In just a few short weeks the COVID-19 pandemic and efforts to stem the outbreak have knocked the global economy into a recession-like market, sent financial markets into the worst skid in more than a decade, and led to millions of Americans losing their jobs.
Small businesses, especially restaurants and brick-and-mortar retailers that rely on customers to physically show up to buy their goods and services, have been particularly hard hit as social distancing and shelter-in-place orders in many states have forced people to stay home.
The government has taken steps to give entrepreneurs a financial lifeline in the form of expanded emergency small business loans that don't have to be paid back if firms keep their employees.
Whether the financial shot in the arm is sufficient or arrives quickly enough to help is uncertain, given that no one yet knows how long the shelter-in-place mandates will continue, when the outbreak will be contained, or how long it will take for consumers to feel they can return to business as usual.
Already, the situation for many small businesses is grim.
Some 59% of small businesses say they have experienced losses related to the coronavirus crisis, according to a recent survey by Next Insurance. And more than half of the over 800 respondents also said they were expecting to let go of workers or close their business altogether.
You may not be able to do much about the trajectory of the outbreak or the timing for when social distancing will be relaxed in your area, but there are ways to ensure that you can navigate these uncertain times and come out stronger on the other side.
Stabilize your finances.
The first step to surviving this crisis is to assess your finances and do whatever you can to preserve cash and maximize your access to credit so that you can have a financial cushion. You'll want to focus on cash flow. Do you have a good grasp of how much money is yet to come in and how much you need to pay out to cover expenses or employee pay?
Using software that links up all your finances can help provide you with a real-time view of your cash flow more quickly and easily than shifting from various accounts online, or spending time to accurately fill in a spreadsheet with your accounts payable and receivable.
What you want is an overview of cash flow for the next few months at least, since no one knows how long this situation will last. You may have more financial flexibility if your business hasn't been significantly disrupted, meaning you and your workforce have been able to continue doing their jobs from home, and your service or product can still be purchased by your customers online.
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For those whose sales have declined sharply or perhaps ground to a halt because you've had to temporarily close a storefront, make sure you hold off on making financial commitments that could exceed where your business is 60 to 90 days from now.
Rent will probably be the biggest expense that business owners who lease office or retail space have to contend with. If you haven't already, approach your leasing company and see if they will accept a delayed payment or rework your lease terms.
If you don't have a robust emergency fund, it may be too late now. But it's not too late to use this situation as motivation to put in place a system that enables you to build an emergency fund for the next crisis. You're likely not spending much time outside or driving, so there should be some savings there you can tap.
Access small business funding.
A good rule of thumb is to have at least three months of cash on hand. If that's not the reality for you, financing might be a good option to consider. Fortunately, there are already multiple financial programs in place for businesses that will suffer financially from COVID-19.
SBA Economic Injury Disaster Loans and Emergency Economic Injury Grants
In April, the U.S. Small Business Administration's economic injury disaster loans offer up to $2 million in financing for small businesses that have lost revenue due to virus-related closures and other disruptions. The loans are available in states or U.S. territories that ask the SBA for an economic injury disaster loan declaration. All states have done so.
The loans carry a 3.75% interest rate for small businesses. The interest rate for nonprofits is 2.75%. Once a loan officer reviews your application, you can expect a decision from the SBA within two to three weeks. The SBA also offers other loan programs to help provide businesses with capital, something to consider as you weigh your financing options.
The EIDL program was recently expanded to include an Economic Injury Disaster Loan Emergency Advance up to $10,000. You can request an advance when you apply for an EIDL, and you'll receive the grant within three days of approval. The best part? The $10,000 does not need to be repaid.
Paycheck Protection Program
The SBA's Paycheck Protection Program that was included in the $2.2 trillion CARES Act coronavirus relief package offers forgivable loans to cover payroll. Small businesses that have been affected by COVID-19 may borrow two times their average monthly payroll costs (up to $10 million). The portion of the loan that's used to cover payroll, rent, utilities and mortgage interest for a period of eight weeks from the time of funding will be forgiven.
To qualify for forgiveness, you must maintain your payroll, or rehire any employees laid off due to COVID-19 by June 30. Loan forgiveness will be reduced for businesses that reduce their workforce or lower employee wages more than 25%. Small businesses have two years to pay off the unforgiven portion of the loan, and the interest rate is 1%.
Online lenders are another good source for SBA loans and other types of small business loans. Unlike traditional financial institutions, these alternative lenders crunch a variety of data to give them a broader view of a borrower's creditworthiness. And they often look beyond collateral when determining whether a borrower qualifies for a loan. Another plus: Alternative lenders' loan application process is often simpler, and provides an answer much faster than brick-and-mortar lenders.
Maximize your online options.
If your business already has a robust online sales presence, now's the time to expand this. Millions of people are at home and still very active in purchasing everything from groceries and takeout to yoga classes online.
If you own a business such as a bar, dry cleaners, clothing store or restaurant, explore ways to sell your wares online. There are plenty of internet apps for selling apparel and other goods, for example. Not a good fit for your business? Consider whether your skills or knowledge would translate well into short videos or one-on-one video lessons.
Would your customers pay a small fee to help support your restaurant, for example, if you offered a brief class on how to make your best menu items? The same principle can work for crafting cocktails, tailor-made fashion advice or personal training, and there are no shortage of apps to handle the video streaming and payments.
Even if you don't think you have a way to sell your skills online, you may want to reach out to your customers online by writing a blog or simply being more active than usual on social media platforms. Remember, one day this will all pass, and it will pay off to have spent the time keeping your business on your customers' radar.
This is also a good time to revise and enhance your digital assets: website, social media profiles, and ads — all facets of business that are less likely to be affected by the temporary shutdown of nonessential businesses.
Keep the team together.
Businesses that have the financial means to keep employees on the payroll, or with help from the Paycheck Protection Program, will be in a better position to ride out the coronavirus crisis.
Hopefully you can transition some or all employees to work remotely. This is the perfect time to have them tackle to-do lists that tend to get overlooked, such as reviewing and cleaning up customer lists or your consumer relationship management system. Have some employees spend some time identifying and contacting new prospective customers.
For businesses that have had no choice but to furlough employees, encourage them to stay engaged in the business somehow, even if it's honing their skills via free online courses.
Scheduling regular group video chats can also help keep them from feeling like they're isolated. This could be a good time to talk about goals and listen to suggestions for how to improve working relationships once they're able to come back to work.
You can only control what you can control. Consider this COVID-19 crisis a short-term disruption and use it as motivation to explore how you can make your workforce more productive and your business more efficient. Your efforts will yield significant dividends when business returns to normal.