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New FAQs available to aid families and small business under the American Rescue Plan

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Information for enhanced 2021 child and dependent care tax credits; updated paid sick and family leave credits for Q2 and Q3 of 2021

IR-2021-128, June 11, 2021

WASHINGTON – The Internal Revenue Service today posted two new, separate sets of frequently-asked-questions (FAQs) to assist families and small and mid-sized employers in claiming credits under the American Rescue Plan (ARP).

Both the child and dependent care credit as well as the paid sick and family leave credit were enhanced under the ARP, enacted in March to assist families and small businesses with the fallout of the COVID-19 pandemic and recovery underway. The two sets of FAQs provide information on eligibility, computing the credit amounts, and how to claim these important tax benefits. An overview of these tax credits follows:

Child and dependent care credit

For 2021, the ARP increased the maximum amount of work-related expenses for qualifying care that may be taken into account in calculating the credit, increased the maximum percentage of those expenses for which the credit may be taken, modified how the credit is reduced for higher earners, and made it refundable.

For 2021, eligible taxpayers can claim qualifying work-related expenses up to:

  • $8,000 for one qualifying person, up from $3,000 in prior years, or
  • $16,000 for two or more qualifying persons, up from $6,000 in prior years.

Taxpayers are also required to have earnings; the amount of qualifying work-related expenses claimed cannot exceed the taxpayer's earnings.

Combined with the increase to 50% in the maximum credit rate, taxpayers with the maximum amount of qualifying work-related expenses would receive a credit of $4,000 for one qualifying person, or $8,000 for two or more qualifying persons. When calculating the credit, a taxpayer must subtract employer-provided dependent care benefits, such as those provided through a flexible spending account, from total work-related expenses.

A qualifying person generally is a dependent under the age of 13, or a dependent of any age or spouse who is incapable of self-care and who lives with the taxpayer for more than half of the year.

As in prior years, the more a taxpayer earns, the lower the percentage of work-related expenses that are taken into account in determining the credit. However, under the new law, more taxpayers will qualify for the new maximum 50% credit rate. That's because the ARP increased to $125,000 the adjusted gross income level at which the credit rate starts to be reduced. Above $125,000, the 50% credit percentage goes down as income rises. Taxpayers with adjusted gross income over $438,000 are not eligible for the credit.

The credit is fully refundable for the first time in 2021. This means an eligible taxpayer can receive it, even if they owe no federal income tax. To be eligible for the refundable credit, a taxpayer (or the taxpayer's spouse if filing a joint return) must reside in the United States for more than half of the year. However, special rules apply to military personnel stationed outside of the United States.

To claim the credit for 2021, taxpayers will need to complete Form 2441, Child and Dependent Care Expenses, and include the form when filing their tax returns in 2022. In completing the form to claim the 2021 credit, those claiming the credit will need to provide a valid taxpayer identification number (TIN) for each qualifying person. Generally, this is the Social Security number for the qualifying person. For more information about completing the form and claiming the credit, see the instructions to Form 2441. In addition, those claiming the credit are required to identify all persons or organizations that provided care for the qualifying person. This requires providing the care provider's name, address, and TIN.

Paid sick and family leave credits

The paid sick and family leave credits reimburse eligible employers for the cost of providing paid sick and family leave to their employees for reasons related to COVID-19, including leave taken by employees to receive or recover from COVID-19 vaccinations. Self-employed individuals are eligible for similar tax credits.

The paid sick and family leave tax credits under the ARP are similar to those put in place by the Families First Coronavirus Response Act (FFCRA), as extended and amended by the COVID-related Tax Relief Act of 2020, under which certain employers could receive tax credits for providing paid leave to employees that met the requirements of the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act (as added by FFCRA). The ARP amends and extends these credits, and provides that leave wages paid to an employee who is seeking or awaiting the results of a test for, or diagnosis of, COVID-19, or is obtaining immunizations related to COVID-19 or recovering from immunization, are leave wages that can be eligible for the credits. Additionally, under the ARP, eligible employers may now claim the credit for paid family leave wages for all the same reasons that they can claim the credit for paid sick leave wages.

The FAQs include information on how eligible employers may claim the paid sick and family leave credits, including how to file for and compute the applicable credit amounts, and how to receive advance payments for and refunds of the credits. Under the ARP, eligible employers, including businesses and tax-exempt organizations with fewer than 500 employees and certain governmental employers, may claim tax credits for qualified leave wages and certain other wage-related expenses (such as health plan expenses and certain collectively bargained benefits) paid with respect to leave taken by employees beginning on April 1, 2021, through September 30, 2021.

The ARP keeps the daily wage thresholds that previously existed for these credits under the FFCRA. The aggregate cap on qualified sick leave wages remains at two weeks (up to a maximum of 80 hours), and this aggregate cap reset with respect to leave taken by employees beginning on April 1, 2021. The aggregate cap on qualified family leave wages increases to $12,000 from $10,000, and this aggregate cap reset with respect to leave taken by employees beginning on April 1, 2021.

The paid leave credits under the ARP are tax credits against the employer's share of Medicare tax. The tax credits are refundable, which means that the employer is entitled to payment of the full amount of the credits to the extent it exceeds the employer's share of Medicare tax.

In anticipation of the credits to be claimed on the applicable federal employment tax return, eligible employers can keep the federal employment taxes that they otherwise would have deposited, including federal income tax withheld from employees, the employees' share of social security and Medicare taxes, and the employer's share of social security and Medicare taxes with respect to all employees up to the amount of the credit for which they are eligible. If the eligible employer does not have enough federal employment taxes on deposit to cover the amount of the anticipated credits, the eligible employer may request an advance of the credit by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Self-employed individuals may claim comparable credits on the Form 1040, U.S. Individual Income Tax Return.

See the tax provisions of the American Rescue Plan for more information. See other provisions designed to help taxpayers recovering from the impact of the COVID-19 pandemic. Also, see FAQs on these and other provisions.

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What’s new for small businesses in the American Rescue Plan

Restaurants and venues will soon be able to apply for dedicated grants.

A foods truck with people lined up to order.

Now that the American Rescue Plan (ARP) is officially law, more help is on the way for small businesses, including additional money for efforts like the Paycheck Protection Program (PPP) and a whole new grant offering specifically for restaurants.

In total, the ARP — which Congress passed two weeks ago — has about $50 billion dedicated to bolstering grants and loans for small businesses still navigating the economic fallout of the pandemic . According to a Yelp study , as of August 31, 2020, nearly 100,000 establishments had permanently closed since last March, and another 65,000 had done so temporarily.

The new money in the ARP is in addition to more than $600 billion that’s been allocated in previous bills. In this package, $28.6 billion is set aside for a new program called the Restaurant Revitalization Fund, $15 billion is allocated to beef up funding for Targeted Economic Injury Disaster Loan Advance payments (a.k.a. EIDL grants), $7.25 billion is for PPP, and $1.25 billion is laid out to boost the Shuttered Venue Operators Grant program.

Because the legislation has only recently become law, not all of the aid it provides is accessible just yet, though the Small Business Administration (SBA) is expected to issue more guidance shortly. At this point, here’s what we know about these programs and how businesses can access the support they offer.

“We always recommend talking to your lender, and just staying on top of SBA’s website to see when these programs go live,” says Awesta Sarkash, government affairs manager for the advocacy group Small Business Majority. For now, check out the SBA hub for pandemic relief for more information.

Paycheck Protection Program

Who qualifies: Small businesses are now able to apply for up to two loans via PPP.

To get a first draw PPP loan , most businesses that meet the size standards set by SBA are eligible. For many industries, that means having 500 employees or fewer, though these constraints vary.

Meanwhile, there are more restrictions on second draw PPP loans . To qualify, businesses had to receive a first PPP loan and show that it’s already been (or will be) spent in full. Additionally, only businesses with 300 employees or fewer that can show at least a 25 percent decline in their gross receipts between comparable quarters in 2019 and 2020 are eligible.

What it is: This effort was established in 2020 to help businesses cover their payroll costs specifically, with the goal of preventing layoffs and enabling businesses to bring back employees they had furloughed or let go.

Businesses can receive fully forgivable loans of up to 2.5 times their monthly payroll costs, up to $10 million in total for the first loan and up to $2 million for the second. The funds, however, need to be used a certain way in order for them to ultimately be forgiven. Businesses in the program will have to demonstrate that they used at least 60 percent of the funds for payroll costs, for instance, while the remaining 40 percent can be utilized on operational costs like rent and other overhead.

How to apply: PPP is run through lenders including banks, fintech companies, and community development financial institutions (CDFIs), so business owners must apply directly through them.

The best first step for businesses applying to the program is to reach out to either a lender they have an existing relationship with or one of the options listed on the SBA website .

Though several larger banks have said they won’t consider clients that don’t have an existing line of credit with them, there are a number of other options that are open to new customers, including fintech companies such as PayPal and CDFIs.

Businesses should be prepared with their monthly payroll data and tax identification information. The application forms for first draw loans look like this , while application forms for second draw loans look like this .

What’s new: The ARP adds another $7.25 billion to PPP and makes organizations such as agricultural groups and local digital news services eligible for these loans.

Currently, businesses have until March 31 to apply to PPP, though Congress is actively working to extend the deadline through the end of May. (Lawmakers were unable to include an extension in the ARP due to budget reconciliation rules.)

Economic Injury Disaster Loan and Targeted EIDL Advance payments (a.k.a. EIDL grants)

Who qualifies: There are two programs that are part of the Economic Injury Disaster program including targeted grants and more standard SBA loans.

EIDL grants: The grant — or targeted advance — program is currently aimed at businesses in low-income communities that have applied for EIDL relief in the past but did not receive the full amount they needed. These businesses also had to show a 30 percent decline in revenue in an eight-week window from March 2020 onward versus a comparable time frame before then. SBA is reaching out directly to those eligible for this targeted advance via email .

EIDL loans: The loans program, meanwhile, is still open to all small businesses that meet the SBA size standards and have suffered economic injury during the pandemic.

What it is:

EIDL grants: Businesses in need that have previously submitted applications are eligible for up to $10,000 in grants. These include businesses that either did not receive grants in the past or ones that received a smaller amount than they requested. SBA is directly reaching out to these businesses in order to update them.

EIDL loans: Businesses pursuing the loans can receive up to $150,000 to use on everything from payroll to operational costs.

How to apply :

EIDL grants: Currently, the grants application process is closed to new applicants, and SBA is focused on addressing applications they already received. Those who are eligible for this advance will receive a specific email notice from SBA.

EIDL loans: The application for EIDL loans is directly through SBA’s website here . Businesses should be prepared with gross revenue information as well as payroll data.

What’s new: There’s $15 billion in new funds dedicated to this program, which are intended to help distribute grants to businesses that didn’t previously get as much as they had requested.

Shuttered Venue Operators Grant program

Who qualifies: Businesses that operate venues including theaters, museums, and concert halls are able to participate in this program. They need to be able to show that they suffered a 25 percent decline in revenue between comparable quarters in 2019 and 2020, and that they meet the SBA’s eligibility requirements .

What it is: This program was created last December as part of the stimulus bill that Congress passed at the time. It’s aimed at helping venue operators who’ve been hit particularly hard by the pandemic, given the need for social distancing and public health restrictions that limit larger gatherings.

Businesses are able to obtain grants of up to 45 percent of their annual 2019 gross earned revenue, capped at $10 million.

How to apply: Businesses can apply directly through the SBA website, which is slated to begin taking applications on Thursday, April 8. They should be prepared with their 2019 tax return, quarterly income statements, and payroll statements. The SBA will also be holding a webinar about the program on Tuesday, March 30 .

What’s new: The program previously received $15 billion in funding in the stimulus bill passed last December and received another $1.25 billion in the ARP.

The Restaurant Revitalization Grant program

Who qualifies: Businesses that focus predominantly on serving food and beverages are able to apply, including restaurants, bars, caterers, food trucks, and brewpubs.

What it is: A new program established by the ARP, this effort is intended to help one of the industries disproportionately affected by the pandemic and distribute grants to establishments in need.

These grants could be as much as the difference in revenue that businesses experienced between 2020 and 2019, based on their gross receipts, and are capped at $10 million. $5 billion of the funding for the program is also specifically set aside for establishments that made $500,000 or less in gross receipts in 2019.

“The shuttered venue program is up and running. Hopefully the idea is the restaurants one can look really similar,” says Sarah Crozier, a communications director for the advocacy group Main Street Alliance.

How to apply: Information about this program’s application isn’t available yet, but the SBA should be issuing guidance shortly. Much like the venues program, the application is expected to go through the agency directly.

What’s new: The ARP includes $28.6 billion to set up this program and ultimately distribute to different establishments.

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Set-asides for minority, underserved, veteran, and women-owned businesses, first and second-draw ppp loans, first-draw ppp loan details, first-draw ppp loan eligibility, ineligible entities, second-draw ppp loan details, second-draw ppp loan eligibility.

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The Consolidated Appropriations Act (CAA), 2021, signed into law Dec. 27, 2020, marks the third round of funding for the Paycheck Protection Program (PPP), which last ran out of funds Aug. 8, 2020.

If you were unable to secure a PPP loan during the first two rounds, new CAA funding of $284 billion is now available. The new funds come with relaxed guidelines that make it easier for small businesses to obtain an original PPP loan and even allow those who received funding in Round 1 or Round 2, to secure a second draw (additional) loan this time around.

Key Takeaways

  • Changes to the PPP program provide targeted access to very small businesses and certain previously excluded individuals.
  • A new round of COVID-19 relief legislation provides $284 billion in additional PPP loan funds for small businesses.
  • The legislation mandates that $35 billion of that money will go to first-time (first-draw) borrowers with 500 or fewer employees.
  • An additional $15 billion will provide first-draw loans for small businesses with 10 or fewer employees.
  • Guidance for this round of funding was released on Jan. 6, 2021, by the Small Business Administration (SBA).
  • Additional rule changes announced Feb. 24, 2021, and passage of the PPP Extension Act March 30, 2021, provided further guidance.

PPP Rule Changes Starting Feb. 24, 2021

The Biden administration announced on Feb. 22, 2021, several changes to the PPP program designed to enable the smallest businesses, including some left behind in previous relief efforts, to get help. The changes are outlined below.

  • Beginning Wed., Feb. 24, 2021, businesses with fewer than 20 employees will have an exclusive two-week window to apply for PPP funding. During this period, larger businesses will not be allowed to apply for a PPP loan.
  • The PPP loan calculation formula is being revised to allow sole proprietors, independent contractors, and self-employed individuals to receive more financial support. The rule changes also allocate $1 billion in PPP funds for these types of businesses in low-and moderate-income (LMI) areas.
  • Small business owners with non-fraud-related felonies will now be eligible for PPP relief unless the applicant or owner is incarcerated at the time of the application.
  • Those who are delinquent on federal student loans will now be eligible for a PPP loan.
  • Non-citizen small business owners who are lawful U.S. residents will also be eligible and allowed to use their Individual Taxpayer Identification Numbers (ITINs) to apply. This category includes Green Card holders and those here on a visa.
  • With passage of the PPP Extension Act, applicants have until May 31, 2021, to apply for a PPP loan, lenders have until June 30, 2021, to process those applications, and the covered period for all PPP loans extends to June 30, 2021.

Phased Reopening of PPP Loan Program

The U.S. Small Business Administration (SBA) and Treasury Department announced that the Paycheck Protection Program (PPP) would reopen the week of January 11, 2021, for new borrowers and existing PPP loan recipients.

Initially, only community financial institutions, including Community Development Financial Institutions (CDFIs), minority depository institutions (MDIs), certified development companies , and microloan intermediaries were able to make first-draw PPP loans beginning Monday, January 11. Second-draw PPP loans were available through the same lenders starting Wednesday, January 13. Small lenders with less than $1 billion in assets were able to make first- and second-draw loans starting Friday, January 15.

All participating PPP lenders came on board offering loans to all participants Tuesday January, 19. Guidance in the form of Interim Final Rules (IFRs) for both first- and second-draw PPP loans was released Jan. 6, 2021.

The Paycheck Protection Program (PPP) loan program was created by the  CARES Act  with $349 billion in funding. Those funds, which were expected to last until the end of June 2020, ran out on April 16.

With some tweaks to the allocation process to provide more money to struggling small businesses, the second round of $320 billion lasted until Aug. 8, 2020, after which new PPP loan applications were no longer accepted until now.

The $284 billion allocated in Round 3 will be made available through May 31, 2021, or until funds are expended. This funding round expands on the original PPP goals and guidelines even more than Round 2. The table below shows PPP funding to date.

Round Legislation Funding Expiration
1 CARES Act $349 billion Apr. 16, 2020
2 PPP & Healthcare Enhancement Act $310 billion Aug. 8, 2020
3 Consolidated Appropriations Act, 2021 $284 billion Mar. 31, 2021
 4 American Rescue Plan Act of 2021  $7 billion  May 31, 2021

Sources: H.R. 748, H.R. 266, H.R. 133 H.R. 1319

Round 3 PPP funding contained in the CAA, includes significant changes to the Paycheck Protection Program Flexibility Act of 2020 , which also made significant changes to the original Paycheck Protection Program that was part of the CARES Act.

The new legislation , for example, expands permissible uses of PPP funds beyond payroll, covered utilities, and covered rent. It provides flexibility in choosing the covered period for your loan (8 to 24 weeks or until June 30, 2021, whichever comes first), and simplifies the forgiveness process for loans of $150,000 or less.

In order to get more funds to small businesses left out of previous PPP funding rounds, Congress set aside additional monies and a "first-in-line" application process for minority and other underserved businesses as part of the structure of the CAA, 2021.

  • $15 billion through community financial institutions;
  • $15 billion through Insured Depository Institutions, Credit Unions, and Farm Credit System Institutions with consolidated assets of less than $10 billion;
  • $35 billion for new first-draw PPP borrowers; and
  • $15 billion and $25 billion for first-draw and second-draw PPP loans, respectively, for borrowers with 10 or fewer employees or for loans less than $250,000 to borrowers in low-or moderate-income neighborhoods.

CAA further provides that at least 25% of each set-aside will go to each of the targeted groups:

  • SMBs with a maximum of 10 employees; and
  • Loans under $250,000 to businesses in low-or moderate-income neighborhoods.

The reopening of the Paycheck Protection Program (PPP) on January 11, 2021, included the creation of two PPP loan tiersFirst-Draw and Second-Draw.

Generally speaking, First-Draw loans are for those who have never received a PPP loan, although there are exceptions listed under eligibility below. Second-Draw loans are for those who received a PPP loan under previous funding and now need more funds to stay in business.

The Paycheck Protection Program (PPP) First-Draw loan is designed to help small businesses keep workers on payroll. You can use First Draw PPP funds on payroll, benefits, mortgage interest, rent, utilities, worker protection related to COVID-19, uninsured property damage, and some operations and supplier costs.

Your loan will be forgiven if you meet employee retention criteria and use the money for eligible expenses. PPP First-Draw loans:

  • Have an interest rate of 1%
  • Have a maturity of five years
  • Let you defer payments, provided you apply for forgiveness, until the SBA remits your loan forgiveness amount to your lender
  • Let you defer payments for 10 months after the end of the covered period for your loan if you don't apply for forgiveness
  • Require no collateral and no personal guarantee
  • Have no fees

The maximum loan amount for a First-Draw PPP loan is 2.5 times your average monthly payroll costs in 2019 or 2020 up to $10 million.

If your business was affected by COVID-19, you may be eligible for a First-Draw PPP loan if you did not receive a PPP loan under either of the first two funding programs and you are:

  • A sole proprietor, independent contractor, or self-employed person
  • A small business that meets SBA’s size standards (either the industry size standard or the alternative size standard)
  • A business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with 500 or fewer employees OR
  • That meets the SBA industry size standard if more than 500
  • A business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 people per location

If you received a PPP loan in the past but did not receive forgiveness by December 27, 2020, you may be eligible to apply for a makeup First-Draw loan.

If you received a PPP loan under previous funding but did not receive loan forgiveness by December 27, 2020, you may:

  • Reapply for a First-Draw PPP Loan if you previously returned some or all of your First-Draw PPP Loan funds, or
  • Under certain circumstances, you may request a modification of your First Draw-PPP Loan amount if you previously did not accept the full amount for which you were eligible

Businesses or organization that are not eligible for a First-Draw PPP loan include:  

  • Companies whose primary activity involves lobbying
  • Companies with 20% or more ownership by China
  • Companies with a board member who is a resident of China
  • Entities with a Shuttered Venue Operator (SVO) Grant under Section 24 of the new law
  • Publicly traded companies
  • Companies not normally eligible by SBA guidelines unless specifically allowed by the new law.

Loan terms for a Second-Draw loan are the same as for a First-Draw PPP loan. Second-Draw loans are for borrowers who previously received a PPP loan under previous funding and meet the eligibility requirements listed below. 

Second Draw PPP Loans can be used for payroll, benefits, mortgage interest, rent, utilities, COVID-19-related worker protection, uninsured property damage costs, certain supplier costs, and operations expenses.

The maximum loan amount for a Second-Draw PPP loan is 2.5 times your average monthly payroll costs in 2019 or 2020 up to $2 million. If you are in the Accommodation and Food Services sector, you can borrow 3.5 times your average monthly payroll costs, still limited to $2 million.

A borrower is generally eligible for a Second Draw PPP Loan if the borrower: 

  • Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses
  • Has no more than 300 employees; and
  • Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020  

Application Process for First and Second-Draw PPP Loans

As noted above, applications for first- and second-draw PPP loans will be accepted by all SBA-approved lenders through May 31, 2021. Lenders have until June 30, 2021, to process loans.

There are two things you need to do:

  • Download and complete the 5-page first-draw loan application or 6-page second-draw application from the SBA website ; and
  • Contact an approved SBA lender and apply.

Keep in mind that first draw PPP loans are generally only for businesses that have never received a PPP loan in the past—with exceptions noted in the eligibility section. Second-draw loans are for those who received a PPP loan earlier.

If you need help locating an approved lender, the SBA provides an online Lender Match tool or you can check the PPP Lender List, organized by state.

Whether you apply for a first or second draw loan you will need payroll and other records in order to complete the application:

  • Pertinent tax returns (2019 and 2020)
  • Payroll records to help verify the amount you are requesting
  • Documentation showing the legal structure of your company
  • Some demonstration of how COVID-19 has impacted your business

Although the legislation calls for Round 3 PPP loan applications to be accepted through May 31, 2021 , past experience suggests the actual availability of funds could be much less. Recall that the first round of funding lasted only two weeks.

U.S. Congress. " H.R.133 - Consolidated Appropriations Act, 2021 ." " FACT SHEET: Biden-Harris Administration Increases Lending to Small Businesses in Need, Announces Changes to PPP to Further Promote Equitable Access to Relief ."

U.S. Congress. " H.R. 1799 - The PPP Extension Act. "

Small Business Administration. " SBA Reopening Paycheck Protection Program to Small Lenders on Friday January 15 and all Lenders Tuesday January 19 ."

U.S. Congress. " H.R.748 - CARES Act ."

U.S. Congress. " H.R.266 - Paycheck Protection Program and Health Care Enhancement Act ."

Small Business Administration. " SBA Administrator Isabella Casillas Guzman's Statement on President Biden's Signing the PPP Extension Act of 2021 into Law ." " H.R. 1319 - American Rescue Plan Act of 2021 ."

Small Business Administration. " Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns ."

Small Business Administration. " First-Draw Loan Details ."

Small Business Administration. " Second-Draw Loan Details ."

Small Business Administration. " Paycheck Protection Program Second Draw Borrower Application Form ."

Small Business Administration. " Paycheck Protection Program Borrower Application Form Revised January 8, 2021 ."

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ARPA Local Relief Frequently Asked Questions

The American Rescue Plan Act was signed into law by President Biden on March 11, 2021, it guaranteed direct funding to all cities, towns and villages in the United States. The U.S. Department of the Treasury responsible for overseeing the program. 

NLC has identified your frequently asked questions about State and Local Fiscal Recovery Fund (SLFRF) grants program. These answers will be updated as additional information becomes available. 

We’ve organized the frequently asked questions in sections to help guide you.

Introduction to the American Rescue Plan Act

  • Where can I find in-depth information on the American Rescue Plan Act (ARPA)?

What is the Final Rule?

  • What guidance is available?

Receiving Funds

  • How was my city allocated funds?
  • How were NEUs allocated funds?   
  • When will my city receive the second tranche of funding?

Compliance and Reporting

  • What are SLFRF reporting requirements? 
  • What is a UEI Number?   
  • What is an active SAM registration?   
  • How do I submit funding reports?    
  • When do I need to submit funding reports?   

Is there a deadline to report or spend the funds? 

  • How do I calculate my city’s lost revenue?  
  • What is the Standard Allowance?  

Eligible Uses

  • What are eligible uses for funding?  
  • Can recovery funds be used to fund lost revenue?   
  • Can recovery funds be used for stormwater projects and expenses?

Can my city decrease taxes after receiving these funds? 

  • What infrastructure projects can funds be used on? 

Can recovery funds be used to cover administrative costs? 

  • Can recovery funds be used to relieve other payroll costs? 
  • Can recovery funds be used for pensions?  
  • What is ARPA Flex and what are the new expenditure categories it created?  
  • If I use SLFRF funds for a surface transportation project, is that project subject to the National Environmental Policy Act (NEPA)?

Where can we find in-depth information on the American Rescue Plan Act (ARPA)?

The following list includes some of the available resources that provide guidance on ARPA, compliance, and reporting requirements:

  • Title by Title Bill Summary
  • State and Local Fiscal Recovery Funds Fact Sheet
  • Coronavirus State and Local Recovery Funds
  • 2022 Final Rule   
  • 2022 Final Rule Overview   
  • Treasury Final Rule FAQs   
  • Compliance and Reporting Guidance   
  • Information for NEUs    
  • Project and Expenditure Reporting Guide (Updated April 2022)   
  • 2023 Interim Final Rule  
  • 2023 Interim Final Rule Overview   

In addition, NLC has created and continues to develop resources for members on specific ARPA-related questions/issues. A number of these are referenced throughout the answers to these Frequently Asked Questions.

The Final Rule was released on January 6, 2022 and took effect on April 1, 2022. State and local funding allocated in the American Rescue Plan Act is subject to the specifications outlined in the Final Rule. The Final Rule provides a comprehensive list of eligible expenditures, encouraged expenditures, and prohibited expenditures. The Final Rule Overview provides a non-exhaustive list of provisions in the Final Rule and serves as a guide for some of the actions municipalities may take in utilizing their recovery funds.  

Learn more about what the Final Rule means for local government leaders here.  

What guidance is available? 

The U.S. Department of Treasury provides guidance for cities on determining eligible uses, allocating funds, and reporting and compliance of their local fiscal recovery funds.   

There are  additional resources  available for Non-Entitlement Units of Local Government (NEUs), or municipalities generally with a population under 50,000, as well. This guidance from Treasury includes information states used to allocate funding to NEUs, as well as guidelines for crucial reporting and compliance measures.     

The  Compliance and Reporting Guidance , released in February 2022, provides an overview of the Project and Expenditure Report and Recovery Plan Performance Report required to be submitted by cities, towns and villages to Treasury.

Treasury has released a series of webinars on State and Local Fiscal Recovery Funds, which outline the most important details from the Final Rule, while also covering expenditure reporting.  

Finally, NLC has released a variety of blogs and webinars on to help ensure municipalities are equipped to spend their funds as efficiently and effectively as possible.   

How was my city allocated funds? 


The Act provides that the Secretary shall substitute “all metropolitan cities” for “all metropolitan areas” in each place it appears. This substitution removes urban counties, which are provided for separately under the Act, 4 from the ratios used in the calculation of allocations for metropolitan cities. The Act also provides that the Secretary shall allocate and pay to each metropolitan city an amount determined for the city “consistent with” the CDBG formula.  

As noted, the CDBG formula uses six weighted variables.5 This formula reflects an approach taken since the 1970s on how to assess communities’ needs for funds to provide suitable living environments and expanded economic opportunities, particularly for low-income communities. But applying the formula solely by substituting “all metropolitan cities” for “all metropolitan areas” has the effect of changing the relative importance of the variables: in particular, it alters the weight normally assigned to “population growth lag.”  

While substituting “all metropolitan cities” for “all metropolitan areas” ensures that all of the metropolitan cities’ allocation will be distributed, a substitution that changes the relative importance of the variables that drive the underlying CDBG formula would produce results that are not “consistent with” with the formula, as the statute requires. To achieve the statutorily mandated consistency with the CDBG formula, while still “substitut[ing] ‘all metropolitan cities’ for ‘all metropolitan areas’ each place it appears,” Treasury has adjusted the relative weights of the ratios that make up the formula to reflect the same relative importance of the ratios absent the substitution. 

Coronavirus Local Fiscal Recovery Fund grants are formula grants and under the formula, every municipal government is entitled to receive a calculated share of the $65.1 billion for cities, towns, and villages. These are not competitive grants and local governments will never need to submit an application or justify their needs in advance to receive funding. There are, however, steps to be taken to ensure local governments receive their grants.  

How were NEUs allocated funds?

Non-entitlement units of local government (NEUs), or generally municipalities with fewer than 50,000 residents, received their ARPA funding through their state government. States calculated the funding using the following equation, and a spreadsheet of funding designated to each NEU in your state should be available online:  

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The second tranche of remaining funding would be dispersed by the state based on the following calculation: 

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Non-entitlement units of local government (population <50,000) must have a valid UEI number and active SAM registration to meet reporting requirements.  


What are slfrf reporting requirements  .

For metropolitan cities and non-entitlement units of local government to receive their SLFRF funding, they must abide by the following reporting requirements:    

  • Having a Unique Entity Identifier (UEI) number 
  • Having an active SAM registration, which must be renewed annually 
  • Reporting funding obligations and expenditures, quarterly or annually, depending on municipality size (see below)     

What is a UEI Number?

A Unique Entity Identifier (UEI) number is a unique 12-digit number assigned to each municipality for use in reporting their fiscal recovery funding on  

As of April 4, 2022, the federal government switched from the DUNS number to the UEI number. If you have an existing registered entity but do not know your UEI number, you will  find your UEI number on . New entities will receive their UEI number when registering on    

What is an active SAM registration?

SAM is the official government-wide database to register with in order to do business with the U.S. government. All Federal financial assistance recipients must register on and renew their SAM registration annually to maintain an active status to be eligible to receive Federal financial assistance. There is no charge to register or maintain your entity SAM registration.  

Metropolitan cities and NEUs will need an active SAM registration to receive funds, and ALL cities will need an active SAM registration to submit reports through the Treasury reporting portal. NEUs who have not previously registered with may do so after receipt of the award, but before the submission of mandatory reporting. 

If an entity does not have an active SAM registration, please visit to begin the entity registration or renewal process. Please note that SAM registration can take up to several weeks. 

How do I submit my funding reports? 

Each designated individual in a jurisdiction should register with a account, which will give each registered individual access to Treasury’s Reporting and Compliance Portal .  

Some municipalities may have already registered to report through If that is the case, there is a separate Portal through which municipalities may submit their expenditure reports.   

If you need assistance submitting your reports, please contact [email protected] .  

When do I submit my funding reports?

Specifications for future deadlines depend on the type and size of municipality. Project and Expenditure Reports are due 30 days after the end of the quarter for Metropolitan Cities, and by April 30 for NEUs.  

SLFRF funding must be obligated by December 31, 2024 and jurisdictions have until December 31, 2026 to fully expend their funds. Spending should be used for costs incurred after March 3, 2021.  

How do I calculate my city’s lost revenue? 

If you are not using the standard allowance up to $10 million in revenue loss, the funding your city receives will be based on its lost revenue. Lost revenue is equal to counterfactual revenue – actual revenue (adjusted for tax changes). If counterfactual revenue is greater than actual revenue, the loss is set at $0.  

Counterfactual revenue can be calculated using the following equation:

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n is the number of months elapsed since the end of the base year to the calculation date. The growth adjustment is the greater of either a 5.2% standard growth rate, or the recipient’s average annual revenue growth in the last full three fiscal years prior to the COVID-19 pandemic.  

Actual revenue is the total revenue collected over the 12 months immediately preceding the calculation date.  

There is an example of this calculation in the Revenue Loss section of the Final Rule , which may be helpful if your municipality is still looking to calculate revenue loss during the pandemic.  

What is the standard allowance?

Treasury has encouraged NEUs to utilize the “standard allowance” for SLFRF funds, which allows a municipality to claim up to $10M in revenue loss funding to each, regardless of actual loss of revenue. However, the revenue loss amount cannot exceed the size of the grant. Municipalities had to choose whether they were going to use the Standard Allowance by the April 30, 2023 reporting deadline. Local governments may spend these funds on government services.    

Filing using the standard allowance streamlines the process of reporting and compliance. If an NEU chooses not to receive their funding under the standard allowance, it must classify its projects under one of the expenditure categories outlined by Treasury, rather than generally under revenue loss.   

What are eligible uses for funding?  

Municipalities are granted flexibility in choosing how they will spend their ARPA funds. As outlined in the Final Rule, funding must fit into one of the following categories:  

  • Responding to the public health and negative economic impacts of the pandemic   
  • Providing premium pay to essential workers  
  • Providing government services to the extent of revenue loss due to the pandemic  
  • Making necessary investments in water, sewer, and broadband infrastructure   
  • Disaster Relief (see more in ARPA Flex section) 
  • Surface transportation (see more in ARPA Flex section) 
  • Community development Block Grants (see more in ARPA Flex section) 

Responding to the public health and negative economic impacts of the pandemic includes:  

  • Utilizing funding for programs or services in response to those impacted by the negative health and economic impacts of the pandemic, including the general public 
  • Providing funding that can be utilized by households, populations, or classes that experienced pandemic impacts, including disproportionately impacted communities 
  • Responding with funds for COVID-19 mitigation and prevention, medical expenses, behavioral healthcare, and preventing and responding to violence 
  • Providing additional assistance to households, small businesses, and nonprofits 
  • Granting assistance to impacted industries, including tourism, travel, and hospitality that faced inordinate impacts due to the pandemic   

Funding to provide government services to the extent of revenue loss due to the pandemic includes:  

  • Permitting spending of a standard allowance of up to $10 million, not to exceed a city’s award amount, during the program, or 
  • Calculating a municipality’s specific revenue loss using a formula set forth by Treasury 

The commitment to make investments in water, sewer, and broadband infrastructure includes:  

  • Allowing funding for improving access to clean drinking water, supporting vital wastewater and stormwater infrastructure, and expanding affordable access to broadband  
  • Granting access to a broad range of water and sewer projects, including the EPA’s Clean Water State Revolving Fund, EPA’s Drinking Water State Revolving Fund, and certain additional projects, including a wide set of lead remediation, stormwater infrastructure, and aid for private wells and septic units 
  • Providing funds for high-speed broadband infrastructure in areas of need, including those without access to high speeds, affordable options, or where connections are unreliable   

All SLFRF funding must fit into one of the general categories listed above. The Final Rule provides further detail on the allowances for funding and information on compliance responsibilities. However, the Final Rule provides a non-exhaustive list of uses and municipalities may use their funds in any way that responds directly to a pandemic impact. Spending for each category has its own distinct reporting requirements. 

Can recovery funds be used to fund lost revenue?

Yes, recipients can use SLFRF dollars to fund lost revenue. This is one of the eligible uses of ARPA funds. The fiscal relief funds give recipients broad latitude to use funds to provide government services to the extent of the reduction in revenue or the standard allowance. Government services can include but are not limited to, maintenance of infrastructure, modernization of cybersecurity, health services, school or educational services, and public safety services. When calculating lost revenue, recipients should sum across all revenue streams covered as general revenue, for administrative ease.  

Can SLFRF funds be used for stormwater projects and expenses? 

Recipients may use State and Local Fiscal Recovery Funds to invest in necessary improvements to their water and sewer infrastructures, including projects that address the impacts of climate change. Recipients may use this funding to invest in an array of drinking water infrastructure projects, such as building or upgrading facilities and transmission, distribution, and storage systems, including the replacement of lead service lines.  

Recipients may also use this funding to invest in wastewater infrastructure projects, including constructing publicly-owned treatment infrastructure, managing and treating stormwater or subsurface drainage water, facilitating water reuse, and securing publicly-owned treatment works.    

To help jurisdictions expedite their execution of these essential investments, Treasury’s Final Rule aligns types of eligible projects with the wide range of projects that can be supported by the Environmental Protection Agency’s Clean Water State Revolving Fund and Drinking Water State Revolving Fund. Recipients retain substantial flexibility to identify those water and sewer infrastructure investments that are of the highest priority for their own communities.   

The rule that would prohibit tax decreases is a restriction only on states. The local government section of the bill contains no prohibition on lowering taxes.   

What infrastructure projects can funds be used on?

NLC has created resources on using funds for infrastructure projects: 

  • Using American Rescue Plan Act Funds for Water, Wastewater and Stormwater Infrastructure Projects   
  • Treasury Expands Broadband Eligibility for ARPA in a Win for Cities  
  • How Local Leaders Can Help Residents Access the Emergency Broadband Benefit    
  • How Communities Are Using ARPA to Improve Infrastructure

Yes, funds may be used to pay administrative costs, including payment to consultants and/or payroll to assist with the implementation of ARPA projects. This includes costs of consultants to ensure effective project management, as well as legal and regulatory compliance. Funds may be used to increase staff capacity in order to stabilize government operations. 

Can recovery funds be used to relieve other payroll costs?

The statute provides that recipients may not use Fiscal Recovery Funds for “deposit into any pension fund.” For the reasons discussed below, Treasury interprets “deposit” in this context to refer to an extraordinary payment into a pension fund for the purpose of reducing an accrued, unfunded liability. More specifically, the final rule does not permit this assistance to be used to make a payment into a pension fund if both: 

  • the payment reduces a liability incurred prior to the start of the COVID-19 public health emergency, and 
  • the payment occurs outside the recipient’s regular timing for making such payments. 

Under this interpretation, a “deposit” is distinct from a “payroll contribution,” which occurs when employers make payments into pension funds on regular intervals, with contribution amounts based on a pre-determined percentage of employees’ wages and salaries.

Can recovery funds be used for pensions?

The statute provides that recipients may not use Fiscal Recovery Funds for “deposit into any pension fund.” For the reasons discussed below, Treasury interprets “deposit” in this context to refer to an extraordinary payment into a pension fund for the purpose of reducing an accrued, unfunded liability. More specifically, the final rule does not permit this assistance to be used to make a payment into a pension fund if both:

  • the payment reduces a liability incurred prior to the start of the COVID-19 public health emergency, and
  • the payment occurs outside the recipient’s regular timing for making such payments.

What is ARPA Flex and what are the new expenditure categories it created? 

On August 10, 2023 Treasury issued a Interim Final Rule for ARPA Flex. This provision allows for spending in three new expenditure categories.  

  • Spending to provide emergency relief from natural disasters.   
  • Spending on transportation infrastructure eligible projects and matching funds.   
  • Spending on any program, project, or service that would also be eligible  
  • under HUD’s Community Development Block Grant program. 

These categories come with their own set of compliance requirements. To explore whether you are eligible to spend SLFRF on these categories, please view this comprehensive resource for more information .  

If I use SLFRF funds for a surface transportation project, is that project subject to the National Environmental Policy Act (NEPA)? 

Yes, certain projects under the new ARPA Flex eligibilities are subject to NEPA. For more details, click here.    

Who can I contact for more information if I still have questions? 

If you have additional questions about your SLFRF funds, you may contact the US Treasury at [email protected] .  

If you would like assistance from the National League of Cities, please contact our Federal Advocacy team at [email protected] .  

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Here are the new government efforts to help small businesses

american rescue plan small business loans

My oh my! Since the passage of the American Rescue Plan signed into law by President Joe Biden on March 11, there are lots of new benefits and government support for small businesses.

There have been changes to the Paycheck Protection Program (PPP) and new funds made available for restaurants and companies that provide live performances.

More money for the self-employed

The PPP enabled small businesses and the self-employed to get a forgivable loan – in other words, a loan that could easily turn into a grant. But it was pretty limited on how much you could get if you were self-employed or a gig worker.

If you are a sole proprietor who files a Schedule C on your federal income tax return – and you qualify for a first or second PPP loan and haven’t applied – you can get a larger amount.

You can calculate your maximum loan amount based on your gross income  instead of the bottom line of your Schedule C. (Line 7 of your schedule C instead of Line 31.) This means – in almost every case – you can get more money.

'Women are more strategic, men quicker to action': How women small-business owners can grow

Small-business owners: Here's why you need an accountant even if you do your own taxes

Let’s say you are a driver for a ride service, and you "make" $20,000 a year. That’s your gross income. But you deduct all kinds of expenses – your gas, your car, the little bottles of water you have for riders. By the time you deduct all that, the bottom line of your schedule C is $10,000. Before this change, you could only apply for a PPP based on $10,000 – now you’d be able to apply based on $20,000.

What if you've already applied for – and received – a PPP loan using only net income? Can you go back and get the higher amount? No. This change isn’t retroactive, though many are lobbying to have it made retroactive.   

P aycheck P rotection P rogram deadline extended

The deadline to apply for the PPP was extended. On March 30 – right down to the wire – the deadline was extended for your first or second or both to May 31 . If you didn’t apply for your first PPP loan or your second PPP loan, you still can.

PPP second loans can happen faster

If you only recently applied for your first draw PPP loan, you might have been frustrated by being told you had to wait until your first PPP loan forgiveness period was up – at least eight weeks – to apply for your second. That appears to no longer be the case.

Shuttered venue grants available

After a long wait, the Small Business Administration is set to open applications Thursday for a new program offering grants – not loans – to live venue businesses forced to shut during the COVID-19 pandemic. These included movie theaters, museums and performing arts representatives.

Grants are available for up to 45% of your 2019 gross earned revenue, and you can apply for up to $10 million. The amount of $2 billion has been reserved for small operators with up to 50 full-time employees. You can find more information here .

Restaurant help

Restaurants and bars were among the hardest hit businesses last year. There's help in the form of grants, not loans. The Restaurant Revitalization Fund (RRF) , part of the American Rescue Plan, provides a total of $28.6 billion in grants to restaurants and bars with 1-20 locations. You can get up to $5 million per location, up to a total of $10 million. The amount is determined by subtracting 2020 sales from 2019 revenues.

All kinds of food and drink establishments are eligible, including restaurants, bars, food trucks, caterers, tasting rooms, brewpubs and so on. There's good news for smaller businesses: $5 billion is set aside for establishments with $500,000 or less in gross receipts in 2019.

You will apply through the SBA, but applications are not yet open. 

And there's more

There are changes in the Employee Retention Tax Credit, changes in EIDL (Economic Injury Disaster Loan) and other small-business programs.

There's so much to cover – I couldn't do it all here – so email me at [email protected] , and I'll send you details and updates on these and future government help available to you.

Rhonda Abrams was named a "Top 30 Global Guru" for Startups. Connect with Rhonda on Facebook , Instagram and Twitter . Register for Rhonda’s free business tips newsletter at .

The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.

8 Ways the American Rescue Plan Will Help Small Businesses

8 Ways the American Rescue Plan Will Help Small Businesses

The American Rescue Plan Act has passed the House and Senate, and President Biden is expected to sign it this week. It includes a number of provisions that will help small business owners— including those who are self-employed or are independent contractors— in the form of grants, tax credits and forgivable loans. 

Most of these are extensions of programs that were originally included in the CARES Act passed March 27, 2020 and the Economic Aid Act that was signed December 27, 2020. However there is a brand new grant program for restaurants and similar businesses. 

Here’s an overview of what’s available to small businesses: 

1. Targeted EIDL Advances

The legislation allocates $15 billion for Targeted EIDL Advances to qualified small businesses. Targeted EIDL Advances are tax-free grants of up to $10,000 to small businesses located in low-income areas that can demonstrate a 30% or greater economic impact. This package includes $10 billion in additional funding for these grants as well as another $5 billion to fund $5000 supplemental grants for businesses with ten or fewer employees that have suffered an economic impact of at least 50%.

2. Paycheck Protection Program (PPP) 

An additional $7.25 billion is provided to fund PPP loans. The legislation also expands eligibility to certain not–for-profit organizations and digital media organizations that may not have been eligible previously. It currently does not, however, extend the deadline for PPP loans past March 31, 2021, the deadline set in the Economic Aid Act. 

3. Restaurant Grants

Restaurants and related businesses (including food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, and others) may qualify for grants of up to $5 million per location ($10 million total per business) under the newly created Restaurant Revitalization Fund. Grants will generally be equal to the pandemic-related revenue loss of the business. The SBA will administer these grants.

Funds may be used for expenses similar to PPP loans though the use of funds is somewhat broader than PPP.  The legislation does not state that a certain percentage of funds must be used toward payroll, and since this is a grant rather than a forgivable loan, applicants will not have to apply for forgiveness. 

4. Pandemic Unemployment

Pandemic Unemployment Assistance (PUA) may be available to self-employed workers, independent contractors, and gig workers who traditionally don’t qualify for unemployment. PUA is extended through Sept. 6, 2021 and increases the total number of weeks of benefits that may be available to those who cannot return to work from 50 to 74 weeks. Other forms of unemployment are extended as well. 

The first $10,200 in 2020 unemployment benefits will not be taxed (at the federal level) for households with incomes of less than $150,000 annually.

5. Employee Retention Credit

The Employee Retention Credit provides a credit for wages paid by businesses whose operations were fully or partially suspended due to a government order related to COVID-19 or that experienced a significant decline in receipts. This credit is extended through the end of 2021 and allows for a credit against Medicare tax. Startups may be eligible as well.

6. Shuttered Venue Operators Grants

Additional funding ($1.25 billion) is appropriated for the Shuttered Venue Operators grants program administered by the SBA. This program provides grants of up to $10 million to certain businesses, such as live venue operators, museums, theaters and more. While before these businesses had to choose between PPP and SVOG, now businesses may apply for both and subtract PPP funding from any SVOC grant received. 

7. Paid Family and Sick Leave

This program extends the credit for employers providing paid sick and family leave under the Families First Coronavirus Response Act to September 30, 2021. Self-employed individuals may qualify, and their number of covered days are increased. The amount of covered wages is increased as well. It also expands covered time off to include time to get a COVID-19 vaccine or to recover from one. 

8. Community Navigator Program

Funding is available for “Community Navigators,” including CDFIs and other nonprofits community organizations as well as resource partners such as SBDCs to help small business owners access programs and resources made available due to the pandemic. The SBA will establish a hotline that will provide referrals to these organizations. While this funding doesn’t go directly to small businesses, it should help more understand and qualify for assistance. 

Many of these programs will be crucial to help businesses survive the pandemic crisis. Be sure to take advantage of those that apply to your small business. 

This article was originally written on March 11, 2021 and updated on March 23, 2021.

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Gerri Detweiler

Education Consultant, Nav

Known as a financing and credit expert, Gerri Detweiler has been interviewed in more than 4000 news stories, and answered over 10,000 credit and lending questions online. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. She has testified before Congress on consumer credit legislation.

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9 responses to “ 8 Ways the American Rescue Plan Will Help Small Businesses ”

Thanks for the help & support with this vital information it’s great for small business owners like myself and others.

Our pleasure Wade. We hope you’re successful navigating these tough times!

I just discovered your website, I am overjoyed, elated , jumping up and down . I used your site to help get the ppp loan processed. Thanks so much for all you do to help small businesses.

I apply with smartbiz for ppp loan still waiting to process and approval. I wish I would went through my local bank. It’s been over 5weeks, keeping reaching out to a advisor very slow response. Can you tell what your experience with Smartbiz.,

If you applied through Nav, feel free to reach out to Nav’s customer support team at [email protected] .. They’ll try to help you understand what may be keeping your application from getting approved.

Is there any grants for individual who took action and helped people in need during the pandemic. I have helped hundreds of house hold and over 20 business with submitting application for unemployment, PPP, Immigration, and other assistance but as an individual not as none profit organization.

I’m not sure Allen. You may want to connect with the resources we recommend in our webinar we did with SCORE about how to find a small business grant. You can find that recording here .

Is there money or grants available in Rescue Plan to start up a new restaurant idea that focuses on a particular style / type of foods that would eventually allow investors to buy into franchises of what will become a very popular & unique food(s). I have over 22 years of restaurant / hospitality experience. My idea will quickly become a place that will tap into a new venue that will create a very high demand.

Paul -I don’t see anything in the American Rescue Plan that would be a fit. It’s not really aimed at startups. Generally this doesn’t sound like a typical grant opportunity and will more likely require financing. But you can use the resources we have listed to see what may be out there. There are thousands of grants so it’s impossible for me to know off the top of my head unfortunately.

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  • Small Business

3 Ways to Secure Funding for Your Small Business

Published on July 8, 2024

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By: Jordi Lippe-McGraw

  • Venture capital provides substantial funding and expert mentorship for businesses with high growth potential.
  • Crowdfunding allows you to raise money directly from customers and fans, offering perks or products in return.
  • Small business loans, including those backed by the SBA, offer a traditional way to secure funding while retaining full control of your business.

Starting a small business or launching a startup is an adventure filled with excitement and challenges, one of which is securing the necessary funding to turn your big ideas into reality.

1. Venture capital: The big-league booster

Venture capital (VC) isn't just for tech giants and Silicon Valley startups. It's a viable option for various businesses with high growth potential. Securing venture capital means partnering with investors who provide funding in exchange for equity, or shares, in your company. This is not just about money; it's about forming strategic partnerships that bring experience, mentorship, and networks to your business.

Making the pitch

To attract a venture capitalist, you'll need a rock-solid business plan and a pitch that not only shows your passion, but backs it up with hard data. Demonstrate clear paths to profitability, a deep understanding of your market, and a unique selling proposition that sets you apart. Remember, VCs are all about high returns, so you'll need to show how your business can scale significantly and efficiently.

Pros and cons

The upside? Access to substantial amounts of funding and invaluable guidance from industry veterans. The downside? You'll likely give up a portion of your company and some control. Decisions will now be made jointly with your investors, who will have a vested interest in how your business is run.

2. Crowdfunding: Power to the people

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Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Crafting a compelling campaign

The key to a successful crowdfunding campaign is engagement. You'll need a compelling story and clear communication about your business goals, how the funds will be used, and what contributors will get in return. Videos, blogs, and regular updates can help personalize your campaign, making it more likely to resonate with potential backers.

Crowdfunding not only raises capital but also validates your business idea through public interest. It's less risky in terms of debt and doesn't require giving up equity -- unless you opt for equity crowdfunding. However, the success of crowdfunding is not guaranteed, and it requires substantial marketing effort to reach your target amount.

3. Small business loans: The traditional route

When more traditional methods are preferred, small business loans from banks, credit unions, or community-based lenders are a go-to. These loans are specifically designed to meet the needs of small businesses, offering lower borrowing amounts with feasible repayment terms.

Additionally, the Small Business Administration (SBA) offers a variety of loan programs that assist small businesses in securing loans from $500 to $5.5 million through guaranteed backing by the SBA, which makes lenders more willing to take a risk.

Navigating the loan landscape

Prepare to face rigorous scrutiny when applying for a business loan. Banks will examine your business plan, credit history, financial projections, and preparedness to ensure the risk they're taking is minimal. The better your preparation, the higher your chances of approval.

Don't forget to explore community-based lenders who may have more favorable terms or greater interest in supporting local businesses. SBA loans can also be a fantastic route due to their lower interest rates and longer repayment terms, making them especially attractive to new entrepreneurs.

The advantage of a small business loan is clear: you get the funds you need without giving up any equity in your business. You maintain full control. On the flip side, these loans can be hard to qualify for, especially if you're a new business owner without financial history. Plus, failing to repay the loan can negatively impact your business and personal credit scores.

Securing funding for your startup or small business involves weighing options, strategic planning, and a bit of courage. With the right approach and a little persistence, you'll find the funding you need and build a solid foundation for your business's financial future. Remember, the most successful funding journey is the one best aligned with your business goals and values.

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Jordi Lippe-McGraw is a freelance personal finance writer who has appeared in publications such as Forbes, The Wall Street Journal, TODAY, and Saving for College. In addition to personal finance, Jordi has a passion for travel. She's visited all 7 continents and over 55 countries, writing for outlets such as Travel + Leisure and Conde Nast Traveler.

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FACT SHEET: Vice President Harris to Announce Support to Help Historically Underserved Entrepreneurs Tap into Bidenomics-Fueled Small Business   Boom

During visit to local D.C. small businesses, Vice President Harris will announce grants to non-profit and community-based organizations from $125 million Capital Readiness Program to support underserved small businesses’ access to capital—a key pillar of Bidenomics Today, Vice President Kamala Harris will announce the 43 winners of the $125 million American Rescue Plan-funded Capital Readiness Program (CRP) awards competition, critical funding that will help underserved entrepreneurs launch and scale their small businesses—a key pillar of Bidenomics.  The CRP is the latest American Rescue Plan investment in navigation and support services for small businesses, building upon the $300 million in funds already announced or deployed through the Small Business Administration’s (SBA) Community Navigator Program and the Treasury Department’s State Small Business Credit Initiative (SSBCI). Under the Biden-Harris Administration, the United States has seen the strongest showing for new business applications on record—12.6 million—and recent reports show that the U.S. is continuing that trend in 2023 – a sign of confidence from entrepreneurs that Bidenomics is working. Vice President Harris will announce the awards while visiting a local D.C. minority-owned retail village, Sycamore & Oak, that houses other local small businesses. The Capital Readiness Program is the largest-ever direct Federal investment in small business incubators and accelerators of its kind . Administered by the Minority Business Development Agency (MBDA), which was made permanent and expanded thanks to the President’s Bipartisan Infrastructure Law, the Capital Readiness Program is also the largest initiative in the over 50-year history of the MBDA. The 43 winning organizations – a mix of non-profit and community-based organizations, private sector entities, and institutions of higher education located across the country – are forming partnerships to assist and train underserved entrepreneurs seeking resources, tools, and support to start or scale their businesses in high-growth, high-wage industries such as healthcare, climate resilient technology, asset management, infrastructure, and more. “President Biden and I firmly believe that for America’s economy to be strong, America’s small businesses must be strong. I am proud to announce that we will invest an additional $125 million in small businesses across our country through a national network of small business incubators and accelerators,” said Vice President Kamala Harris. “President Biden and I are fighting to ensure that every entrepreneur in America — no matter who they are or where they live — can access the capital to start or grow a business, create jobs, and thrive.” Examples of awardees include:

  • Arizona Hispanic Chamber of Commerce Foundation (Phoenix, Arizona) is receiving $3 million to deliver an enhanced business accelerator and incubator program to help underserved entrepreneurs in Arizona, Nevada, and California to access capital – including by connecting small businesses with their partners at Raza Development Fund, World Bank, and other funding entities, to help secure assistance on projects focused on renewable energy, information technology, and infrastructure development.  
  • Bridgeway Capital (Pittsburgh, Pennsylvania) is receiving $2 million to serve at least 340 minority-owned and rural entrepreneurs in Pennsylvania, West Virginia, and Ohio. Bridgeway Capital will use CRP funds to scale up its cohort-based Regional Investments for Social and Equitable Prosperity (RISE UP) business education programs to help entrepreneurs build capacity to access revenue-generating growth opportunities and the capital needed to realize these opportunities.
  • The Urban League of Greater Atlanta, Georgia is receiving $3 million to deliver incubator and accelerator services through its Entrepreneurship Center to historically underserved entrepreneurs that are starting or operating enterprises in high-growth industries including healthcare, climate-resilient technology, infrastructure, and transportation and logistics.
  • The Northern Great Lakes Initiative (Marquette, Michigan) – a partnership between a community lender and a small business incubator – is receiving $3 million to create a streamlined process that will support entrepreneurs in Michigan, with an emphasis on West Michigan, from the launch of an idea, through incubation of a new business, to capital for growth.
  • The Capital Region Minority Supplier Development Council (Silver Spring, Maryland) is receiving $3 million to support its Ingenuity Consortium, a regional approach to supporting entrepreneurial opportunities for underserved small business owners through a collaborative of six Historically Black Colleges and Universities and Minority-Serving Institutions—like the University of Maryland Global Campus, Bowie State University, Morgan State University, and Virginia State University—and six capital access partners.

A full list of CRP award-winners is available here . Additionally, the Biden-Harris Administration is announcing the first approvals of awards for up to $58 million to 12 states as part of the State Small Business Credit Initiative (SSBCI) Technical Assistance (TA) Grant Program. In total, the SSBCI TA Grant Program will provide roughly $200 million to states, territories, and tribal governments to help small businesses access the historic support for underserved small businesses included in the American Rescue Plan—including an unprecedented nearly $10 billion through the Treasury Department’s SSBCI. SSBCI is expected to directly benefit roughly 100,000 small businesses over the next decade, including underserved entrepreneurs – providing capital, building ecosystems of opportunity and entrepreneurship, and creating new jobs and economic opportunity. Investing in small businesses is at the center of the President and Vice President’s plan to grow the economy from the middle out and bottom up, not the top down. Today’s announcement through the Capital Readiness Program and the SSBCI TA Grant Program are just the latest steps the Biden-Harris Administration is taking to ensure that small businesses and entrepreneurs in every community benefit from the small business boom ushered in under this Administration. Additional actions the Administration has taken under the President’s Bidenomics agenda to support small businesses and underserved entrepreneurs include: Expanding Access to Capital

  • Delivering Historic Support to Minority-Supporting Community Financial Institutions to Improve Access to Capital for Historically Underserved Small Businesses. Stemming from funding Vice President Harris secured during her time in the Senate, through the competitive Community Development Financial Institutions (CDFI) Equitable Recovery Program, Treasury has awarded over $1.7 billion in grants to more than 600 CDFIs across the country to support lending to small businesses and microenterprises and other community investments. Additionally, the Emergency Capital Investment Program (ECIP) has distributed nearly $9 billion to CDFIs and Minority Deposit Institutions designed to support their provision of loans, grants, and forbearance for small businesses and minority-owned businesses, especially in low-income and underserved communities. Based on preliminary analysis, Treasury projects that investments across the entire ECIP portfolio may increase lending in Latino communities by nearly $58 billion and in Black communities by up to $80 billion over the next decade.
  • Making Permanent Programs that Boost Lending to Underserved Communities. In order to address persistent gaps in access to capital for small businesses, earlier this year SBA finalized a rule allowing more than 100 nonprofit lenders participating in the Community Advantage pilot program to secure permanent access to SBA loan products. These lenders have a proven track record of higher rates of lending to underserved businesses, including Black, Latino, women, and veteran-owned businesses.
  • Expanding Lending Licenses to Address Capital Access Gaps . For the first time in 40 years, SBA is increasing the number of licenses for non-depository lenders that make government-guaranteed loans in SBA’s flagship loan program. This action will expand competition among lenders and provide more borrowing options for the capital that is so critical to small business growth. SBA will award new licenses based on lenders’ organizational capacity and their capability to fill gaps in the small business lending marketplace, including those to new businesses, small-dollar loans, and those to traditionally underserved communities.
  • Forming the Interagency Community Investment Committee (ICIC). In July of 2022, Vice President Harris announced the formation of the Interagency Community Investment Committee (ICIC) chaired by the Treasury Department. The ICIC facilitates collaboration and operational coordination of federal community investments to maximize the impact of federal dollars. This June, they released an Action Plan with a slate of new steps to improve the alignment of various federal programs and facilitate the flow of more resources into underserved rural and urban communities across the country.
  • Streamlining and Simplifying Small Business Lending. SBA is modernizing the lending criteria and conditions for SBA’s business loan programs and reducing red tape for SBA lenders, which will expand the number of credit-worthy business owners who can access an affordable loan. SBA is doing this by simplifying standards that determine who qualifies for an SBA loan, reducing paperwork required of lenders, and increasing lender flexibility for small-dollar loans.
  • Delivering Historic Support for Small Business Investment in Clean Energy Projects. The Environmental Protection Agency (EPA) has launched the Greenhouse Gas Reduction Fund (GGRF), a $27 billion program to mobilize financing and private capital for clean energy projects that reduce air pollution. The GGRF will launch a national network of nonprofit finance institutions to invest in clean technology deployment, with a particular focus in low-income and disadvantaged communities, while simultaneously building the capacity of community lenders that serve those communities. As a result, small business owners will be able to access financing, such as below-market interest rate loans, that they may not have been able to obtain from traditional banks. Small business owners may also be able to receive predevelopment support and technical assistance to move early-stage project ideas from the drawing board to execution.

  Making historic investments in helping small businesses navigate available resources

  • Meeting Small Business Owners Where They Are. Funded by the American Rescue Plan, SBA’s $100 million Community Navigator program provides funding to nonprofits, state and local governments, Resource Partners, and tribal entities who partner with trusted and culturally competent community service providers to close resource, capital and educational gaps for small businesses. As of July 2023, Community Navigators have helped secure nearly $250 million in approved funding for small businesses, trained over 290,000 business owners, and conducted 145,000 hours of one-on-one counseling. Last year, Federal agencies also hosted events and webinars aimed at supporting more equitable contracting opportunities under the Bipartisan Infrastructure Law and creating opportunities for key stakeholders across the contracting landscape to connect, including federal and State DOT officials, prime contractors, and industry.
  • Providing dedicated support at MBDA Business Centers to help businesses become “contract ready.”  The Bipartisan Infrastructure Law made the MBDA permanent. MBDA also awarded nearly $3 million in funding to 26 of its Business Centers to support the hiring of federal contract specialists in each Center focused on assisting underserved businesses access contracting opportunities, including those stemming from Bipartisan Infrastructure Law funding. Specialists will provide wide-ranging technical assistance to help small businesses, including by facilitating access to capital and by coordinating targeted matchmaking between underserved businesses and both government acquisition offices and prime contractors.
  • Maximizing Federal Agency Resources from the Bipartisan Infrastructure Law to Support Small Businesses . SBA, MBDA, and DOT all signed Memorandums of Understanding with each other to help small and disadvantaged businesses better access resources, foster equity in procurement initiatives, and improve access to capital and resources available from the Bipartisan Infrastructure Law. Specifically, the MOUs will help small businesses in transportation obtain bonds or increase their bonding capacity to compete in DOT-funded projects and will make available to DOT stakeholders the network of SBA Small Business Investment Company (SBIC)-related resources to facilitate access to private capital for small businesses pursing BIL contracts.

  Leveraging federal spending to support small businesses

  • Using Federal Contracting Dollars to Support Small and Disadvantaged Businesses. Recognizing that the federal government spends more than $650 billion each year on purchasing goods and services, President Biden has directed agencies to use federal purchasing power to grow federal contracting with underserved small businesses. He set a goal that 15% of federal procurement dollars go to small disadvantaged businesses by 2025. Last month, SBA announced that the federal government awarded a record $162.9 billion in federal contracts to small businesses and a record $69.9 billion of that to small disadvantaged businesses.
  • Ensuring CHIPS Act Funding Supports Small Businesses. The Administration is ensuring that small businesses benefit from the $52.7 billion CHIPS Act. For example, this year the Department of Commerce released two funding applications that, among other elements, required applicants to outline how they will support inclusion of small businesses in their projects. In the fall, an additional funding opportunity for projects with capital investments below $300 million will be released, which may be of interest to small and medium sized businesses.
  • Creating Contracting Opportunities in Clean Energy and Energy Efficiency.  In addition to spurring billions in private-sector investments that will lower energy costs for small businesses, the Inflation Reduction Act includes $200 million for state-based grants to train contractors to install home energy efficiency and electrification improvements and nearly $9 billion for state-based rebate programs energy efficiency and appliance upgrades for consumers. These investments will save families money and create jobs and opportunity in the home contracting sector, which contains hundreds of thousands of small businesses.
  • Leveling the Playing Field for Innovative Small Businesses. The Inflation Reduction Act doubled the Research and Development (R&D) Tax Credit to $500,000 for small businesses, leveling the playing field and bolstering the ability for small businesses to innovate and commercialize to solve global problems.
  • Improving Federal Certifications for Small Businesses. The Department of Transportation (DOT) has proposed a rule to modernize the Disadvantaged Business Enterprise (DBE) and Airport Concession DBE (ACDBE) programs, including, among other things, increasing the net worth threshold for DBEs so that minority- and women-owned businesses do not “graduate out” of the DBE program once they start achieving modest success, as well as simplifying eligibility certification requirements and the interstate certification process. Also, in January, SBA launched its new VetCert platform, featuring customer experience improvements for Veteran entrepreneurs and business owners seeking certification.
  • Expanding Rural Opportunities.  The Inflation Reduction Act significantly expands the Rural Energy for America Program, which supports rural small businesses and agricultural producers with clean energy and energy efficiency upgrades. The U.S. Department of Agriculture estimates that this expansion will reach more than 41,500 small businesses and farms. The Act also provides more than $9 billion to assist rural electric cooperatives, which serve more than 21 million businesses, homes, and farms, in boosting resilience, reliability, and affordability, including through clean energy projects.
  • A tax credit that covers 30% of the cost of switching over to low-cost solar power – lowering operating costs and protecting against the volatile energy prices that are currently squeezing small businesses.
  • A tax deduction of up to $5 per square foot in commercial buildings to support energy efficiency improvements that deliver lower utility bills.
  • A tax credit of up to $7,500 for purchasing clean commercial vehicles up to 14,000 lbs in weight, like vans and pick-up trucks, or up to $40,000 for purchasing clean heavy-duty vehicles, which will help small businesses save on fuel and operating costs.

The 43 entities will complete the final stages of the process necessary for their award to be distributed in the coming weeks.

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U.S. Department of the Treasury

Fact sheet: the american rescue plan will deliver immediate economic relief to families.

The current public health crisis and resulting economic crisis have devastated the health and economic wellbeing of millions of Americans. From big cities to small towns, Americans – particularly people of color, immigrants, and low-wage workers – are facing a deep economic crisis. More than 9.5 million workers have lost their jobs in the wake of the pandemic, with 4 million out of work for half a year or longer.

The American Rescue Plan will change the course of the pandemic and deliver immediate and direct relief to families and workers impacted by the COVID-19 crisis through no fault of their own. This law is one of the most progressive pieces of legislation in history, and will build a bridge to an equitable economic recovery.

Economic Impact Payments

Through this third round of Economic Impact Payments, the U.S. Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) are ensuring that Americans will receive fast and direct relief during the final phase of the COVID-19 crisis. As of yesterday, approximately 90 million Economic Impact Payments had been disbursed , thereby ensuring that more than $242 billion of much-needed relief will be received by millions of Americans and their families within days of enactment of the American Rescue Plan. Unlike the prior rounds of Economic Impact Payments, the American Rescue Plan requires a 2021 “true-up” additional payment, when applicable, based on information (such as a recently filed 2020 tax return) that the IRS receives mid-year during 2021. This additional Economic Impact Payment will ensure that Americans and their families receive greater amounts of financial assistance during 2021, rather than waiting to claim a Recovery Rebate Credit on a tax return in 2022.

Those eligible will automatically receive an Economic Impact Payment of up to $1,400 for individuals or

$2,800 for married couples, plus $1,400 for each dependent. Unlike the prior rounds of Economic Impact Payments, families will get a payment for all their dependents claimed on a tax return, not just their qualifying children under 17.

Normally, a taxpayer will qualify for the full amount if they have an adjusted gross income of up to

$75,000 for singles and married persons filing a separate return, up to $112,500 for heads of household, and up to $150,000 for married couples filing joint returns and surviving spouses. Payment amounts are reduced for filers with incomes above those levels.

The Treasury Department and the IRS continue to expand outreach to the millions of homeless, rural poor, and other disadvantaged Americans to ensure that they receive Economic Impact Payments. This includes new and continued relationships with homeless shelters, legal aid clinics, and providing Economic Impact Payment information in more than 35 languages.

Child Tax Credit

The American Rescue Plan’s expansion of the Child Tax Credit will substantially reduce child poverty by supplementing the earnings of families receiving the tax credit. Specifically, the Child Tax Credit has been revised in the following ways:

  • The credit amount has been increased. The American Rescue Plan increased the amount of the Child Tax Credit from $2,000 to $3,600 for children under age 6, and $3,000 for other children under age 18.
  • The credit’s scope has been expanded. Children 17 years old and younger, as opposed to 16 years old and younger, will now be covered by the Child Tax Credit.
  • Credit amounts will be made through advance payments during 2021. Individuals eligible for a 2021 Child Tax Credit will receive advance payments of the individual’s credit, which the IRS and the Bureau of the Fiscal Service will make through periodic payments from July 1, to December 31, 2021. This change will allow struggling families to receive financial assistance now, rather than waiting until the 2022 tax filing season to receive the Child Tax Credit benefit.
  • The credit is now fully refundable. By making the Child Tax Credit fully refundable, low- income households will be entitled to receive the full credit benefit, as significantly expanded and increased by the American Rescue Plan.
  • The credit is now extended to Puerto Rico and the U.S. Territories. For the first time, low- income families residing in Puerto Rico and the U.S. Territories will receive this vital financial assistance to better support their children’s development and health and educational attainment.

To facilitate the disbursement of Child Tax Credit advance payments during 2021, the American Rescue Plan requires the IRS to establish an online portal for taxpayers to update relevant data for mid-year payment adjustments (for example, the birth of a child during 2021). In addition to this online tool, the Treasury Department and the IRS will carry out a sweeping public awareness campaign parallel to its Economic Impact Payment campaign to reach all Americans who may be eligible for this financial assistance.

State and Local Fiscal Recovery Fund

State, local and tribal governments across America have been under an unprecedented strain in the wake of the COVID-19 crisis. While the need for services has increased —including setting up emergency medical facilities, standing up vaccination sites, and supporting struggling small businesses—state and local revenues have plummeted as a result of the economic fallout from the crisis. At the height of the fallout, public sector employment fell by around 1.4 million jobs, including layoffs of 1 million educators, compared to around 750,000 job losses during the Great Recession. As a result, communities have faced

untenable choices, between laying off educators, firefighters and other frontline workers or failing to provide services that communities rely on.

The American Rescue Plan provides $350 billion dollars in emergency funding for state, local, territorial, and Tribal governments to remedy this mismatch between rising costs and falling revenues. This includes:

  • $195 billion for states, (a minimum of $500 million for each State);
  • $130 billion for local governments (a minimum of $1.25 billion per state is provided by the statute inclusive of the amounts allocated to local governments within the state);
  • $20 billion for tribal governments; and
  • $4.5 billion for territories

The Rescue Plan will provide needed relief to state, local, and Tribal governments to enable them to continue to support the public health response and lay the foundation for a strong and equitable economic recovery. In addition to helping these governments address the revenue losses they have experienced as a result of the crisis, it will help them cover the costs incurred due responding to the public health emergency and provide support for a recovery – including through assistance to households, small businesses and nonprofits, aid to impacted industries, and support for essential workers. It will also provide resources for state, local, and Tribal governments to invest in infrastructure, including water, sewer, and broadband services.

Capital Projects Fund

The COVID-19 crisis starkly illuminated key shortcomings – and inequalities – in U.S. infrastructure. While some communities were able to adapt to the pandemic with remote or socially-distanced options for work, education, and health care, others lacked the infrastructure needed to do so, compounding the disruptions of the pandemic and exacerbating existing inequalities, with long-term consequences for American families. One particularly salient infrastructure challenge has been the digital divide and the absence of foundational conditions that enable network connectivity and access. As more and more areas of work and education move online, this divide risks leaving many American families behind.

Recognizing these challenges, the American Rescue Plan provides $10 billion for states, territories, and Tribes to cover the costs of capital projects like broadband infrastructure.

The Capital Projects Fund takes critical steps to addressing these challenges laid bare by the pandemic, especially in rural America and low- and moderate-income communities, helping to ensure that all communities have access to the high-quality, modern infrastructure needed to thrive, including internet access.

Homeowner Assistance Fund

As the economic fallout from the COVID-19 crisis took form, millions of Americans were faced with the pressures of having to decide between making mortgage payments and other essential obligations. This was especially true for the low-income communities and communities of color who bore the brunt of this crisis. Across the country, one in 10 homeowners with a mortgage are behind on payments. The law takes immediate steps to help Americans stay in their homes and keep a roof over their heads.

The American Rescue Plan provides nearly $10 billion for states, territories, and Tribes to provide relief for our country’s most vulnerable homeowners. This includes:

  • A minimum of $50 million for each state, the District of Columbia and Puerto Rico;
  • $30 million for the territories of Guam, American Samoa, the United States Virgin Islands, and the Commonwealth of the Northern Mariana Islands;
  • An explicit mandate to prioritize socially disadvantaged households;

The law prioritizes those homeowners that have experienced the greatest hardships, leveraging local and national income indicators to maximize intended impact. Applicable funding uses include delinquent mortgage payments, allowing Americans across the country to take a step in the right direction toward household stabilization. These necessary actions will minimize foreclosures in the coming months, alleviate emergency shelter capacity, and mitigate potential COVID-19 infections.

Emergency Rental Assistance

An underlying consequence of the COVID-19 pandemic is that household stability is not just a financial security issue, but also a health concern. As the country entered the throes of the crisis, many cities and states began creating or expanding rental assistance programs to support at-risk households. The December appropriations bill provided $25 billion of federal relief to be administered by the Emergency Rental Assistance (ERA) program for disbursement to existing state and local government programs. The American Rescue Plan nearly doubles the initial funding to expand the reach and impact of the existing ERA program, taking additional steps to mitigate the financial harm caused by the pandemic and keeping Americans safe as the country addresses the virus.

The American Rescue Plan provides $21.6 billion for states, territories, and local governments to assist households that are unable to pay rent and utilities due to the COVID-19 crisis. This includes:

  • A minimum of $152 million for each state and the District of Columbia;
  • $305 million for the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands, and American Samoa;
  • $2.5 billion for payments to “high-need grantees,” locations with an urgent need for assistance when factoring conditions such as change in employment, concentration of very low-income renters, and rental market costs

As a result of the American Rescue Plan, states and localities across the country will be better armed to provide relief and assistance to those vulnerable households. The new funding will leverage existing program structures, allowing for money to be disbursed quickly and efficiently to on the ground emergency programs, and ensuring this country’s hardest-hit families to receive their equitable share of relief.

State Small Business Credit Initiative

It is no secret that the pandemic has disproportionately impacted small businesses across the country, particularly those owned and operated by women and minorities. Every community has had to face the unfortunate reality of local storefronts that are closing or have closed, resulting in friends and family members being furloughed or laid off. Nationally, small business revenue is down 32 percent, and at least 400,000 firms have permanently closed. After a year of the public health crisis, many businesses are hanging on by a thread. Within this law are plans to provide critical assistance to small businesses across the country, facilitating the urgent deployment of capital and support to help these organizations not just persevere, but recover on solid footing.

The American Rescue Plan provides $10 billion to state and Tribal governments to fund small business credit expansion initiatives. This program will build off the inaugural model developed in 2011 during the Obama-Biden Administration, in which nearly $1.5 billion in capital supported over $8 billion in new lending and investing activity across 142 different programs in its first 5 years. The new iteration will expand in scale and include:

  • $1.5 billion for states to support businesses owned by socially and economically disadvantaged people;
  • $1 billion for an incentive program to boost funding tranches for states that show robust support for such businesses; and
  • $500 million to support very small businesses with fewer than 10 employees;

This law will inject capital into state small business support and capital access programs, provide collateral support, facilitate loan participation, and enable credit guarantee programs. It will boost state venture capital programs and provide funding for technical support and assistance. This Administration recognizes that small businesses—enterprises that are responsible for two-thirds of net new jobs in this country—are the backbone of the American economy, and a bellwether of economic progress.

Employee Retention Credit and Paid Leave Credit Programs

In addition to the SSBCI, the American Rescue Plan extends a number of critical tax benefits to small businesses that are intended to help businesses through to the recovery while keeping up their payrolls and still taking steps to protect health outcomes for employees.

The American Rescue Plan extends the availability of the Employee Retention Credit for small businesses through December 2021 and allows businesses to offset their current payroll tax liabilities by up to

$7,000 per employee per quarter . This credit of up to $28,000 per employee for 2021 is available to small businesses who have seen their revenues decline, or even been temporarily shuttered, due to COVID.

The American Rescue Plan also extends through September 2021 the availability of Paid Leave Credits for small and midsize businesses that offer paid leave to employees who may take leave due to illness, quarantine, or caregiving. Businesses can take dollar-for-dollar tax credits equal to wages of up to

$5,000 if they offer paid leave to employees who are sick or quarantining. Paid Leave Credits are a powerful incentive to encourage the offer of paid sick and family leave, which will help keep the virus under control by ensuring sick employees can stay home.

Unemployment Compensation

Across the nation, millions of Americans lost their jobs in the wake of the COVID-19 pandemic and, as a result, claimed unemployment benefits. The American Rescue Plan waives federal income taxes on the first $10,200 of unemployment benefits received in 2020 by middle- and lower-income taxpayers. The tax relief extends to both workers who received benefits through federal unemployment programs as well as those who received traditional benefits through their state unemployment insurance fund. This law will provide tax relief for Americans who lost their jobs and utilized unemployment benefits last year – allowing millions of workers to focus their benefits on covering essentials during the COVID-19 pandemic.

FACT SHEET: The American Rescue Plan Will Deliver Immediate Economic Relief to Families (3/18/21)

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Small-Business Lenders Share an Inside Look at the Loan Process

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Whether you have done it before or you’re new to the process, applying for a small-business loan can be frustrating and difficult to navigate. In the Federal Reserve’s 2023 Small-Business Credit Survey, over half of business owners who reported feeling discouraged from applying for funding cited lender requirements as the reason. With large banks in particular, a difficult application process was one of the top challenges borrowers faced, second only to high interest rates.

To help shed light on the process, we spoke with two small-business lending professionals — who together have nearly four decades of experience working with small businesses — about the funding process, what lenders are looking for and how business owners can approach lenders.

Responses have been edited for length and clarity. Learn more about each lender after the questions.

What components of a business’s financials do lenders look at?

Alexis Dishman (small business chief lending officer at Community Reinvestment Fund): Each small-business lender will vary, but many will look at the last several years of revenue to get a sense of how the business has performed. For example, is revenue going up? If not, is there a reason for the decline? A lender may use this information to evaluate growth projections for the business to ensure that they’re achievable and ultimately support the repayment of the potential loan.

Underwriters also often look at net income and losses and try to understand the drivers behind each measurement.

How does underwriting for business loans differ from personal loans?

Samuel Fuentes (loan officer at InterBank): Business loans use debt service coverage ratio (DSCR) that is calculated as an annual number to see if a deal will cash flow (if a business has enough cash to support the loan). Consumer loans use debt-to-income ratio (DTI) that is calculated as a monthly number to see if a deal will cash flow. This is because some businesses might be cyclical and a monthly calculation would be misleading for the business’s overall cash flow.

Why do lenders look at personal tax returns or income for a business loan?

Alexis Dishman : Underwriters will often look at personal tax returns to make sure income from the business isn’t funding a borrower’s lifestyle beyond the salary they take. Tax returns also help the lender identify any additional sources of income that could support the business, which could help improve chances of approval.

Should businesses expect to sign a personal guarantee?

Alexis Dishman : Personal guarantees are pretty typical with small-business loans because the owner is an integral part of the business’s success. As a lender it’s our way of asking them to stick in there with us. I kind of look at it sometimes as moral support, but it's really them putting their name behind the loan because we're partners in the transaction.

Samuel Fuentes : Yes, InterBank does require personal guarantees. For two reasons mainly. One, so there is a second source of repayment. Two, so that the owner has skin in the game. A business owner who isn't willing to sign on the dotted line with their business raises character issue questions .

What can small-business owners do to prepare themselves to apply for funding?

Samuel Fuentes : They should start talking to their lender and accountant about their plans to borrow. The team a business owner has around them should be connected and be able to help each other understand what the other needs to help the client succeed.

Don't be afraid to ask if you don't understand what the lender asks of you, or if you don't know how to fill something out.

What are some common mistakes that applicants make?

Alexis Dishman : One common mistake that applicants make when applying for a loan is not being upfront about past challenges, such as personal credit blemishes or business downturns. These aren’t always enjoyable topics to discuss, but being transparent with the lender is always a good idea.

It may seem counterintuitive, but by discussing past challenges with a lender, an entrepreneur may be able to highlight how they overcame these obstacles and better positioned their business for success in the long-term as a result.

Samuel Fuentes : Many applicants don't fill out their personal financial statement fully or correctly. This creates questions when it comes to figuring out the strength of the guarantor.

Some applicants try to turn in just portions of their tax returns or even try to send in transcripts only. The banks need the full complete tax returns to work loans.

What are some common reasons loan applications get denied?

Alexis Dishman : In some cases an applicant may not have sufficient operating cash flow to make loan payments or lack the collateral required. In other cases, a loan may be denied simply because an applicant didn’t complete the loan application. Before applying for a loan it’s important to understand the lender’s parameters.

Samuel Fuentes : Number one would be credit issues (current collections, past dues, etc.) with no explanation. Two would be cash flow (applicants don't have the income to support the loan request). Three, the collateral isn't sufficient to cover the loan request.

What do you recommend as next steps for applicants who are denied?

Alexis Dishman : If a loan is declined, I would recommend scheduling a meeting with the lender to discuss the reasons why. Once the applicant is able to understand the reasons for the declined loan, seek a technical assistance provider or business advisory service to provide assistance with making changes to the application or business framework that will make future applications successful.

Samuel Fuentes : It depends on the denial reason. If it's a credit issue, I tell them to work on paying things off or catching up before coming back for a loan. If it's cash flow, I tell them to meet with their accountant to discuss the business owner’s goals of borrowing, and find ways to increase write-offs that are add-backs, or discuss ways to find money for a down payment.

There are no quick fixes though — most of these solutions will push business owners at least to the following year for a loan.

What's your advice for a business that doesn't meet the criteria but still needs funding?

Alexis Dishman : I would suggest researching other lenders that the applicant's business profile may better align with such as community development financial institutions (CDFIs) or crowdfunding.

Samuel Fuentes : There are several alternative lending institutions and alternative ways to raise capital. CDFIs, hard money loans , private money loans, or sell equity in the company (ownership stake). These are just a few examples.

More about the lenders

Alexis Dishman is the small business chief lending officer at Community Reinvestment Fund (CRF), a nonprofit CDFI that aims to equalize economic opportunities by working with businesses that are typically denied capital access. She oversees all small-business lending at CRF and has previously worked at Bank of America and Comerica Bank.

Samuel Fuentes is a loan officer with InterBank, a community bank with offices in Oklahoma and Texas. He has worked previously at Bank of America, Chase and TruFund Financial Services Inc., a CDFI.

On a similar note...

TIME Stamped: Personal Finance Made Easy

Personal Finance

Best unsecured business loans in july 2024.

Best Unsecured Business Loans

Our evaluations and opinions are not influenced by our advertising relationships, but we may earn a commission from our partners’ links. This content is created independently from TIME’s editorial staff. Learn more about it.

Unsecured business loans allow businesses to borrow funds without the requirement of collateral, such as real estate or equipment. These loans are typically approved based on the credit history of the business and owner. Due to the increased risk the lender assumes, they generally come with higher interest rates than secured loans.

Choosing the right business loan can be challenging, as you have to understand various loan terms and conditions, as well as the associated costs and fees. Here’s a closer look at the best unsecured business loans to help you navigate your borrowing decision.

Best unsecured business loans compared

* Interest rates as of Dec. 19, 2023

Our recommendations

Axos supports Small Business Associations (SBA) loans for small businesses, which generally require collateral to secure the loan. For unsecured loans, you may want to take out a personal loan to fund your new business venture. While they incur a personal guarantee, you can borrow up to $50,000 with terms of three to six years. You’ll need a good credit score of 700 or above for approval.

If you complete the application and answer all follow-up questions quickly, it’s a fast lender. You’ll get funds as soon as the next business day after signing your loan offer.

Lending Club

Lending Club offers unsecured business loans through a partnership with the Accion Opportunity Fund. To qualify for a loan of up to $500,000, you’ll need at least $50,000 in annual sales and at least 12 months of business history and be based in the U.S.

There’s no prepayment penalty, so you can get out of debt faster if you can afford more than the monthly fixed payment. Lending Club also offers SBA loans for $400,000 to $5 million, though collateral may be required.


LendingPoint allows healthcare and construction businesses to offer loans to customers. With LendingPoint integrated, medical offices and contractors can get paid quickly, while customers can pay over time.

The financing company also offers marketplace operators an option to offer financing to sellers, so they can purchase inventory to grow their business on your platform. And while it doesn’t offer direct business loans, you can use LendingPoint for a personal loan.

OneMain Financial

If you’re a business owner and want a personal loan for non-business needs, OneMain Financial could be a good choice. Loans are not to be used for business purposes. However, you can take out a loan for personal use when your money is tied up in the business.

OneMain features loans for up to $20,000 with repayment terms of two to five years. Beware that the annual percentage rate (APR) can be quite high, well above 30%. You can apply online or at one of 1,400 branch locations. If you don’t like the unsecured loan offer, secured loans are also available.

Upstart no longer offers unsecured business loans to new applicants, but it doesn’t prevent you from using a personal loan for business purposes. Loans are available for $1,000 to $50,000 with terms of three or five years. While borrowers with strong credit profiles can receive extremely competitive rates, borrowers with less-than-stellar credit may pay well over a 30% APR.

According to Upstart, the initial loan application takes about five minutes, and most borrowers receive funds one business day after signing loan documents. There’s no prepayment penalty if you pay off your loan early, which can lead to significant interest savings compared with regularly making the scheduled monthly payments.

OnDeck offers fixed-term loans and lines of credit for small businesses. It’s focused exclusively on business lending, and the application process takes about 10 minutes. Credit lines are available up to $100,000, and term loans are available up to $250,000.

You’ll need at least one year in business and $100,000 in annual revenue to qualify. However, beware of potentially high interest rates. OnDeck doesn’t share its full range of rates, but the average rate is 55.8% APR for term loans and 56% for lines of credit, as of March 2024. You may get a very expensive loan offer depending on your approved terms.

Bluevine is a business bank offering checking accounts and lines of credit. You can borrow up to $250,000 and get approved in as little as five minutes. You can draw on your loan using the Bluevine website whenever you need funds. There’s no fee to open, maintain, or prepay a Bluevine line of credit.

To qualify for a Bluevine loan, you must have at least two years of business history, a 625 credit score, and $40,000 in monthly revenue. You must connect Bluevine with your business bank account or submit at least three months of bank statements. If your business qualifies, rates can be very competitive.


To evaluate the loans included in this list, we reviewed lenders for loan offerings, interest rates, fees, and repayment terms. This approach ensured a comprehensive understanding of each lender's flexibility, costs, and loan structures, enabling us to identify the most favorable options for small business owners.

How to select the best unsecured business loan

To find the right unsecured business loan, start by assessing your business' financial needs and credit health. Consider the loan amount you require and how it aligns with your business's cash flow and repayment abilities. Examine your personal credit score , as it can impact loan approval and terms.

Next, compare the interest rates, fees, and terms various lenders offer. Look for competitive interest rates and be vigilant about hidden fees that can increase the overall cost. Balancing these factors will help you choose an unsecured business loan that best fits your business's financial situation.

Alternatives to unsecured business loans

Several unsecured business loan alternatives can provide different financing solutions suitable for various business needs. Here are five options.

  • Business line of credit. Offers flexible access to funds up to a certain limit, useful for managing cash flow or unexpected expenses.
  • Secured business loan. Requires collateral but often comes with lower interest rates and longer repayment terms compared with an unsecured loan.
  • Business credit card. Ideal for short-term financing needs, offers the convenience of quick access to funds with the potential to earn rewards.
  • Invoice financing. Allows businesses to borrow against unpaid invoices, providing immediate cash flow to support operations.
  • Equity financing. Involves selling a portion of business equity to investors and is suitable for businesses looking for significant capital without the burden of debt.

More about unsecured business loans

What is an unsecured business loan.

An unsecured business loan is a type of loan given to businesses without requiring collateral, such as property or equipment. Unsecured loans rely on the borrower's creditworthiness and business performance. It's often chosen by businesses that prefer not to risk their assets and don’t mind paying a higher interest rate.

How do unsecured business loans work?

Unsecured business loans provide funds based on the borrower's credit score and the business’s financial stability. The lender typically evaluates the business' revenue, financial statements, and credit history to determine loan eligibility and terms. Repayment includes the principal amount plus interest, typically through fixed monthly payments.

Average unsecured business loan rates

The loans we reviewed had APRs starting at around 6% to 7%. However, several lenders featured rates around 35%, and a few loans were over 50%. Shopping around for the best rates and terms can lead to significant savings.

Types of unsecured business loans

Unsecured business loans come in several forms, including fixed-term loans, where borrowers receive a lump sum to be repaid over a set period. Lines of credit offer flexible access to funds up to a certain limit. Invoice loans allow you to borrow using expected customer payments as collateral.

Pros and cons of unsecured business loans

  • No collateral required
  • Online lenders can offer fast funding
  • Flexible repayment terms
  • Higher interest rates than secured loans
  • Stricter credit requirements than other loan types
  • Potentially high fees, depending on the lender

How to get an unsecured business loan

To get an unsecured business loan, start by assessing your personal and business credit and preparing your financial statements. Research and compare different lenders, focusing on their loan terms and eligibility criteria. Submit a comprehensive application, including detailed business plans and financial records, to improve your chances of approval. Shopping around can help you find the lowest rate for your particular situation.

Tips to manage an unsecured business loan

To effectively manage an unsecured business loan, prioritize timely payments to avoid late fees and credit score impacts. Regularly review your business's financial situation and adjust your budget to ensure you can afford the loan payments. If you find better rates or terms to reduce costs, consider refinancing down the road.

TIME Stamp: An unsecured business loan can be a responsible way to support your business

Unsecured business loans can be a reasonable way for businesses to fund various business needs, from equipment to expansion to inventory to covering the bills during a cash crunch. If you’re confident in your ability to repay the loan and fully understand the costs, an unsecured business loan can be a good business decision.

Frequently asked questions (FAQs)

How do you qualify for an unsecured business loan.

You typically need a strong credit history, a solid business track record, and a stable income. Lenders will assess your business's financial health, credit score, and cash flow to determine your eligibility.

An unsecured business loan is a loan given to businesses without requiring any collateral, such as property or equipment. Approval and conditions are based primarily on the borrower's creditworthiness and the financial health of the business.

What is the average interest rate for an unsecured business loan?

The interest rates for the unsecured business loans covered in this article vary widely, ranging from 6.4% to over 50%%. The online small-business platform NAV conducted research that found rates ranging from 4% to as much as 100%.

Such variances make an average a bit less than useful and, indeed, according to NAV, “There is no central source of data that collects and reports the average interest rates that business owners are paying on all types of small business loans and financing.”

In general, interest rates depend on factors such as the lender's policies, the borrower's credit score, and the financial stability of the business.

How much money can I get on an unsecured loan?

The amount you can get from an unsecured loan depends on your business's financial situation and creditworthiness. Unsecured business loans can range from a few thousand dollars to several hundred thousand dollars.

The information presented here is created independently from the TIME editorial staff. To learn more, see our About page.

How We Review Debt Consolidation Loans

Compare the best debt consolidation loans, debt consolidation loans in 2024: finding the best personal loan for debt consolidation.

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate personal loans to write unbiased product reviews.

Debt consolidation is when you take out one loan and use it to pay off other debts that you have, leaving you with one monthly payment and interest rate. This can help you manage your debt more efficiently, and in some cases, reduce the total amount of interest you'll pay if the new loan's APR is lower.

Generally, you'll need a personal loan for debt consolidation, which means replacing multiple loans with a single loan instead.

Debt Consolidation Loans of 2024

  • Best for good to excellent credit: LightStream Personal Loan
  • Best for fast funding: Upgrade Personal Loan
  • Best for high balances: SoFi Personal Loan
  • Best for bad credit: Avant Personal Loan
  • Best for fair credit: Payoff Loan™
  • Best for loan options: Wells Fargo Personal Loan

Compare Personal Loan Rates

Which debt consolidation loan lender is the most trustworthy?

We've compared each institution's Better Business Bureau score to give you another piece of information to choose your lender. Whether you're considering a $5,000 loan or a $10,000 loan , a trustworthy lender can improve your loan experience. The BBB measures businesses based on factors like their responsiveness to customer complaints, honesty in advertising, and transparency about business practices. Here is each company's score:

Wells Fargo Personal LoanF
LightStream Personal LoanA+
Sofi Personal LoanA+
Payoff Personal Loan™A+
Avant Personal LoanA
Upgrade Personal LoanA+

With the exception of Wells Fargo, our top picks are rated A+ by the BBB. Keep in mind that a high BBB score does not guarantee a positive relationship with a lender, and that you should continue to do research and talk to others who have used the company to get the most complete information possible. 

Wells Fargo is currently rated an F by the BBB due to government actions against the business and a failure to respond to 14 complaints. Most recently, the Consumer Financial Protection Bureau in December 2022 ordered Wells Fargo to return $2 billion to customers and pay a $1.7 billion penalty for legal violations involving auto loans, mortgages, and deposit accounts. The bank illegally charged fees and interest penalties on auto and mortgage loans. Additionally, it misapplied payments to those loans for many customers. 

If you're uncomfortable with this history, you may want to use one of the other personal loan lenders on our list.

How to Choose a Debt Consolidation Loan

The main benefits of consolidating debt are streamlining your debts into a single account with one monthly payment and reducing the total amount of interest you'll owe.

When shopping for a debt consolidation loan, look for an APR that is lower than the average you're paying on the debt you want to consolidate. If you can't qualify for a lower rate, a debt consolidation loan might not be a good choice for you.

Also consider the loan amounts, associated fees and penalties, as well as a lender's credit score and other eligibility requirements when choosing a debt consolidation loan.

Personal Finance Insider's mission is to help smart people make the best decisions with their money. We understand that "best" is often subjective, so in addition to highlighting the clear benefits of a financial product, we outline the limitations, too. We spent hours comparing and contrasting the features and fine print of various products so you don't have to.

How to Qualify for a Personal Loan for Debt Consolidation

Qualifying for a debt consolidation loan is the same as it is for most other kinds of personal loans. 

Generally, lenders require a credit score in the mid-600s, although some will accept borrowers with lower scores. Remember, though, that with a lower credit score you'll pay a higher interest rate.

In addition to checking your credit score, debt consolidation companies will also need proof of your employment and ability to repay in order to determine eligibility. They will also check your debt-to-income ratio to make sure you haven't borrowed more than you can feasibly pay back.

Most lenders will allow you to prequalify for a loan, which allows you to compare interest rates and terms without affecting your credit score. 

How to Apply for a Debt Consolidation Loan

After you've gotten prequalified with several lenders, compare their offers and choose the one that best suits your needs. To complete the  full loan application process you'll need a significant amount of documentation, including things like: 

  • Pay stubs/proof of income
  • The last couple years of tax returns
  • Documentation of 401(k)s and other financial accounts
  • Rent/mortgage history
  • Proof of collateral, if you're pursuing a secured loan

Get these basics in order before applying for the loan, in order to speed up the process. You can apply for most loans by filling out a form online.

If you are approved, the lender will send you the final loan documents to sign off on. These include all the details such as the interest rate, the amount of time you have to pay it off, the amount you're borrowing, the monthly payments, and any fees. Make sure you fully understand all of it before signing for the loan.

Alternatives to Debt Consolidation Loans

If you're looking for a debt consolidation loan because your credit cards carry high APRs, it's worth your time to consider some alternatives.

One often underutilized strategy is to simply ask your credit card company for a lower rate. There's no guarantee that they'll agree. However, they may well do so, especially if you've been diligent about payments. You can also ask about upgrading your credit card, which may come with a lower APR and other perks. 

You may also be able to get a lower rate by transferring your balances to a different credit card. Cards designed for this purpose often come with an introductory 0% APR period that can last anywhere from 12-18 months. Tackling your debt head-on using strategies such as the avalanche and snowball methods is another alternative.

We consulted loan and financial planning experts to inform these picks and give their insights into finding the best loans for your needs. You can read their advice at the bottom of this post.

  • Andre Jean-Pierre , senior wealth advisor and managing director at Aces Advisors
  • Forrest McCall , founder of Don't Work Another Day
  • Fred Winchar , CEO and co-founder at MaxCash
  • Ryan Wangman , former loans reporter at Personal Finance Insider

Generally, What Makes a Personal Loan Good or Not Good?

Andre Jean-Pierre:

"One of the most important factors to consider in a personal loan is the interest rate. Because personal loans are typically unsecured, they usually carry higher interest rates than secured lending options. However, if a person has a strong credit profile, a personal loan can carry a lower APR than other unsecured sources of financing such as credit cards."

Forrest McCall:

"One of the best ways to use a personal loan is to pay off other high-interest debts like credit card debts. Because you can often lock in lower rates than a revolving line of credit like a credit card it can be a smart decision for your finances and save you thousands in interest payments over time."

How Should a Borrower Decide if They Should Take Out a Personal Loan?

Fred Winchar:

"Whether or not to take a personal loan depends on if one can afford it. The purpose of the loan and the value that comes with it is of importance to note. In most cases, it is beneficial to use the loan to invest in a project that can bring extra income or savings."

Ryan Wangman: 

"Borrowers should carefully consider alternatives to personal loans before taking one out. Personal loans can come with high interest rates, especially for borrowers with poor credit. If you can't fit those monthly payments into your budget, steer clear of the loan."

Why You Should Trust Us: How We Chose the Best Debt Consolidation Loans

To find the best personal loans for debt consolidation, we combed through the fine print and terms of about a dozen personal loans to find the ones that were best suited to help with consolidating debt. We considered four main features: 

  • APR range: For the most help with debt payoff, a personal loan for debt consolidation needs to have lower interest rates than the credit card or other debts you're consolidating. We looked for the loans that had the lowest rates possible for each credit range and purpose. The average credit card interest rate was 16.65% in the second quarter of 2022, so we focused on loans that had the potential to beat this. 
  • Appropriate loan amounts:  We looked for personal loans that had the most variety in loan amounts. According to loan comparison site Credible, the median amount of debt consolidated in May 2020 was $18,000. To benefit the most borrowers, we included personal loans with maximum limits over $10,000. 
  • Minimum credit score requirements: Where available, we considered the minimum credit score requirements for each company. We considered loans for excellent, fair, and poor credit, grouping loans into categories based on these credit score requirements.
  • Fees:  We considered fees like origination fees or administrative fees in our decisions, looking for loans with the fewest or lowest fees. None of the best loans listed have prepayment penalties. 
  • Nationwide availability: We only considered loans with availability in most or all 50 US states. 

See our ratings methodology for personal loans »

The best debt consolidation loans help you work toward paying off debt by bundling multiple debts into one account, and they're generally only a good idea if you can get a lower interest rate than your various debts carry. We looked at lenders that are best for fast cash, a variety of credit scores, and for high debt balances to come up with our list of top picks.

LightStream Personal Loan

Lightstream is a highly regarded lender for many loan types, and has been a top pick across Insider's coverage of the best personal loans and best auto loans . However, this lender only works with borrowers with good or better credit, with a minimum credit score requirement of 660. 

LightStream offers consistently low personal loan interest rates , though its minimum interest rate for debt consolidation is higher than its typical personal loan's interest rates. However, this lender does not have any prepayment or origination fees. Same-day funding is available with LightStream. 

Watch out for:  Maximum loan amount limits. Only borrowers with excellent credit can borrow the $100,000 maximum, and anyone without excellent credit may not qualify for the full amount.

LightStream defines excellent credit as an account with five or more years of credit history, stable and sufficient income for debts, and a variety of credit history with little or no credit card debt. If you're looking for a debt consolidation loan, chances are you have a significant amount of debt, and may not fit these qualifications.

Additionally, LightStream doesn't have a way to pre-qualify online. You'll have to apply for the loan to find out exactly what your rates and terms could look like, which could make comparison shopping difficult. 

LightStream Personal Loan Review

Upgrade Personal Loan

Upgrade is great for fast cash because it allows you to get your money within one business day after your loan is reviewed and approved. 

You're also able to get a loan for as little as $1,000, which is less than many of the other competitors on our list. It could be a good choice if you only have a small amount of debt you need to consolidate.

What to watch out for:  Origination and late fees. Your origination fee will be late fee of up to $10 if you don't make a full payment within 15 days of your due date.

Upgrade Personal Loan Review

SoFi Personal Loan

A SoFi personal loan is the best option for anyone with a high balance, as this lender makes debt consolidation loans of up to $100,000. Debt consolidation loans from this lender are comparable in rates to those offered by LightStream, but SoFi offers higher loan limits to all applicants, whereas LightStream only allows some borrowers to borrow up to $100,000. Similarly, SoFi doesn't have any application or prepayment fees as well as doesn't require an origination fee. 

Watch out for:  Stringent requirements. SoFi personal loans have a minimum credit score of 680. According to NerdWallet, the average income among borrowers is over $100,000.

SoFi Personal Loan Review

Avant Personal Loan

Getting a loan with bad credit , whether to consolidate debt or for something else, can be expensive, or hard to qualify for. An Avant personal loan is the best bet for borrowers with poor credit, requiring a minimum credit score of 600.

Compared with other personal loan lenders offering debt consolidation loans for bad credit borrowers, Avant's terms are the most generous. While there is an administration fee, it could be lower than competitors' fees with a cap up to 4.75% in administration fees with an undisclosed late fee and returned payment fee. Avant also has the advantage of offering fast personal loan funding .

Watch out for:  High rates with a low credit score. While Avant is accessible to borrowers with poor credit scores, approval might go hand in hand with high interest rates on your loan.

Avant Personal Loan Review

Payoff Loan™

In the fair credit range, it can be tough to qualify for a personal loan with reasonable interest rates — many lenders have a minimum of 660 or 680. However, a Happy Money Payoff Loan™ could be a good option for people with credit scores as low as 640. Interest rates are comparable to those offered by LightStream and SoFi, but this lender has less stringent requirements. 

Compared with competitors Prosper and Best Egg , which both have the same 640 minimum credit score requirement, Payoff's interest rates are capped lower, and could have lower origination fees. 

Watch out for: Origination fees. Payoff offers loans with a 0% to 5% origination fee. Competing lenders Prosper and Best Egg charge 1.00% to 9.99% and 0.99% and 9.99% origination fees, respectively. The better deal will depend on your credit score, income, and repayment term.

Happy Money Personal Loan Review

Wells Fargo Personal Loan

Flexibility makes Wells Fargo personal loan a top contender for best personal loans for debt consolidation. Wells Fargo separates debt consolidation loans from personal loans, but the interest rates are the same.

Benefits include competitive interest rates and an autopay discount of 0.25% if payments are made from a Wells Fargo account. For unsecured personal loans, the most common type for debt consolidation, there are no origination or prepayment fees.

Wells Fargo can send your loan funds to your Wells Fargo bank account, or to a credit account outside of Wells Fargo to pay down your debts directly. 

Watch out for:  Wells Fargo's history with data security and compliance. The bank has faced several federal penalties for improper customer referrals to lending and insurance products, and security issues tied to creating fake accounts several years ago. 

Wells Fargo Personal Loan Review

Debt Consolidation Loan FAQs

Personal loans are the most common type of loan used for debt consolidation. Other options for consolidating debt include a  home equity loan , a home equity line of credit (HELOC), and a balance transfer credit card .

When you take out a debt consolidation loan, the funds are used to pay down the debts you have with multiple lenders, leaving you with a single monthly payment to make. It does not erase your debt, and you might end up paying more over the long term even if  you end up paying less each month on the consolidation loan.

Your credit will often be boosted in the long run if you consolidate your debt because it can reduce the amount you owe and lower monthly minimum payments, which all affect your credit score. With a debt consolidation loan, you can benefit from a lower interest rate.

Getting a debt consolidation loan is as easy or difficult as it would be getting any kind of personal loan. It depends on your personal financial situation. Lenders usually require a credit score in the mid-600s.

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    WASHINGTON - As part of the Biden-Harris Administration's Investing in America Agenda, the U.S. Department of the Treasury today announced six new awards to states and two new awards to territories under the State Small Business Credit Initiative (SSBCI) Technical Assistance Grant Program, totaling more than $27 million. These awards will be used to provide legal, accounting, and financial ...

  4. American Rescue Plan

    Get an extra $300 per week and. unemployment benefits extended until 9/6/21. Find your state's Unemployment Benefits and sign up: Search Services By Location or call: (866) 487-2365.

  5. Assistance for Small Businesses

    Small Business Tax Credit Programs. The American Rescue Plan extends a number of critical tax benefits, particularly the Employee Retention Credit and Paid Leave Credit, to small businesses. Emergency Capital Investment Program. The Emergency Capital Investment Program support the efforts of low- and moderate-income community financial institutions

  6. PDF The American Rescue Plan Will Provide Relief for Small Businesses

    The American Rescue Plan Will Provide Relief for Small Businesses Small businesses account for 44 percent of U.S. GDP, create two-thirds of net new jobs, and employ nearly half of America's workers.

  7. FACT SHEET: The U.S. Small Business Administration is Delivering

    Last year, shoppers came together in full force to support their local communities, and Small Business Saturday hit a record high with an estimated $19.8 billion in reported spending. ... (SBA)'s implementation of President Biden's American Rescue Plan (ARP) and other traditional loan programs have helped the smallest of small businesses ...

  8. New FAQs available to aid families and small business under the

    IR-2021-128, June 11, 2021 — The Internal Revenue Service today posted two new, separate sets of frequently-asked-questions (FAQs) to assist families and small and mid-sized employers in claiming credits under the American Rescue Plan (ARP).

  9. President Biden Announces American Rescue Plan

    With a $35 billion investment in successful state, local, tribal, and non-profit small business financing programs, Congress can generate as much as $175 billion in low-interest loans and venture ...

  10. What's new for small businesses in the American Rescue Plan

    In this package, $28.6 billion is set aside for a new program called the Restaurant Revitalization Fund, $15 billion is allocated to beef up funding for Targeted Economic Injury Disaster Loan ...

  11. How to Navigate the Latest Small Business Relief Plan and Get a PPP Loan

    A new round of COVID-19 relief legislation provides $284 billion in additional PPP loan funds for small businesses. The legislation mandates that $35 billion of that money will go to first-time ...

  12. American Rescue Plan: direct funding opportunities to assist small

    The EIDL provides loan assistance of up to $500,000 to small businesses impacted by the coronavirus pandemic. These loans are not forgivable and have repayment terms of 30-years at 3.75% interest for businesses and 2.75% for not-for-profit organizations. The loans have no pre-payment penalty or fees. Loan proceeds are available to be used with ...

  13. PDF State Small Business Credit Initiative (SSBCI)

    Overview. The American Rescue Plan Act of 2021 (ARPA) reauthorizes the State Small Business Credit Initiative (SSBCI) Program. Provides a combined $10 billion to states, the District of Columbia, territories, and Tribal governments (Eligible Jurisdictions) to help address the economic fallout of the pandemic and lay the foundation for a strong ...

  14. One Year Later: Biden-Harris Administration, SBA Have Prioritized an

    Through the American Rescue Plan (ARP) and other critical federally funded relief programs, ... 2021 through more than 61,000 loans. Additionally, Small Business Investment Companies (SBICs) provided over $7 billion in long-term funding to more than 1,000 small businesses helping to start, grow, and sustain small businesses and startups across ...

  15. PDF State Small Business Credit Initiative

    Reauthorized and expanded by President Biden's American Rescue Plan, the State Small Business Credit Initiative (SSBCI) is a nearly $10 billion program to support small businesses and entrepreneurship in communities across the United States by providing capital and technical assistance to promote small business stability, growth, and success.

  16. ARPA Local Relief Frequently Asked Questions

    American Rescue Plan Act. ARPA Local Relief Frequently Asked Questions. The American Rescue Plan Act was signed into law by President Biden on March 11, 2021, it guaranteed direct funding to all cities, towns and villages in the United States. The U.S. Department of the Treasury responsible for overseeing the program.

  17. FACT SHEET: Ahead of Small Business Saturday, Biden-

    This summer, the SBA announced that its more than 50 American Rescue Plan-funded Community Navigators grantees had already helped to secure nearly $250 million in approved funding for small ...

  18. What the American Rescue Plan means for small businesses

    There's help in the form of grants, not loans. The Restaurant Revitalization Fund (RRF), part of the American Rescue Plan, provides a total of $28.6 billion in grants to restaurants and bars with ...

  19. The American Rescue Plan

    4 min read. The American Rescue Plan Act has passed the House and Senate, and President Biden is expected to sign it this week. It includes a number of provisions that will help small business owners— including those who are self-employed or are independent contractors— in the form of grants, tax credits and forgivable loans.

  20. What's in the $1.9 trillion rescue plan for small businesses

    The $1.9 trillion American Rescue Plan Act that President Joe Biden signed into law on March 11 contains a number of provisions intended to help small businesses, especially restaurants. It ...

  21. Statement by SBA Administrator Guzman on Anniversary of American Rescue

    WASHINGTON - Today, Administrator Isabel Casillas Guzman, head of the U.S. Small Business Administration (SBA) and voice in President Biden's Cabinet for America's more than 33 million small businesses, issued the following statement on the anniversary of President Joe Biden's American Rescue Plan: "Three years ago, President Biden signed the American Rescue Plan which catalyzed our ...

  22. 3 Ways to Secure Funding for Your Small Business

    3. Small business loans: The traditional route. When more traditional methods are preferred, small business loans from banks, credit unions, or community-based lenders are a go-to. These loans are ...

  23. FACT SHEET: Vice President Harris to Announce Support to Help

    The CRP is the latest American Rescue Plan investment in navigation and support services for small businesses, building upon the $300 million in funds already announced or deployed through the ...

  24. Red Lake Nation to receive $3.3 million for small business development

    The funding was given through the Small Business Credit Initiative, which was reauthorized and expanded by the American Rescue Plan. By Pioneer Staff Report Today at 3:07 PM

  25. FACT SHEET: The American Rescue Plan Will Deliver Immediate Economic

    The American Rescue Plan provides $10 billion to state and Tribal governments to fund small business credit expansion initiatives. This program will build off the inaugural model developed in 2011 during the Obama-Biden Administration, in which nearly $1.5 billion in capital supported over $8 billion in new lending and investing activity across ...

  26. Small-Business Lenders Share an Inside Look at the Loan Process

    Samuel Fuentes (loan officer at InterBank): Business loans use debt service coverage ratio (DSCR) that is calculated as an annual number to see if a deal will cash flow (if a business has enough ...

  27. Best Unsecured Business Loans in July 2024

    *Interest rates as of Dec. 19, 2023. Our recommendations Axos. Axos supports Small Business Associations (SBA) loans for small businesses, which generally require collateral to secure the loan.

  28. Biden-Harris Administration Opens SBA Loan Programs to New Green

    BOSTON - Today, Administrator Isabel Casillas Guzman, head of the U.S. Small Business Administration (SBA) and the voice in President Biden's Cabinet for America's more than 33 million small businesses, announced a new Green Lender Initiative to enroll additional climate lenders in SBA's loan programs. The initiative will employ SBA loan guarantees to attract additional private capital ...

  29. Debt Consolidation Loans in 2024

    Discover the best debt consolidation loans for 2024. Compare interest rates, fees, and terms to simplify your debt and save on interest.