What to do when relief from COVID-19 cases is not enough

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Dear Business Banter,

Last year I received a $ 25,000 PPP loan and a $ 10,000 EIDL advance for small business COVID relief. This money definitely helped keep my cafe doors open and I’m grateful for that, but it didn’t last too long. Now I am relaunching my business full time and I can use additional funds. I have decent credit so I’m thinking of buying a few business credit cards. Do you have any advice for me? Dion

Dear Dion,

When the pandemic hit the country in 2020, the federal government took action, offering relief to small businesses. Aid has taken many forms, including Paycheck Protection Plan (PPP) loans and Economic Disaster Loans (EIDL).

As long as you were using the PPP for qualifying expenses (your employees’ payroll, mortgage interest, to cover rent or rental of the cafe and utilities), this loan did not have to be repaid. Since you have obtained the EIDL advance, it is also a grant without waiting for repayment. Therefore, even if you seem to be low on capital – which is certainly stressful – you have good credit. You’re not burdened with monthly loan payments, so some of your income isn’t already pledged for other obligations, and your credit rating is healthy.

One or two business credit cards can help you manage your expenses as you exit the pandemic. It can be slow at first, as some customers may still be hesitant to enter a place of business. According to a Bankrate 2021 survey, nearly 24% of people say they are not comfortable visiting a retailer, restaurant, grocery store or other business in person. For this reason, it will be important to get the right small business credit cards and use them effectively.

The idea is to take advantage of the large pool of funds of a credit card issuer. Here’s how to do it:

Apply for a rewards-packed 0% APR small business credit card

There are a large number of business credit cards on the market, but focus on the one that allows you to borrow money without paying interest for a period of time and offers a signup bonus and a great rewards program.

For example, take a look at the Chase Ink Business Unlimited® card. You will have 12 months of 0% APR on purchases (13.24% to 19.24% variable APR thereafter). If you take out the debt before the regular rate goes into effect, you’ve got a free loan – and a big one. You will also earn $ 750 after billing $ 7,500 in the first three months of opening the account. In addition, this card allows you to get unlimited 1.5% cash back on all business purchases, so the rewards keep increasing.

Another business credit card to consider is the Capital One Spark Cash Select for Business, as it offers 0% APR on purchases for 9 months (13.99% to 23.99% variable APR thereafter. ). You will get a $ 200 bonus after spending $ 3000 in the first three months, plus 1.5% cash back on purchases. Apply for the card that best suits your needs.

Plan your costs

Only you know your business and the expenses associated with it. First of all, think about what you need to buy that you can put on the card to meet the minimum spending. Do you need upgraded appliances to replace rickety tables and chairs, interior and exterior paint job? Don’t waste the free money.

Then think about what you will put on the card regularly so that you can accumulate the rewards each month. This can include marketing and advertising costs, accounting software, food and beverage inventory, and insurance premiums. It all adds up.

Make sure you are comfortable with the minimum monthly payments

During the 0% APR period, your purchase balance will not earn interest, but you will still need to make at least the minimum payments, which are typically 2% of the balance. A debt of $ 7,500 will result in a minimum upfront payment of $ 150, while a debt of $ 3,000 will be $ 60. Of course, the payment will fluctuate depending on your billing and reimbursement activity.

What is vitally important: making sure you have enough money to not only meet but also exceed the smallest amount owed. Credit card debt can get out of hand quickly, and you don’t want to be in a more stressful position than you are now. Try to be debt free before the introductory rate expires, then charge only what you can afford to pay off in 30 days with income.

Reinvest the rewards

With a combination of the signup bonus and rewards, which you earn as you bill, business credit cards will act as a small but valuable source of additional profit. For a retail business like yours, cash back cards are ideal because the rewards are offered in the form of pure cash, as opposed to points and miles on a travel credit card, which you may not need. – not be needed at the moment.

Play a cash back card correctly and the payouts can be big. Let’s say you add $ 5,000 each month to a card offering 1.5% cash back. As long as you pay the bill in full, you earn $ 900 in a year. This would surely cover something essential for coffee!

The advantage of using capital from a credit card issuer is that you are in control. Issuers are always on the lookout for new and interesting clients, and credit limits are often high – according to a 2020 The Face of Small Business study by Experian, the average credit limit for business owners is a bit low. over $ 56,000.

As a business owner, federal help is great when you can get it, but the funding comes and goes. Stay on top of the latest developments regarding COVID-19 relief options by visiting the Small Business Administration website as they are responsible for administering the program.

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