Congress acted faster than it usually does in passing the CARES Act, which provides more than $367 billion in loans to small businesses, including Paycheck Protection Loans of up to $10 million for qualified small business owners who keep employees on their payroll. And, the SBA has already been fielding a record number of applications for Economic Injury Disaster Loans of up to $2 million each, which now carry a $10,000 advance that does not have to be repaid.
As businesses are closed all across the country, your shop has probably already been impacted by mandatory closures or a drop in business — or you’re worried it will be. It’s a good idea to start considering applying for funding under these programs. As you weigh the pros and cons of the government funding, here are eight things you should start doing to ensure you’re setting you and your business up for success during this time.
- Connect with vendors. You probably already have payment terms with many of your vendors; now is the time to talk with them and see if you can extend terms while you wait for funding—an extra 30 or 60 days might help make a big difference. Keep them in the loop on your efforts.
- Call your landlord or lender. If you rent your space, be proactive about contacting your landlord to see if you can reduce or defer rent while you wait for your loan or other assistance. If you own commercial space and are making loan payments, it may be possible to refinance. Or your lender may be able to work out a reduction or deferment on payments for a period of time. These aren’t easy conversations to have, but they are essential.
- Check your business and personal credit. Disaster loans currently require “acceptable credit,” and include a personal and business credit check. SBA loans for less than $350,000 typically require the lender use a FICO SBSS score. Though it’s unclear yet what type of credit check will be required for Paycheck Protection Loans, lenders will be looking at credit risk. While the current programs recognize business owner’s credit may deteriorate in the short term, you’ll need to provide an explanation for prior credit problems. Given the hardship for money now, don’t pay to check your credit. Free services like Nav are available online to easily access both personal and business credit.
- Review expenses. Small expenses may feel like moving a pebble when you’ve got a boulder sitting in front of you, but every dollar you can save is one you can use to keep your business alive longer.
- Get organized. You’re going to need to be able to document payroll costs for the past twelve months to determine how much you may be eligible to borrow under the Paycheck Protection Program. You’ll also need to be able to document mortgage interest, rent, payroll costs, and utilities for a specific period of time if you want to apply for loan forgiveness available under that program. If your books aren’t up to date, talk to your bookkeeper or accountant as soon as possible to get information updated.
- Work on your 2019 taxes. Although the deadline to file personal and business taxes has been pushed back significantly, you should use this extra time to get up to date on your accounting and bookkeeping. You’ll also want to ask about the Employee Retention Payroll Tax Credit, which provides a refundable tax credit to eligible employers that keep employees on payroll, whether your business qualifies and whether that’s the best move for your business. (Note: The new legislation says an employer generally can’t take advantage of both the payroll tax credit and Paycheck Protection Act loan forgiveness, so make sure to discuss options with your tax or financial professional.)
- Consult (free) experts. If you haven’t taken advantage of free help from SBA Resource Partners, now is the time to do so. Small Business Development Centers (SBDCs), SCORE, and Women’s Business Centers already help small business owners with free consulting and education. They’re ramping up services to help small business owners apply for these loans and to answer questions through online webinars, office hours, and other events. Find local help here.
- Explore other financial options. You’re no doubt worried about your employees and your business, but you need to take care of yourself too. Bob Sullivan is a journalist who has covered hurricanes and other disasters. He’s also a part-time musician and author of the book, The Barstool MBA: Why Running A Bar Beats Business School. According to Sullivan, one of the most important things to do right now is to fight despair. One way to do that, he suggests, is to “apply for everything.” Researching and applying for grants, loans, and other assistance can help you feel like at least you’re doing everything you can to keep your business alive.
Here are some specific programs to check out:
- Some states and cities are offering low-cost bridge loans or grants.
- Companies like Yelp and Facebook are offering grants and/or free advertising or services.
- Kiva is offering a 0% loan up to $15,000 with a crowdfunding component.
By Gerri Detweiler, who has been guiding individuals through the confusing world of finance and credit for 20+ years. She is the author or coauthor of five books, including her most recent, Finance Your Own Business: Get on the Financing Fast Track. Today, Gerri serves as the Education Director for Nav, an online platform that matches small business owners to their best financing options and gives free access to personal and business credit scores.
Photo courtesy of Helloquence on Unsplash
