Small businesses across the nation are feeling the effects of the coronavirus pandemic in significant ways. With all non-essential companies forced to close their doors, many small business owners are scrambling to come up with solutions to pay rent, pay their employees, and keep their business afloat.
While it is impossible to prevent crises from occurring, there are some things small businesses can do to lessen the economic impact. That’s where Rene Flores comes in. Flores’s experience as a commercial loan officer has spanned the recession of 2008 and the effects of Hurricane Harvey in 2017. To learn more about how to survive a small business disaster, we asked Flores to share some of the things he’s learned over the past two decades in banking.
Here are some of the helpful tips Flores shared on how to keep your small business alive in the midst of uncertainty.
Reach Out to Your Accountant and Financial Advisor for Budgetary Measures
One of the first steps that you should take when faced with financial hardship is to take a look at where you stand. “It is always easier to operate knowing that you are working with the latest information,” Flores states. If you have an accountant or financial advisor that you work with, their counsel will be extremely beneficial in times of disaster and uncertain times. If you don’t have an advisor already in your corner, ask for recommendations from other business owners that you trust.
Understanding your budget and expenses will allow you to see things that aren’t necessary at the moment. “Maybe you have been providing “extras” to you or your staff.
You need electricity and water, maybe not the unlimited lunch and snacks,” Flores explains. “Once you know what variable expenses you might be able to trim, you can move forward with more certainty.”
Seek Assistance from the Direct SBA Disaster Loan Program
When it comes to seeking disaster assistance, Flores urges everyone to consider all options. “Don’t exclude anything because of what you think you have heard. Do your homework and again seek good counsel from your circle of advisors.”
Of course, most small businesses will start their research with the U.S. Small Business Administration. “The SBA program will be one of many relief programs for you to consider,” Flores notes. The SBA offers low-interest loans and programs for small businesses located in regions affected by declared disasters.
These SBA disaster loans can be used to pay for repairs or replacement of physical assets or to cover operating expenses due to economic injury in a declared disaster. However, Flores reminds us that, as with any loan, it’s important to be aware of all program responsibilities and requirements before applying.
During certain disasters, the federal government may also enact limited-time programs. In the case of the coronavirus, for example, the government launched paycheck protection loans aimed at helping small businesses offset payroll costs. Be sure to always check on the Small Business Administration’s website for the most recent programs and services.
Explore State and Municipal Loan Programs
Aside from federal loan programs, you’ll want to be sure to check out what your state and local government is offering. Often, these programs help bridge the gap for businesses waiting on federal aid.
For example, amid the coronavirus crisis, the City of Austin passed a plan to offer low-interest loans up to $35,000 to local businesses. Loans provided by smaller government bodies are usually less than what the federal government lends. Still, they can be used to cover immediate expenses such as payroll, bills, and fixed debts.
Funds available vary from place to place, and in many cases, loan applications are approved by loan review committees. Most often, approval is based on many factors. These include:
- The loan applicant’s ability to repay the loan
- Number of jobs that will be retained
- Current cash flow, collateral, or security available
- Total program funds
It helps to do a little research to explore all of the economic injury disaster loans available to you and your business.
Discuss Repayment Options with Your Loan Provider
You may think that loan repayment is a rigid plan that has no flexibility whatsoever. However, this isn’t necessarily the case. “Understand that lenders are people too,” Flores explains, “and unless they hear from you, they may never know of challenges that you are experiencing or going through.”
In unique situations and times of financial crisis, open communication between you and your lender is crucial. Some lenders may already have procedures in place to help out small businesses, such as Amplify Credit Union’s commercial deferment plan, in response to the coronavirus crisis. “Most lenders will be willing to work with you to find a solution that works for both parties,” Flores reminds us.
Consider Alternative Financing Platforms
Loans aren’t your only option when it comes to emergency financing. Flores has observed that nowadays, people are turning to other methods to raise cash. “Crowdfunding is now just another source for business owners to tap into,” he mentions. Platforms like GoFundMe are easily shared through social media, allowing businesses to generate support quickly.
Unlike loans, money raised from crowdfunding doesn’t need to be repaid. “This is perhaps a good option for smaller loan requests,” Flores notes. If your business is looking for a small amount to cover some necessary expenses, this may be the route to go. As a bonus, crowdfunding campaigns can draw attention and support for your business from new folks who were unaware of you beforehand.
Consider your existing network of friends, family, and business connections. Small businesses are there for their communities, so frequently, communities are happy to rally around popular local shops in times of need.
As with any financing, though, Flores recommends you read the fine print. “Read all of the rules and requirements,” he concludes, “so that you can make a well-informed decision.”
Nationwide crises don’t have to spell disaster for your small business. Consider all the options you have available and consult with financial professionals to find what works best for you and your business. In times like these, remember— we’re all in this together.
Need a little help with your small business?
Talk to the Amplify Credit Union lending team about your financing options.