Overcoming Virus-Caused Debt
Small Business Plan to Thriving During The Great Mess
Small-business owners, partners, board members and business investors have two primary concerns top-of-mind: debt and revenue. The new CARES Act and even the current SBA Economic Injury Disaster Loans (EIDL) program might offer sufficient funds to save thousands of dollars each month. Both are now apparently offering low-interest loans AND grants for recovery from economic injury, including:
• Operating Expenses
• Cash Flow Disruption
• Delayed Working Capital
• Accounts Payable
• Fixed Debts.
Although the EIDL program is not designed to replace profits or revenues, the focus is, indeed, on paying financial obligations “directly related to disasters.” And your debt clearly meets this objective. Congress has expanded the EIDL program and relaxed the underwriting guidelines for small businesses.
Immediate Takeaways
The first step is to assess and prioritize your company/agency/firm’s needs and then scan the SBA website for eligibility definitions. This should include previewing the application process and identifying where and how your economic “injuries” fit. Next, complete and submit applications as soon as feasible, recognizing you might need to modify them as the Agency begins its review process. Note that although the impetus from Covid-19 is to streamline the government’s procedures, the volume of claims will most likely slow the process down.
Key takeaway: Act quickly and ask for help if you need it. At some point, an SBA staff member will be assigned to work with you to complete and hopefully approve your application. And there is a provision to “grant” up to $10,000.00 within three days.
Once your application(s) is accepted, there may be more forms to fill in, more tax returns to file, collateral could be required and an evaluation of business activity from past years might also be requested. Time estimates I have heard include 50–60 days before the application is completed and approved, the loan/grant documents forwarded, and another week or two for signatures. Then a check should be forthcoming.
Side note: Sometimes the SBA asks for “verified” financial statements, so it is a good idea to start this process now.
But it should all be worth it if your debt for the above expenses are covered. The Act even provides a system in which many loans granted under these programs could be waived.
Pandemic Business Life
Now we’ve covered inexpensive debt financing. So, let’s view your revenue needs next.
Our challenge is to prepare businesses to move rapidly when key “turning points”arrive. Public health experts are examining several scenarios in which social distancing could be relaxed in two months, partial operations starting in four months, and “business as usual” may be a year away. If, as one scenario suggests, warm weather brings major relief from the virus spreading, “. . . . we need to use the summer lull to steel our response.”
(Pinsker, The Atlantic, March 26, 2020).
Let’s not wait to find out what post-pandemic-life will be like. Begin building a flexible strategic business/actions plan now and start working with some of its tasks. It will provide immediate takeaways you can begin implementing now and may lead to unique solutions as we all wrestle facing uncertainty.
Get to work today on what your business needed all along. Focus on what will help you when the NEW NORMAL is ready to be kick-started.
We will keep you updated as more develops, and we are always here to help answer any pressing questions on your mind. Please feel free to reach out directly to me at: acolman@closersgroup.com
Dr. Allan Colman, Chief Revenue Officer