Action steps: How businesses at every stage of the cycle can minimize COVID-19 Impact
While the COVID-19 pandemic continues to evolve, one thing is certain: this is temporary. We will get through this, learn from it and be better prepared in the future.
As we await its resolution, there are actionable steps for businesses at every stage of the life cycle to minimize its financial impact:
- Health comes first. No financial reward is worth the risk of another’s health and safety. Always keep this in mind when evaluating your personal impact. This is a fact of life that must be dealt with. We are all involved, nobody will escape its impact.
- Workflows are being disrupted and will continue to do so. Give your employees the opportunity to do what is necessary based on their personal beliefs, even if it differs from your own. Where possible, allow people to work remotely. If not possible, try to be patient as time provides the healing necessary to allow people to return to work safely. Keep the same level of patience when transacting with other businesses, knowing they are dealing with the same issues you are.
- Take cost-cutting measures wherever possible. If revenues slow down, cash flow will decline. Being fiscally responsible is a necessary part of running any business, but in times like this it becomes significantly more important. Consider decreasing, delaying or cancelling discretionary spending until things stabilize.
- Consider conserving cash. We all feel much more vulnerable with the stock market decline, and that will impact your business decisions. There are many government-supported financial support plans in the works. Stay up to date as these plans develop and take advantage if you need.
- If you are moving towards opening a new business, consider slowing down. You may be looking for a location to rent but haven’t yet found the right location. It may be beneficial to delay the process. This may not be the best time to enter into a lease agreement, then again it might. The decision will be based on your personal circumstances and not on what is considered best for everybody.
- People are asking what others are doing as far as paying their employees during work stoppage. Many of you regard your employees as friends/family, as many may have been with you for years and have served your business well over that time. Your employees depend on their wages to meet expenses, some week-to-week. While there is no right or wrong answer to this question, I would suggest doing what you are able, even if it means covering at a certain level for a short term, possibly a reduced level in the mid-term and cessation if the situation continues for a specified time.
- Don’t be afraid to ask for help. Those of you who are renting office or warehouse space should consider talking to your landlord to see if there is something that can be done to restructure your lease. Banks are overly aware of the financial situation we are now in, so loan modification or temporary suspension of payments might be a favorable alternative. Reach out to credit card companies to see if they are providing any actions for relief. Talk to your suppliers to see if they would be willing to work out terms on outstanding balances. Remember, we are in this together, and it isn’t in anybody’s best interests to evict tenants or call loans. We need to deal with this situation with compromise and understanding.
- Many banks require the submission of financial statements and tax returns within a specific timeframe to comply with loan covenants and requirements. If this applies to you, talk to your bank and make them aware that you will need an extension of time to satisfy certain obligations. They know what is going on, and they will be reasonable in providing slack.
- Consider bank financing. Ask your bank about taking out a loan to get you through this difficult time. A number of our clients are reporting that their banks are reaching out to provide financing to help weather the storm.
- Consider going the SBA loan route. SBA has a Disaster Loan program which provides low-interest loans to businesses of all sizes, private non-profit organizations, homeowners, and renters. SBA provides loans up to $2,000,000 at a rate of 3.75% with terms available up to 30 years. Information and a link to the three-step application can be found at https://disasterloan.sba.gov/ela/Information/Index.
- If you are operating a franchise business, reach out to your franchisor to see if they have a plan in place to deal with the financial situation. Consider reaching out to fellow franchisees to see if they have any ideas. Reach out to fellow business owners and colleagues to see what they are doing, even if you are not operating a franchise business.
- Consider putting in a claim for business interruption with your insurance carrier. Many policies won’t cover this type of claim, but you won’t know unless you ask. The federal government is also involved in discussions to come up with financial assistance in the event business interruption insurance doesn’t cover your claim. Look for updates as this situation continues to develop.
- Keep track of all costs you incur as a direct result of the pandemic. There may be government assistance programs down the road that will require you to provide this information. It’s much easier to keep track now as opposed to trying to recreate an analysis of costs when the programs become available.
- Try not to panic. I know, easier said than done. Making decisions while in panic mode can be a dangerous thing. Anything that should be thought through must take time. A knee-jerk reaction can result in long-term unconsidered consequences.
- When deciding on a plan of action in the short term, keep long-term impact in mind. Because your business has lost its customer base doesn’t necessarily mean you should close your business or let go of all your help. Your best employees and key customers are judging your behaviors and will always remember how you act and react, good or bad.
- Communication is extremely important. Be proactive in devising a plan that works for your situation. Make sure you keep others informed of your action plan for dealing with the virus. Consider getting the input of your employees in developing a plan.
- Keep rumors at bay and deal only with the facts applying to your personal circumstances. Surprisingly, everything on the Internet isn’t necessarily true. Check facts and don’t pass on rumors. And take a break from watching the news or reading information online. The situation is difficult enough without adding emotional stress and distress.
Herbein is responding to the COVID-19 (Coronavirus) pandemic with our Coronavirus Resource Center, which provides regularly updated information, answers to frequently asked questions and other resources to help during this global health crisis. Continue to check back for more updates in the coming weeks.