Small Businesses Seek a Crisis Lifeline Beyond Loans

“We’re not going to be able to pay the mortgage on our house,” Ms. Benefiel said. “Our credit is perfect, but by the time we get through this, it will be so horrific that even if we had any money, we wouldn’t be able to rent a place.”

Entrepreneurs desperate for quick cash, at nearly any cost, have flocked to online lenders and loan brokers. Daily loan requests at Lendio, a loan marketplace, jumped from $130 million right before the World Health Organization declared the virus outbreak a pandemic to an average of $212 million in the days after.

But the credit available has dwindled. Two of Lendio’s 75 lenders have stopped making any new loans, and most of the rest have restricted the industries and geographic areas they’re willing to fund.

“Many of the business owners that are seeking capital are those that have been the most affected by the coronavirus — restaurants, event centers, bars,” said Brock Blake, Lendio’s chief executive. “Those are the exact businesses that the lenders are removing from their credit box.”

Kabbage, one of the largest online business lenders, acknowledged that the market has shifted fast. The lender is not increasing rates but has to manage its risk, meaning that some customers will have less access to credit, said Kathryn Petralia, the president of Kabbage.

What many entrepreneurs want is government help to delay or reduce fixed costs like rent and to keep their workers solvent. But the federal options being discussed for helping companies with problems such as making payroll also require business owners to take on more debt — something most are loath to do.

“That’s all but useless for our clients,” said Ned Staebler, the chief executive of TechTown Detroit, a business incubator. “If we don’t do something big and creative to get money into the hands of business owners immediately, you’ll be seeing a lot of vacancies and empty storefronts. We’re at risk of about half the small businesses in this country being gone.”

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