Small Business Financing In California Has Gone Online - Los Angeles Post-ExaminerLos Angeles Post-Examiner

Small Business Financing In California Has Gone Online

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California has been the center of technological startups for decades already. Silicon Valley is famously where some of the biggest modern businesses were started. It is no exaggeration to say that the emergence and survival of small businesses in California is essential to both the American economy and global technological progress. The availability of California small business finance is generally guaranteed.

Unfortunately, over the past year, Californian small businesses have not been spared by the pandemic’s decimation. While many businesses that operate primarily or entirely online have flourished, many more have floundered or had to close down entirely. Even those businesses that do not require in-person service or transactions have been impacted by the fact that the average American has less money to spend.

Furthermore, businesses that launched just before or during the pandemic have had a particularly tough time getting off the ground. Goals and projections have had to change drastically, leading to an uncertain future.

It does not help that so many Californian small businesses rely primarily on funding from VCs and angel investors. The main benefit of this kind of funding is that the business does not start in a position of debt but with the investment of a person or company that believes in its vision. However, for this to work, VCs and angel investors need an appetite for risk and confidence in the business landscape, which is largely absent during these times.

California small businesses have therefore had to turn to loans from banks and California’s business lenders in order to survive the pandemic. This began with the much-publicized Payment Protection Program (PPP) loans.

PPP Loans and Californian SMEs

The Payment Protection Program (PPP) had its issues. The rollout was sloppy and confusing. Millions of dollars meant for small businesses went to big corporations. There was more than a hint of corruption – with nearly $3 million going to companies that are part of a group founded by Governor Gavin Newsom.

However, it also saved many small businesses. PPP loans allowed businesses to stay open, paying employees even when income was slow or non-existent. For some businesses, this was merely kicking the can down the road, as the pandemic stretched on and they found no way forward. For many, it was exactly what was needed, keeping them afloat while they figured out a way forward.

The problem is that the pandemic has stuck around far longer than almost anyone expected. Companies that managed to survive up until now are still struggling. While a new round of PPP loans is available, these loans will only go so far, and many businesses are ineligible for a second loan.

 

On the other hand, online lending in California is on the rise, providing alternative solutions to many businesses. This has been helped by the PPP process.

California’s Business Lenders

One of the reasons California’s business lenders have been able to show up for small businesses during the pandemic is that the Small Business Administration (SBA) utilized them to dispense PPP funds. Rather than having to go through traditional lenders, with lots of paperwork and processing times, small businesses could go online and apply for a PPP loan in no time.

Online lenders in California were not limited to dispensing PPP loans. They have had to walk a fine line during the pandemic. On the one hand, there are tons of potential borrowers they can fund. On the other, they know that many companies are likely to default on their loans.

Online lenders have therefore become an integral part of small business financing in California over the past year. Their quick and easy application processes make them the perfect option during these trying times.

But are there any downsides to online business lenders?

When to Avoid Online Lenders

When your business is on the verge of shutting down, chances are you are going to take whatever option is available, even if it seems like an unwise financial decision. Some online lenders take advantage of this.

You see this most often when it comes to the unsecured business loans offered by online lenders. Secured loans are always the best option for a business, but not all businesses have assets they can afford to use as a guarantee. Online lenders offer unsecured loans, but with interest rates that are so high that they leave businesses hamstrung, unable to pay back their debt, let alone make any money.

Of course, high-interest rates are a given when it comes to unsecured loans. However, some online lenders are essentially predatory, taking advantage of people’s desperation in the full knowledge that their loan may actually signal an ignoble end for the business. Their business model is not designed around the survival of small businesses, but rather around draining as much as possible from them.

For this reason, even if you think you have no other options, getting a high-interest unsecured business loan may not be worth it. Ultimately, it can leave you with a huge debt problem that prevents you from being able to afford bankruptcy. You might end up paying out endless funds on a business that is no longer viable.

The Return of Small Business Financing

Online lenders may be exactly what you need during this time to keep your business going. If you choose a loan that is not stacked with massive interest rates, you may be able to keep afloat throughout the rest of this pandemic. No business wants to be in debt, but some of the biggest businesses thrive while technically in perpetual debt.

The good news is that we should see the return of small business financing in California in the near future. As vaccine rollout continues, VCs and angel investors are looking for companies to fund. Some of the traditional ways of making money as a business are no longer available or desirable, but there is a host of new directions modern businesses can take post-COVD-19.

Find out if your business is eligible for another PPP loan if you are struggling. If you cannot get another PPP loan, or if it is just not enough, take a look at the small business lenders online in California. Be careful with them. High-interest rate loans are never ideal. However, if you find the right loan for your company, and do your due diligence to make sure you are not going with a predatory lender, you can use this financing to keep afloat.

The pandemic will inevitably still have a permanent impact on some businesses. But there are ways to survive if you are savvy and are careful with the funding you choose.


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