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7 Alternatives to Taking the Paycheck Protection Program (PPP) Loan

Congress is back with another COVID-19 relief package. With $900 billion in funds on the table, small businesses are waiting to see if President Donald Trump signs on the dotted line. Although President Trump has already raised some concerns with the current plan, it’s unclear if this would impact the Paycheck Protection Program (PPP). As it stands now, $284 billion (about 32% of the total funds available) will be set aside for PPP.1 Let’s break down what this means—and why you should steer clear.

What Is the Paycheck Protection Program?

Back in March, President Trump signed the CARES Act, a $2 trillion coronavirus economic stimulus bill, into law. The stimulus act was meant to reduce the economic impact of the coronavirus on both individuals and businesses—and the PPP was part of the deal.

The PPP is a forgivable small-business loan intended to prevent layoffs and pay cuts. The idea is a lender (aka a bank) will give you a loan so you can make payroll and stay in business.2 Your entire loan may be eligible for forgiveness if you follow some terms that are even stricter than the first time around.

Businesses that already received a PPP loan under the CARES Act will be eligible to get another under the new terms.3 Sounds great, right? But wait! Before you get too excited, remember there’s no guarantee these loans will be forgiven in full—or at all.

Why You Shouldn’t Apply for a PPP Loan

A Loan Increases Risk

The only time a forgivable loan works in your favor is when everything goes right. But life’s pretty messy, isn’t it? If you take out a loan and something goes wrong—and suddenly you don’t meet the forgiveness qualifications—you’ll have to make payments. That’s a big risk to take.

There’s No Guarantee Your Loan Will Be Forgiven

And that brings us to this fact: If the Small Business Administration (SBA) only forgives a portion of your PPP loan, you could still end up making payments. And there’s a chance your application could be denied entirely.4 Yep, you’ve got to read the fine print.

Government-Backed Debt Plus Ridiculous Oversight Equals a Bad Business Partner

Owning a business is hard enough. Owning a business in a pandemic is even harder. And having the government as a controlling business partner—in a stressful year and a shaky economy—is a disaster waiting to happen. Don’t do it. You’ve got to fight and find another way—and we’re going to tell you how.

7 Ways to Better Protect Your Business (That Don’t Involve a PPP Loan)

1. Trim Expenses

This is where you’re going to have to get creative. Go through that profit and loss statement line by line with a Sharpie in hand and see what monthly expenses you don’t really need right now. It’s sad, but maybe the coffee budget needs to go temporarily. What if you and your team handle lawn care for a few months? Don’t be afraid to get scrappy!

2. Negotiate With Your Landlord

Ultimately, your landlord wants the building he owns to stay occupied. There’s nothing more frightening to a landlord than an empty building in times of economic uncertainty. Work together and find a solution that will benefit both parties in the long run.

3. Brainstorm With Your Team

Being transparent with your team is crucial. They want the company and their jobs to thrive too, so ask them for ideas on how to cut expenses. They’re in the trenches and know where potential opportunities lie.

4. Renegotiate Payment Terms With Vendors

Cash on delivery is a great business practice, but the world won’t end if you switch to net-30 payment terms.

5. Look for New Marketplace Opportunities

Businesses exist to solve problems. Guess what the economy is chock-full of right now—problems! Get on the phone with your customers. Figure out what they’re struggling with and find a unique way to solve those problems.

6. Get Involved in a Community of Other Business Owners

Let’s be honest—owning a small business can be lonely at times. Add an isolating pandemic to the mix and that feeling can overtake you. That’s why we highly recommend getting plugged into a group of like-minded business owners that will provide accountability, perspective and emotional support.

7. Get Everyone on the Same Page

We cannot say this loud enough: Clear and frequent communication with your leaders and your entire team is the only chance your business has to succeed during this pandemic. It’s better to overshare than to let your team make up their own stories about what’s going on. Keep them updated with weekly staff meetings and consistent communication.

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Applying these principles has allowed Ramsey Solutions to survive and thrive during this pandemic—and you can too. You do not need the government! At the end of the day, the PPP loan is just a temporary Band-Aid to the real issues you, your business and our economy face. As the leader of your company, you’re the solution. You’re the secret sauce. And in the words of Dave Ramsey, “Don’t you dare quit!

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About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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