You Got PPP Funding. Now What?

The No. 1 challenge small-business owners experience is cash flow difficulty, and as the Covid-19 economic slowdown lingers, that rings true now more than ever. Small businesses across the board felt the economic ripples of mandated shutdowns, heavy restrictions and plummeting consumer demand. The Paycheck Protection Program (PPP) helped alleviate these cash flow challenges by providing payroll-specific funding to small businesses — but only enough for two and a half months. The question small-business owners are (or should be) asking is: Now what?

If your small business is still fighting the lasting effects of the Covid-19 slowdown, then you need to think about the next steps you can take to not only stay afloat, but pursue new opportunities that could help you establish a stronger footing in the new norm.

The PPP loan was a good solution for struggling businesses — while it lasted.

Back in March, nobody truly understood the economic scope of what the country would experience. At the time, the PPP loan seemed like a cure-all for the problem every small business faced: a lack of revenue.

The PPP's primary goal was to offer small-business owners a means and incentive to continue paying employees, instead of resorting to layoffs. Because it was free (provided that recipients adhered to stringent spending guidelines), most eligible owners applied. Some received funding and others didn't, partly as a result of the limited funds, but also due to the confusing application process and bottlenecking every bank faced from receiving thousands of applications.

But even for businesses that received funding, the PPP loan was more of a painkiller than a remedy. Nearly 87% of PPP loans were under $150,000, offering short-term flexibility but not the long-term security business owners needed. The loan forgiveness qualifications were confusing and difficult to meet, especially for industries that did not immediately pick back up (such as restaurants). Some owners also struggled to rehire employees.

If your small business is still suffering because of Covid-19, you should consider other ways to access funding or reduce costs.

Another wave of PPP funding is possible, but it may not be a lasting fix, either.

The first thought for most entrepreneurs would be to bank on more PPP funding. This is certainly a possibility, but before small-business owners can access new PPP funding, Congress must approve an additional stimulus package that allocates these funds. If and when they do, there's no telling what provisions the new package will have in place to make access to funds secure and fair. 

Will businesses that didn't receive a PPP loan in the first wave of fundings receive priority? And in the event that a business does receive a second PPP loan, how long will this cash last? If the pandemic continues to impede cash flow, will they simply find themselves in the same position again three months down the line? The uncertain future makes these questions impossible to answer, but there are other ways you can position your business for long-term stability and success.

Respond to cash flow and demand shifts in your business by auditing costs and reallocating budgets.

If you haven't already, then you can start future-proofing your business by fully auditing your expenses and reallocating your budget where it makes sense. When bracing for potential tough times ahead, you must shift your mindset from want-to-have features to revenue. In other words, prioritize expenses that drive sales.

Steer away from building upgrades or long-term investments that don't drive revenue today and other nonessential costs. Instead, prioritize operating costs that allow you to run your business, and payroll for employees that perform tasks essential to your bottom line.

Depending on your business model, marketing may be a good example of an area in which you can reduce costs without sacrificing the benefits entirely. Emphasize the channels that drive the highest revenue, and reduce spending on those that deliver minimal ROI.

Overall, look at the big picture of what will help your business now, and moving forward into the new norm.

Find an alternative cash flow solution and secure funds while you can.

To prepare your small business for the future, you want to make sure you are well capitalized. Unlike the PPP, the vast majority of financing programs allow full spending control. With extra cash, you can not only breathe easy but also take steps to introduce new revenue streams.

To drive revenue when restrictions prevent you from conducting business as usual, think about how else you can provide value with what you already have. Transitioning can be costly, but it's ultimately profitable when you go about it correctly.

It's also important to consider how you can find capital. Banks are often the best source of capital when it comes to rates, but qualifying can be difficult and time consuming. Often, banks only approve the most qualified applicants, meaning that businesses that suffered because of Covid-19 might not meet the mark. The application will require extensive documentation, and the review process could last from one to several months. If you can qualify, though, then it makes sense to take advantage of this option.

Fintech lenders offer a faster and easier application process that's more likely to result in an approval for you, but funding can come at a higher cost depending on the lender. The fintech lending industry has come a long way since its beginnings during the Great Recession, with some lenders now offering competitive market rates. Applying through a marketplace (rather than a direct lender) also opens the door to compare multiple options, so you can choose the right one for your business. Ultimately, though, the ability to cover expenses and pursue new opportunities immediately might make this cost worthwhile.

When it comes to rebuilding your business, there's no one-size-fits-all solution. But, considering exactly what your business needs — and how future events could affect your bottom line — will help you chart the right course.

This article originally appeared on Forbes.

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