to rebuild, re-open, repair, enhance or improve your small business. 

3. Business Term Loan

A business term loan is a type of loan a business can gain from a conventional lender. Like other small business loans, you receive a lump sum of capital and repay it on a fixed schedule over a set period of time. You can use business term loans for long-term investments in your business or to solve cash flow issues temporarily.

4. Business Credit Card

While not a comparable PPP alternative, a business credit card allows you to cover business expenses on credit. Business credit cards generally come with high interest rates, so it's best to avoid expenses that you might not be able to pay off when payments are due. 

However, you can apply for a new business credit card with an introductory 0% APR for a set period of time, giving your business the credit it needs and time to catch up before you start paying interest. Using the business credit card to cover other business expenses could potentially free up cash for paycheck payments. 

5. Factoring

Invoice factoring companies take responsibility for collecting unpaid invoices. For small businesses with longer invoice terms, invoice factoring can ensure you get paid on time without having to follow up. With invoice factoring, you sell your invoices to a factoring company, which will then collect on them. 

Depending on the type of factoring, you may or may not be liable for the invoice if the clients don't pay. In either case, factoring can put money into your company bank account sooner, allowing you to cover employee paychecks and other needed payments. 

6. Merchant Cash Advance

A merchant cash advance is an alternative type of business financing that gives a company an upfront sum of cash. With a merchant cash advance, you repay the loan plus a fee using a percentage of debit and credit card sales. While merchant cash advances may come with higher fees than the other options on this list, they can quickly cover payroll and other short-term cash needs. 

7. Economic Injury Disaster Loan (EIDL)

An Economic Injury Disaster Loan offered through the SBA provides working capital to small businesses impacted by disasters like hurricanes, fires or other natural disasters. This loan is the most direct PPP alternative, as it aims to help businesses survive until normal operations resume. EIDL assistance is only offered to small businesses that are unable to obtain credit elsewhere. 

As a last-resort option in extreme situations, an EIDL is comparable to the role of PPP during the pandemic in helping businesses stay afloat during extreme situations. 

8. Employee Retention Credits (ERC)

Bringing money back to your business is often no more difficult than filing your tax returns properly and seeking all the credits, deductions and extras to which you are entitled. The ERC or Employee Retention Credit is, according to the IRS, “a refundable tax credit for businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic.”

Moreover, ERC credits are fundamental for businesses that did not take advantage of PPP loans because you cannot claim ERC credits on income paid through a PPP loan.

The IRS is quite specific about who can claim these credits, stating that businesses are eligible for these credits if you:

• “Were shut down by a government order due to the COVID-19 pandemic during 2020 or the first three calendar quarters of 2021.”

OR

• “Experienced the required decline in gross receipts during the eligibility periods during 2020 or the first three calendar quarters of 2021.”

OR

• “Qualified as a recovery startup business for the third or fourth quarters of 2021.”

Want to know how much you can recover through Employee Retention Credits (ERC)? You can work with Innovation Refunds to learn about all your options, how to recover credits from previous tax returns and bolster your bottom line.

9. Crowdfunding

Crowdfunding has grown in popularity recently and is a viable option for many businesses to meet short-term cash flow needs. If your business is struggling after a natural disaster, planning an expansion or working on new product development, crowdfunding could offer an alternative source of cash.

With crowdfunding, you create an appeal on sites like Kickstarter, Patreon or GoFundMe with a set cash goal and an appeal to supporters with a business vision. You'll share that aspiration on social media and ask clients and friends to share with their following to garner organic business support.  

10. Microlenders

Microlenders offer small loans to businesses that might not otherwise qualify for the loan. As the name implies, microloans are small loans, usually less than $50,000 and often less than $10,000. They may offer flexible repayment terms or lower interest rates for a set period if you qualify. Microloans can help businesses cover payroll and other short-term expenses to improve long-term cash flow. 

11. Equipment Refinancing

Equipment refinancing lets your company secure a loan using equipment and other business assets as collateral. It is used to convert long-term assets into cash in hand to cover payroll, build business expansion and other financial needs. Most businesses use equipment refinancing to give the company an injection of working capital or to restructure debt.

Using PPP Alternatives

PPP loans offered needed relief during the COVID-19 pandemic, but businesses' cash flow needs continue. Whether you aim to cover payroll or are looking to expand, you can find resources available to help. In addition to the options on this list, you can speak with local lenders or check with credit card companies about small business loans with favorable terms. With research and creativity, the funds you need to take your business through this time and to the next level could be available. 

Frequently Asked Questions