Small Business Loans for Party Planners

In late February 2020, a report indicated that the party and event planning industry had grown approximately 2.6% per year between 2015 and 2019. Just weeks later, the industry was upended when the U.S. entered a nationwide shutdown due to the COVID-19 pandemic.

As an occupation centered around gatherings, party planners and similar event planning professionals are not expected to “return to normal” for quite some time. For example, some experts think that concerts may not return until 2022. Similar trajectories are expected for weddings, sweet 16s, and other events, as people postpone or cancel them altogether.

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Even before the pandemic, party planners faced unique challenges in turning profits. Crowdfunding – having a large group of people fund your events instead of borrowing money from one lender – is especially prominent in the event planning industry, but this fundraising route isn’t perfect. Crowdfunding can take several months or years, and less than one-third of crowdfunding campaigns meet their financial goals.

Despite this grim outlook, party planners are finding ways to stay afloat: many have pivoted to virtual event planning to reflect the new reality. Some party planners were already well-versed in this field and have shifted to solely this service, but even party planners unfamiliar with virtual events are moving in this direction. Since many events previously planned to be in-person have gone virtual, the demand for party planners hasn’t disappeared – it’s simply evolving.

If your party planning business is in need of low-cost funding, there are more options out there than you’d think. Keep reading to learn how to find your options and decide what’s right for you.

Financing Options for Established Party Planners During the COVID-19 Coronavirus Pandemic

Following widespread, temporary business closures in March 2020 due to the COVID-19 pandemic, the federal government enacted the CARES Act. Through this act, the Small Business Administration (SBA) launched the Paycheck Protection Program (PPP).

Through the PPP program, which is a new type of SBA 7(a) loan, small businesses were able to apply for emergency business funding.

For more about how small business owners such as party planners can use PPP funds, visit the SmartBiz Loans COVID-19 information center: Small Business Loans & Resources in Times of Coronavirus (COVID-19).

Applying for a first or second PPP loan in 2021

The SmartBiz streamlined PPP Loan application can help you fill out your application, upload required documents, and submit them to the bank quickly.**

SmartBiz can help you apply for these funds. We have specialized in SBA loans since 2013 and our network of banks has funded nearly $4 billion in SBA, PPP, and bank term loans.

Whether this is your first or second PPP loan, SmartBiz can help! Businesses with less than 500 employees that are negatively impacted by the pandemic can apply for their first PPP loan.

The program expires on May 31, 2021. No applications will be accepted after that date. Keep an eye on the SmartBiz Small Business Blog for updated information about an extension if approved by congress.

Funding options for party planners

Despite the challenges party planners face in obtaining funding, you can pursue financing routes, including SBA loans. These loans may be your best bet, though you can explore non-government funding as well. All the possibilities are below, and each has its own unique approval period and loan rates.

The SBA 7(a) loan program

Most financial experts will tell you that you should choose a low-cost SBA 7(a) loan if you qualify for it. Party planners such as yourself may find these loans’ low monthly payments, long payment terms, and low rates highly favorable.

SBA 7(a) loans are great for saving your company money, hiring new team members, and working toward growth. You can also use them for:

  • Working Capital – Working capital is the amount of cash your agency has readily accessible for day-to-day operations. It is also the difference between your current assets and your current liabilities, thus making it the strongest indicator of your company’s health. A negative difference is cause for concern – but your SBA 7(a) loan can help.
    As a party planner, you can use your SBA 7(a) loan to obtain working capital by hiring new employees and buying new equipment (including software). Your goal no matter the condition of the economy should be to calculate a positive difference when determining your working capital.
  • Debt Consolidation Loans – Use SBA 7(a) loans to refinance your practice’s current loans. Your loan can go toward refinancing short-term business loans, cash advances, daily or weekly payment loans, or high-interest business loans.
  • Commercial Real Estate – You can use your SBA 7(a) loan to buy owner-occupied commercial real estate for your party planning company. You can also put your funds toward refinancing your current commercial real estate mortgages.

Advantages of SBA 7(a) loans for party planners

Many lending experts describe SBA 7(a) loans as the “gold standard” due to their low rates and 10-year terms (though this term expands to 25 years for commercial real estate loans). Other prominent advantages of choosing SBA 7(a) loans include:

  • Wide use of funds
  • No prepayment penalties
  • Affordable monthly payments
  • Availability in all 50 states

Requirements for party planners to apply for SBA 7(a) loans

To determine whether your party planning company can apply for SBA 7(a) loans, see the below requirements. Before doing so, keep in mind that some requirements will vary by lender. For example, many lenders ask for business plans, but SmartBiz Loans does not.

  • Your company must have no outstanding tax liens, recent settlements, or charge-offs
  • You and your company must be on-schedule with all government-related loan repayments
  • You must be a U.S. citizen or lawful permanent resident
  • You must be at least 21 years old
  • Your company must be based in the U.S.
  • Your company must be at least two years old
  • Your personal credit score must be above 650
  • You must have no foreclosures or bankruptcies in the last three years
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How to apply for an SBA 7(a) loan for your party planning company

Step 1: Confirm that you qualify based on the above SBA 7(a) loan requirements. Read the SmartBiz Loans page about SBA Loan Requirements for Existing Business to learn more.

To discover how your business financials stack up for funding, use our easy-to-use online tool. SmartBiz Advisor™ helps you track the financial health of your business and learn how banks typically evaluate your business.* SmartBiz Advisor also recommends ways to help you improve your credit and strengthen the financial health of your business as needed. Read feedback from real SmartBiz Advisor users and sign up here.*

Step 2: Collect all your required paperwork. Assistance from your bookkeeper, accountant, or another financial expert may also prove helpful.

Step 3:  Decide on your lender based on their:

Availability

A good lender will pair you with a representative whom you can usually reach quickly by phone or email. This representative should know your loan application, company, and industry like the back of their hand.

Transparency

Make sure that any and all information about your APR or annual interest rate is clearly stated upfront. A lender that hesitates to provide this information may be a red flag.

Obvious loan terms

Avoid complex fine print, as it often masks unfavorable loan costs and payment schedules. You’ll know you’re in the clear if you see clearly stated prepayment penalties (if applicable), a total loan amount, collateral requirements, and your required payment amounts and frequency.

Fees

Other than interest and repayment, you should see a few fees. If this isn’t the case, you should choose a different lender. It’s also good practice to confirm with your lender that all fees are due during your loan’s lifetime and before loan funding.

Strong reputation

A lender that checks all the above boxes can still be a poor fit. Read Google, Consumer Affairs, and TrustPilot to find out whether party planners like yourself have had good experiences working with your lender. If you don’t see party planners in the reviews, then you can assume you’re in good hands if people of all stripes have enjoyed working with the lender.

The SBA 504 loan program

Through the SBA 504 loan program, your party planning company can obtain low-cost funding for its expansion and modernization needs. Use these loans to buy owner-occupied commercial real estate or turn to your local community development corporation (CDC) for assistance. If your company meets your CDC’s public policy goals, your CDC may cover up to 40% of your project cost, and your SBA 504 loan can cover up to 50%. You’ll cover the rest via a down payment.

The SBA microloan program

If your party planning company qualifies as a very small business or a microbusiness, consider the SBA Microloan Program. You’ll get funding of at most $50,000 to use toward all business needs except debt payments and commercial real estate purchases.

Non-SBA loans and other financial options for party planners

SBA loans are a top-notch choice for small business funding, but party planners like yourself have other funding options too. These options, though, may have shorter terms, higher rates, and larger payments than SBA loans. They include:

Bank term loans

Bank term loans can lead to funding as quickly as can SBA loans, and their application requirements may be more lenient as well. Usually, you can use these loans toward working capital and debt refinancing. Get thorough details from your bank term loan provider about rates, prepayment penalties, possible loan amounts, and repayment terms.

Business lines of credit

A business line of credit exposes your company to funds of a preset maximum. You can use some or all of this money, and you only pay interest fees on the portion you actually use. Your maximum is based on your credit and will be less than what you could obtain from a bank term loan.

You can tap into your business line of credit as often or infrequently as needed until you reach your maximum. Your business line of credit is also unlikely to have collateral requirements. Find out more via the SmartBiz Loans blog Small Business Lines of Credit Pros and Cons.

In some ways, business lines of credit resemble credit cards. Both are revolving lines of credit with maximums. However, you can pay off your credit card balance and then reuse your card, whereas business lines of credit are one-time funding opportunities. Business lines of credit also lack the spending rewards common among credit cards.

Merchant cash advances

If your clients can pay you via credit or debit card, you can pursue a merchant cash advance (MCA). This loan option gives you advance funding that you can repay in one of two convenient ways. You’ll either send a small percentage of all your transactions to your card provider or repay your lender in regular installments. Watch out, though: This convenience may not always be worth the extremely high APRs you’ll pay. Learn all about MCAs via the SmartBiz Loans blog What You Need to Know About an MCA.

Why Choose SmartBiz Loans?

Need funding to rebuild your business? Don’t waste time going from bank-to-bank filling out multiple applications. SmartBiz helps you find the best financing for your unique needs whether that’s an SBA loan, Bank Term loan, or other financing.  About 90% of qualified applications we refer to banks are funded and our financial professionals are on hand to answer your questions. Discover if you’re pre-qualified here without impacting your credit scores** and read the SmartBiz 5-star customer service reviews on TrustPilot.

 *The information provided through SmartBiz Advisor, including the Loan Ready Score, is for educational purposes only. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.

**We conduct a soft credit pull that will not affect your credit score. However, in processing your loan application, the lenders with whom we work will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and happens after your application is in the funding process and matched with a lender who is likely to fund your loan.

 What you need to know: The information provided through SmartBiz® University and the articles contained therein are for educational purposes only. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.