No matter what part of the country you’re in, you have small business-owning neighbors struggling to keep the lights on. With erratic reopening plans, caseloads that still won’t decline, and the need for social distancing until there’s a widely-available vaccine, countless businesses have been hit hard. But what can be done? Are there any life-saving measures for small businesses on the brink of closure?
If you’re a business owner in this situation, you could find enough relief to keep your doors open and critical staff employed using one (or all) of the options below.
Review Your Expenses
While you might have already done this back in March, it might be time to review your expenses again.
Instead of eyeing luxury expenses this time around, put an eye toward ways to discontinue some low-margin services and supplies until traffic gets back to pre-pandemic levels again. This could mean paring-down your menu, hiring a delivery person instead of subcontracting to meal delivery services, liquidating inventory at a deep discount to reduce warehouse space, or even limiting workdays to the most profitable days and hours.
When evaluating expenses to cut, don’t think of these expenses as permanently on the chopping block. Instead, you can bring them back and build back up when life and revenue pick up speed once again.
Get Creative With Payment Arrangements
If you’re strapped for cash, your vendors may be as well. Reach out to your accounts payable and start a conversation about mutually-beneficial payment arrangements.
For example, if you can promise $X toward your invoice every two weeks, that’s better for your vendor than zero dollars. Your vendor gets a predictable cash flow, and you get a reasonable payment arrangement.
If you and a vendor do mutual business (they invoice you and you invoice them), set up a call for an invoice review. Explore creative options like applying their invoice for $1000 to your invoice for $800. You’ll still owe them $200, but it’s a lot better than $1000. This is a simple solution that often slips through the cracks because your AP and AR systems might not communicate with one another.
Explore SBA Loan Options
While the Paycheck Protection Program is no longer offered, there are three other SBA loan options you can explore for a much-needed cash infusion:
- Economic Injury Disaster Loan (EIDL): If you’re experiencing a loss of revenue due to COVID-19, you could be eligible. Terms are 3.75% interest (fixed) for up to 30 years with no pre-payment penalty. You can even defer payments for up to one year (but interest will still accrue).
- SBA Express Bridge Loan: If you have an existing relationship with an SBA lender, you may qualify for a loan up to $25,000. These loans can be regular term loans or bridge the gap between today and approval for your EIDL Loan. You just need to reach out to your existing SBA lender to inquire.
- SBA Debt Relief: If you have an existing SBA loan and have trouble making payments due to COVID-related financial hardship, this program can bring you relief. Eligible loans include “7(a), 504, and Microloans in regular servicing status as well as new 7(a), 504, and Microloans disbursed prior to September 27, 2020” per the SBA. If you qualify, the SBA will pay any principal, interest, and fees on your loan for six months.
Have a Candid Conversation with Your Bank
Finally, it could pay to sit down and have a candid conversation with your bank. Your bank doesn’t want to lose your business or see you default on lines of credit or other loans. You could find they’re willing to work with you if they know your full financial picture.
There aren’t any guarantees that your bank could come through with funds or reprieves from payments due. But, if you don’t start the conversation, you’ll never know what’s possible.
Have any other tips or advice on life-saving measures for small businesses? Let us know.
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