The devastating impact that the pandemic had in the US economy was somehow cushioned by the availability of small business financing, or at least that’s what a recent report from the renowned Massachusetts Institute of Technology seems to be saying about the impact that this funding source had during the worst days of the outbreak.
In a paper released in July last year, a study led by multiple academics from the University’s Department of Economics highlighted that the government’s Paycheck Protection Program (PPP), which spearheaded the United States’ effort to contain the fallout caused by the virus, possibly saved between 1.4 and 3.2 million jobs during the crisis.
Meanwhile, private small business financing providers like Camino Financial appear to have played an important role in achieving this collective goal as well, as many offered companies grace periods and restructuring alternatives to help them in surviving a period of depressed revenues and severely constrained cash flows.
Size does matters when it comes to small business financing during a crisis
Despite the fact that multiple sectors criticized the scope of PPP loans and how they were distributed, the report from the MIT emphasizes that the size of the financial aid – with an initial $500 billion approved by Congress for small enterprises only – still provided a floor for the jobs market, while the study found that nearly 70% of the firms that were eligible to receive such grant did apply and receive the aid.
Meanwhile, the fact that the size of the package represented roughly two-thirds of the entire relief provided by legislators to the US economy during the aftermath of the 2007-2008 financial crisis shows that despite a limited number of isolated errors in the distribution of the funds, overall, PPP small business financing contributed to increasing jobs at eligible firms by at least 3.25%.
The role of financial technology businesses during the pandemic
Quarantine measures implemented by the US government during the pandemic forced individuals and businesses to rely on technology to keep their operations up and running.
This situation presented a once-in-a-lifetime opportunity for financial technology companies that provide small business financing for businesses in the United States, as the benefits of their expedited and paperless application and approval processes gain significant appeal for founders who were desperate to secure extra cash to keep their businesses afloat.
One of these companies was Camino Financial, a California-based online lender that offers instant loan quotes in less than 10 minutes with minimal paperwork.
Through these innovative small business financing providers like Camino, thousands of companies in the United States were able to get the cash they needed to pay for essential expenditures while the downturn lasted.
The combination of public and private lending through government-backed programs like PPP and Economic Injury Disaster Loans (EIDL) and private offerings like those promoted by fintech companies were probably the reason why the US economy saw a strong bounce from the dark days of February-April when unemployment rose to 14.7% – although the environment remains a challenging one for small businesses still.
Strengthening your cash flow through small business financing
The current low-interest-rate environment promoted by the Federal Reserve is providing an opportunity for companies to secure external funding at historically low rates.
While debt should not be considered as a long-term solution for keeping a business afloat, it does serve the purpose of helping a company in surviving what is considered a temporary downturn, especially now that multiple vaccines are being rolled out in the country to neutralize the virus in the following quarters.
If you are a business owner struggling to secure extra cash for your company during these difficult months, online lenders might be one of the easiest alternatives to turn to until the health emergency subsides.
Camino Financial emerges as an interesting option, as the company currently offers competitive interest rates for its small business financing instruments, going from 1% to 2.5% per month, while they also extend credit periods of up to 60 months for eligible candidates.