Financing in These Trying Times: How North Carolina Small Businesses Can Stay Afloat

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Like in any other state, small businesses account for a vast majority of North Carolina enterprises—about 98%, in fact. They also employ thousands of workers and contribute to their local economy. Based on data, jobs offered by these companies account for as high as 65% of the total new positions for over 15 years.

But small businesses are the ones likely to face tougher challenges, especially concerning capital and cash flow. The raging COVID-19 pandemic doesn’t help either, shutting down companies for a long period or, worse, for good.

How can local enterprises thrive despite financial setbacks? Here are x options:

1. Explore Other Forms of Credit

Contrary to popular belief, credit is good when it helps a business generate income or profit and even lower existing debts that can carry high interest rates. Often, though, companies find themselves checking business loans by lenders.

This debt can have high interest rates, reaching up to a whopping 100% for those who like to apply for an online loan. The requirements can also be extended while the processing time is long.

Small-scale entrepreneurs can then consider other sources of loans. One of these is the Small Business Administration (SBA) loan. SBA doesn’t extend credit, but it works with a variety of lenders. This gives you plenty of choices on debts with better payment terms.

Another step is to refinance or apply for a secondary mortgage. The applicant might be able to access the best mortgage rates, spread the repayment for more years, and even use a part of the cash for other purposes, such as infusing capital on the business.

They can also explore the home equity line of credit (HELOC). In this arrangement, they apply for a loan equivalent to the difference of their property’s value and the remaining balance of their mortgage. But since this is also transformed into a credit line, the business can now have a revolving fund that they can replenish and use anytime.

man in the cash register at a store

2. Apply for Grants

Although the competition for enterprise grants is fierce, it is still worth trying for anyone who doesn’t want to pay loans. The programs one can apply varies depending on the industry.

In North Carolina, STEM-driven companies can be a good candidate for the One NC Small Business Program, which matches the funds one might have obtained from a round of grant dollar for dollar.

Meanwhile, the US Department of Agriculture has a long list of programs for businesses that venture into anything related to agriculture. Options include the Agriculture Innovation Center Program, Rural Cooperative Development Grants, and Socially Disadvantaged Groups Grants.

For women entrepreneurs, the Amber Grant is available. The group awards $10,000 to one or more recipients every month. At the end of the year, it offers another $25,000 to any of the 12 monthly winners. An applicant, therefore, could potentially receive $35,000.

Moreover, the state government continues to support small businesses affected by the pandemic through various approaches. These include partnering with various institutions that can provide additional capital.

For instance, Durham collaborated with Duke University to create a grant program for businesses that earn $500,000 or less a year and whose number of employees is no more than 25. The successful applicants can receive double the company’s monthly expenses or $10,000, whichever is lower.

3. Maximize Federal Support

The federal government’s policies can help entrepreneurs cover their company expenses or their personal spending to redirect savings to their businesses.

One of the most popular types is the stimulus check. As of late December, these checks worth $2,000 and awarded to individuals who earned no more than $75,000 in their 2019 tax filing were already underway.

Recent news also suggests that Americans might also receive a few more in 2021, although the amount might differ from the previous checks.

On the other hand, the application for the Paycheck Protection Program (PPP) has been reopened, and new loans are already available. Offered through the SBA, this arrangement will (1) forgive loans and (2) allow the funds to be used to pay for business expenses provided that the company will retain its employees during a specific period.

When it comes to taxes, the 2021 tax provisions allow homeowners to deduct the premium through itemization. Meanwhile, under the CARES Act, employers can pay off their workers’ student loans up to $5,250 each year and then exclude it from their employees’ taxable income.

The expenses of small and large businesses are similar, but the spending can be too much for a company barely hitting a million dollars a year.

For example, reports showed that these enterprises are likely to spend up to $5,000 annually on administrative expenses alone. Knowing other sources of cash is thus helpful, especially in these trying times.

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