Don’t wait until it’s too late!
As a small business owner, do you have a plan to combat the impact coronavirus is having on small businesses all over the world
I’ve read a lot of articles on how a small business can prepare for the coronavirus and they’re all the same:
- Stop business travel
- Practice better hygiene
- Discourage handshaking
- No large gatherings
- Require sick employees to work from home
While that’s all sound advice, what about the financial impact this virus will have on your business. Because unless you sell or produce toilet paper, hand sanitizer, or cleaning supplies your small business will be impacted.
My goal in this article is not to spread fear but to prepare your business for the coronavirus impact.
Coronavirus Impact on Your Business
The coronavirus is causing economic uncertainty for many businesses, but it’s small businesses, who are the backbone of our economy, that are being hit the hardest.
Here’s how your business may be impacted, if you haven’t been yet:
Slowdown of Business
Consumer spending is down. Fear is causing people to stay inside and avoid social gatherings. This in affect means less foot traffic.
If you’re B2B, your customers may be spending less in order to better manage their cash flow situation.
With the Spring and Summer travel season upon us, the impact is starting to be felt. People are cancelling or delaying their vacation plans. This will put a major burden on those companies that do most of their business during these seasons.
Bottom line is individuals and companies are spending less, resulting in less revenue for your business.
Companies who ship goods from China are reducing the number of shipping vessels in an attempt to slow down/stop the spread of the coronavirus.
In addition to reduced vessels, China has shut down factors in areas affected by the virus. Other countries are starting to follow suit. This disruption in manufacturing may cause a delay or cancellation in the import of goods and materials.
As a result of cancelled or delayed shipments, you may be forced to outsource somewhere else. I’m sure you negotiated a great price and now must find another vendor, at potentially a higher cost, to produce those goods
Another example is your healthcare cost. This may increase if you pay a portion of your employee’s premiums. They may be seeking medical treatment if they are infected by the coronavirus.
How Your Business Can Prepare for Coronavirus Impact
To lead your business through the coronavirus pandemic, you need to be thinking both short-term and long-term solutions. You don’t want to make any decisions which could negatively impact your long-term growth.
Here are some tips you need to consider.
Ensure Steady Cash Flow
Cash flow is the lifeblood of all small businesses. You may want to consider getting a business loan to guarantee you have cash on hand.
You need to look at where to cut expenses. Question any expenditure which doesn’t make business sense. Do you have any “nice to have” but not necessary type of costs? These should be the first expenses you cut.
You may need to make some tough decisions in the short-term such as cutting employee hours or making delayed payments.
Consumer are nervous but how can you reassure them? Understand how the coronavirus fear is keeping customers away. Then come up with a strategy to combat this and market this to consumers.
For example, if you own a restaurant, can you do curb side pickup or delivery service. Have your employees tested and use that in your marketing?
Now is the Time to Get Funding
Your best defense against the coronavirus is money in the bank. If you have the qualifications, now is the best time to get a business loan while your cash flow is steady.
Even if you don’t need financing now, you’ll have an easier time getting approved before your business is affected. One of the qualifying factors that lenders look at is the steadiness of your cash flow. Negative balances, a fluctuating cash flow, or late payments due to lack of cash may impact your ability to get approved for funding.
Here are a few funding options to consider:
Business Line of Credit
A business line of credit is an option that will provide you the flexibility to have money available should you need it. Yet you will only pay interest on the amount you draw.
You can draw from your line of credit as needed to cover expenses that may arise.
It’s best to get approved and funded for this option while you still qualify. If your business revenue has a significant decrease month over month, or you have a few negative balance days due to slower business, then this may hurt your chances of getting approved.
As long as you meet the following requirements, you may be eligible for a line of credit.
- Time in Business: At least 2 years
- Credit Score: At least a 620
- Revenue: Need to be profitable over the past year
On March 11, 2020, President Trump asked Congress to increase the funding for the SBA (Small Business Association) funding program to $50 billion. The SBA Loan Program provides low interest loans to small business owners. The SBA doesn’t lend directly to small businesses, instead it backs loans made through lenders. You can get an SBA Working Capital Loan through Small Business Funding.
However, while President Trump’s announcement may open more available funds for the program, you will still need to meet the strict guidelines.
- Time in Business: At least 6 months but preferably at least 1 year
- Credit Score: At least a 650
- Revenue: At least $25k a month
- Other Requirements: Submit most recent 2 tax returns
Term loans are design for a more established business. Thus the requirements are more stringent. But this loan type will have a fixed APR with monthly payments.
Here are the minimum requirements:
- Time in Business: At least 2 years
- Credit Score: At least a 640
- Must be profitable
- Other Requirements: No recent bankruptcies
Working Capital Advance
The advantage of a working capital advance when compared to an SBA Loan or Term Loan is with the timing to receive funding. In most cases, with a working capital advance you can have funding within 72 hours. SBA and Terms Loans will take anywhere between 2 – 4 weeks, sometimes longer. Also this type of loan is ideal for a business owner who may have a bad credit score.
The requirements are as follows:
- Time in Business: At least 3 months in business
- Credit Score: At least a 500
- Revenue: $8k month minimum
So anticipating and reacting early is the best way to prepare your business for the coronavirus impact.