Accion’s Director of Coaching in Chicago Rowan Richards tells small business owners how to help your business survive the economic shutdown. From how to secure crisis loans for small businesses, to how to lower your business expenses, plus strategies to use the shutdown to your advantage, Richards gives important tips for crisis management for small businesses.
How to Secure Business Funding Due to the Coronavirus Shutdown
During the COVID economic downturn, Richards says it’s important for all small business owners to secure emergency business funding both during the financial difficulties caused by the COVID shutdown and beyond to when the marketplaces will have returned to economic health.
Richards says for some companies, business has dropped to zero while others are seeing a reduction of 50% in profits. Richards advises all businesses to seek an economic injury disaster loan to help bolster your company’s future due to the economic slowdown. Richards advises business owners to not only apply for crisis loans in order to stay viable during the slowdown but also to plan for near-term opportunities to grow your business.
Richards says to look at available lending programs, whether those are for economic injury disaster loans or grants. He recommends you find out what the requirements are to apply for the maximum dollar amount available depending on the parameters of your business. Richards says to find and secure as much capital as possible because loans designed to help out with COVID generally have extremely low-interest rates and flexible terms such that you don’t have to begin repayment right away. He notes there hasn’t been a period before now with this much capital available at these favorable rates and terms.
Richards says it’s helpful to use an impact calculator to determine the potential impact of COVID-19 on your business, and with the amount of cash you have on hand, how long your business can remain viable. This can help you determine what spending you need to cut to remain operational for a certain period of time, and how much capital you should apply for.
Where Can I Find Emergency Capital?
Depending on the state or region of the United States where your business is headquartered, your options for capital vary. Accion is a microlender that offers flexible funding options, including microloans and lines of credit, in various areas of the country.
Richards says the most attractive lending options right now tend to be local loans and grants. He encourages small business owners to check with their city, county, and state governments to find out what lending programs they are offering to offset the damage done by the COVID economic shutdown. He says to look for loans with a low-interest rate and slow payback term so that you don’t have to stress about making loan payments right away.
Richard says it’s best to apply for a loan through an SBA 7A certified lender. If you’re an existing bank customer, reach out to your banker for help finding the capital you need to stay viable now, and once restrictions have completely loosened up.
Negotiate Your Commercial Real Estate Lease Terms
Richards explains that while your business doesn’t have money coming in, you want to try to reduce your business costs as close to zero as you can. One of the most effective ways to reduce costs is to re-negotiate your lease terms while the dollars aren’t flowing. Initiate the conversation with your landlord or property manager to see if they are willing to change the terms of your lease. Ideally, you would ask for and receive a multi-month deferral of rent payments.
If you are looking to launch a new business and this would require signing a new lease, Richards says it’s possible that this is a good time; however, every business plus the local municipality, city, town, state, or region will be under different circumstances, so you will need to evaluate that before deciding. When you have conversations with a potential landlord, you might be able to negotiate longer rent abatement or other good terms for the near future.
If you’re uncomfortable negotiating, Richards reminds you the tenant-landlord relationship is mutually beneficial and the landlord needs your business to be viable in order for the relationship to work.
Re-Negotiate Existing Loan Terms
Many banks are offering reduced or deferred payments to existing borrowers. If this hasn’t been offered, reach out and ask if this can be done. Anyway you can free up cash right now is helpful, says Richards. If payments can be paused, deferred, or reduced, it will help with the longevity of your business. Again, ask for a multi-month deferral of your existing loans.
Make Difficult but Necessary Staffing Decisions
Richards says to ask yourself honestly if you can afford to retain your employees and stay in business until restrictions end and business picks up again. Draining your coffers dry and going out of business serves no one, least of all employees. Most business owners are having to make difficult decisions to reduce staff or reduce hours. It’s something you need to look at in order to keep your business operational long term.
Sometimes the answer will be a temporary reduction in staff, allowing those who are laid off to receive unemployment, which can be a win-win depending on the wages you were paying. Then when business comes back, you can hire back those employees who desire to return to the business.
Have conversations, and figure out what’s best for your employees. If you reduce hours and thus payment too much, your employees might be better off going on unemployment. As you secure funding, figure out how much runway you have given different scenarios until business returns. Frequently, you will need to be able to generate revenue or other substantial business activity to justify paid staffing decisions.
Find Revenue Opportunities
Richards advises small business owners to look at both the short-term shutdown circumstances you can possibly capitalize on, as well as how long-term market changes can result in new and different business opportunities. For example, Richards points out that within the food and beverage industry, some businesses already have a system for delivery in place during short-term COVID-19 business restrictions. The saturation in the delivery business can make a return to normal profits difficult if not impossible, and so Richards says don’t be too hard on yourself if you still feel like your business is struggling, even with curbside pick-up and delivery in place.
Richards says every retailer should be thinking about how much of your business you can move online. You can also look at how you can appeal to essential workers in your town or city. Richards advises considering partnerships, new sales channels, and shifting more energy into existing secondary revenue channels. Every bit of extra revenue you can generate is helpful, he says, both short and long term.
For the long term, Richards says there will be a day when the restrictions are gone and normal business activity will return. For some industries, Richards says there will be significant long-term changes in how customers interact with your business. He says to be hyper-vigilant to what these changes might be in your industry and spend time thinking through what these changes could mean for your business. For some business owners, it may provide a fantastic opportunity to carve out your space in a new marketplace.
Turn the Shutdown Into an Opportunity
Richards says while no business owner would have reasonably wanted a complete economic shutdown, there are opportunities we can take advantage of while we wait. Here are some of the things he believes would be helpful to look at while you are less busy with normal business activity:
Identify and document operational improvements: Richards says to take the downtime to put together an operations manual by capturing and putting into written form how things get done. Identify the key areas of your business where it’s important to communicate the best practices of how your business operates.
Clean up your bookkeeping: As you’ve applied for capital, you’ve probably been confronted with how beneficial solid bookkeeping is, considering all the documentation you’ve been asked for. Richards says there are a variety of quality bookkeeping software tools out there, so now is the time to get that in place and cleaned up before you get busy again.
Current customer needs you can address: Richards says this isn’t about sales and marketing; this is about great info that can help your customers solve problems, have a relaxed attitude towards the state of the world, and offer whatever expertise best serves your customers. Providing helpful information like this can convert readers consuming the information you are putting out there into paying customers once your business fully opens up again.
Improve technology: Now probably isn’t the time to invest heavily in technology, but Richards says it’s definitely a great time for planning on what kind of technology improvements you’d like to make when the markets stabilize in the future. He says given the current market, at minimum, make an assessment, but he says given the current market, it might be a good time to negotiate new technological solutions depending on your industry and situation.
Share your expertise: Help other business owners solve problems. Use social media to give people really good information who may be struggling. It’s a great time to be helpful and build your business network.
Reach out to mentors: Set a goal to learn something about your industry, new products, and new resources so that you will be in even better shape when we are all back to business as usual. Keep learning and growing, and don’t be stagnant during the downtime.
Rest: Business owners are often overworked. Use this time to recharge mentally and physically. Relax and carve out time to be more creative. Richards encourages business owners to dream a little bit. The downtime is here, so give yourself time to get ready for the busy season that will come after the shutdown is over.
Be Optimistic and Proactive
Overall, Richards urges small business owners to be optimistic and proactive in keeping your business going beyond the economic shutdown. He says maximizing the amount of capital you can secure is key, as well as cutting expenses wherever possible. It’s important to remember, things will return to normal—and not necessarily a “new” normal—but rather a better future that benefits all business owners when we experience a strong economic recovery.