The coronavirus pandemic is creating an economic crisis for small businesses, and we’re here to help.
We know the pandemic is causing a lot of anxiety for small business owners, and deciding what to do next can be confusing. With the right approach, you can do recession planning right now that will help you get through these difficult times.
If you’re concerned about what you can do to try to keep your small business afloat and survive the recession, we’ve got a simple guide to the practical actions you can take right now.
Be Disciplined With Your Business Finances
The first step to helping your business survive the recession is to have a clear understanding of where you’re getting money and how you’re spending it. Strong financial management means being more disciplined about your cash flow by making a number of small changes that add up to major savings.
Here are the main areas to focus on.
Understand Profit and Loss
Get a thorough picture of your profit and loss by categorizing your business expenses and income. Create an overview of all your costs, together with details of exactly where you’re spending money. Look at your revenue streams and how they have changed as a result of COVID-19 so you can see what’s still profitable.
Dig Into Your Profit Margins
If you’ve not examined your profit margins for some time, you should recalculate them now. Figure in all of the expenses that go into producing and supplying products and services, especially as a result of the pandemic. Examine your pricing to see if there are ways to cut costs and boost profits.
Understand Cash Flow and Buffers in the Business
Small businesses survive or fail based on their cash flow—what you have coming in or going out right now. The coronavirus has massively impacted cash flow for millions of us, so look at the savings and cash you have in the business to work out how long you can stay afloat.
Cut Costs Wherever You Can
If your business is entering survival mode (or even if it isn’t), now’s the time to minimize your expenses. Look at every single area where you’re spending money and search for a way to defer or cut the cost. When you contact organizations or individuals to reduce your payments, make sure you cite “coronavirus” or “COVID-19” as the reason.
Areas you can focus on include:
- Defer rent payments or mortgage interest: Contact your landlord or financial institution and request deferral of payments. Ask if they will also forgive interest on the loan for the duration of the crisis.
- Defer utilities costs: Speak to your utilities companies, as many of them will not disconnect due to non-payment during the pandemic. Explain that you will need to defer payments to a later date.
- Return inventory and stock: See if you have an option to return unused or unsold stock to your wholesaler or supplier.
- Minimize loan repayments: If you have business or personal loans, contact the loan provider and ask for a deferral of repayments and see if they can reduce or eliminate interest.
- Furlough or lay off staff: One of the biggest expenses for businesses is staff salaries and payroll. To start, review if the PPP or EIDL funding programs can help, details below. If not, you may have the option to furlough staff until after the crisis. Otherwise, you may need to temporarily lay them off.
- Reduce or eliminate other expenses: Go through your profit and loss report line by line and look at every opportunity to reduce costs. Speak to service or product providers to see what options you have to defer payments.
Apply for Emergency Coronavirus Loans
The CARES Act in the US is a $2 trillion stimulus package to assist individuals, small and medium businesses, and corporations. As a small business, there are a couple of different emergency loans you can apply for.
The Paycheck Protection Program (PPP)
This loan lets you get emergency funding to continue paying your workers during the crisis or rehire them once it’s over. If you use the loan to pay or rehire employees, the amount you borrow is “forgivable” which means you do not need to pay it back.
You can get started with this loan by talking to your bank or other local lenders. The Small Business Administration (SBA) lets you search for PPP loan providers.
The Economic Injury Disaster Loan Program (EIDL)
This loan provides a combination of a cash grant and a loan that can be used for many types of business expenses. The cash grant can be up to $10,000 and is forgivable, meaning you don’t need to repay it. You can apply for EIDL through the SBA website.
We have a complete guide to emergency loans and what you need to do to qualify and apply.
Move to a Different Service Model During Coronavirus
Explore if there are additional ways to create revenue for your business. For example:
- If you’re a retailer, can you move to selling goods online? Setting yourself up on ebay, Amazon, or another marketplace can give you access to a whole new customer base.
- If you own a restaurant, how practical is it to move to take out food, curbside pickup, and delivery? What are the best ways to promote this service to local residents?
- Can you offer promotions or discounts to keep some money flowing in at the moment? Look at cutting prices temporarily, bearing in mind your costs and profit margins.
Keep an Eye On Your Personal Credit
For small businesses, your personal credit score can influence whether a financial provider will lend to your business—that’s why it’s important not to damage your personal credit. Talk to credit card companies, banks, and anyone else you owe money to and see if you can defer payments without it being marked against you on your credit report.
This is a difficult time, but you can get through it. Take a calm look at your finances, create a plan, write everything down, be methodical, and apply for emergency funding. You can do a little more each day to help your business survive.
If you need help or guidance, please reach out to our community of mission-based lenders and banking partners who are here to help however they can.