6 Ways To Rebuild Your Small Business After COVID-19 - Forbes

6 Ways To Rebuild Your Small Business After COVID-19 - Forbes


6 Ways To Rebuild Your Small Business After COVID-19 - Forbes

Posted: 30 Apr 2020 10:11 AM PDT

The COVID-19 outbreak has wreaked financial havoc around the globe, leaving many small-business owners struggling in its wake. According to the National Federation of Independent Business (NFIB), as of March 30—still early in the crisis—92% of small businesses said they had suffered negative effects as a result of the pandemic. Just 5% of small-business owners said they had experienced no effects at all.

While the short-term outlook for small businesses varies greatly by industry, it's important to consider what recovery mode will look like once the economy begins to return to a state of normalcy—or establishes a new normal. Having an exit strategy in place for after COVID-19 can help you be prepared to hit the ground running and rebuild. If you're not sure what your coronavirus exit plan should include, this guide can help with getting your business back on track.

1. Assess the Financial Damage

The first step in developing a rebuilding plan for COVID-19 is determining just how deeply your small business has been affected.

There are different layers involved, starting with the hard numbers. If you haven't updated your financial statements—such as profit and loss or cash flow statements—recently, it's helpful to do that now. You can then compare them to last year's numbers to see how much your business may be down. And while only a small percentage of business owners say they've benefited from the pandemic, 3% according to the NFIB, it's possible that the damage might not be as bad as you think.

Aside from the hard numbers relating to sales, profits and cash flow, consider other ways in which your business has been affected. For example, if you've had to lay off some or all of your employees, you'll need to factor that into your rebuilding plan. If you've cut your advertising and marketing budget down, or some of your customers have migrated toward competitors, then those are things you'll need to account for as you identify financial resources to help you recover.

2. Take a Second Look at Your Business Plan

Your business model may have worked perfectly fine pre-COVID-19, but coming out of it may mean you have to do some fine-tuning.

Specifically, you may need to consider how your business can pivot to adjust to a new normal. For example, if you previously relied on foot traffic to a brick-and-mortar location for sales, you may need to look at a digital expansion to accommodate the higher numbers of people who are shopping from home.

You're not in this alone, however. In partnership with the Small Business Administration (SBA), SCORE offers small businesses access to mentors who can offer guidance and resources as you look to build—or rebuild—your business after the crisis. Remote mentoring services are available, along with free webinars that address coronavirus-specific issues.

Analyzing how your overall industry has been affected by the coronavirus pandemic also is helpful. When looking at your competitors and the industry as a whole, pay attention to the trends and focus on finding the opportunities. Being able to find a gap or need that your business can fulfill that's been neglected up until now could be critical to reclaiming and expanding your customer base going forward.

When going over your business plan and business model, get clear on your business's strengths and weaknesses. Then, look at what was working before that may not work as well now and see where you can adjust or improve to remain competitive. Finally, don't forget to revisit your business goals to make sure they're realistic, given the current circumstances. For example, you may have set a target revenue goal for the year that will need to be scaled back now to account for the damper COVID-19 may have put on your Q2 sales.

3. Consider Whether You'll Need Funding to Recover

Unless you had a large amount of cash on hand going into the pandemic, it's likely that you may need some working capital to jump-start your business operations coming out of it.

When it comes to financing your small business during a COVID-19 rebuilding period, there are several options to consider. The SBA is an obvious choice for business loans, and there are a few programs that can help. The Paycheck Protection Program, for example, is designed to provide funding to small businesses that are struggling to retain their employees during the coronavirus pandemic. Economic Injury Disaster Loans also can help with short-term financing if you need money for things other than employee retention. 

The challenge with both of those federally mandated programs, however, is that the funding is limited. It's entirely possible that funding may be depleted before your application for a loan is ever reviewed. For this reason, it's important to consider other sources of small business funding, including:

  • Traditional SBA 7(a) loans and microloans
  • Small business term loans from banks, credit unions and online lenders
  • Business lines of credit
  • Business credit cards
  • Vendor tradelines
  • Accounts receivable financing
  • Merchant cash advances
  • Inventory financing
  • Purchase order financing
  • Equipment financing

Each option can have pros and cons. Accounts receivable financing and merchant cash advance financing, for example, can be convenient, and neither one requires perfect credit to qualify. Either could be useful for funding your business in the short term.

But they both require that you have something to leverage, i.e., outstanding invoices and credit card sales, respectively. If sales are slow or nonexistent, you might have a hard time getting approved. Alternative financing options like these also can have much higher effective annual percentage rates compared to other types of small-business loans and lines of credit.

If you're considering financing to help rebuild, keep in mind that borrowing may be competitive, as lenders want some reassurance that loans can be repaid. Reviewing your business and personal credit scores, as well as your business and personal financials can help you gauge how likely you are to get approved for funding.

4. Revamp Your Budget to Account for New Spending

Coming out of the COVID-19 pandemic, you may have to spend money before you can make money.

For example, you may need to spend money on hiring and training new employees or rehiring ones you had to lay off. Inventory may need to be purchased, and you might have to rev up your advertising budget again to start building fresh buzz.

As part of your coronavirus recovery, you should have a clear idea of what you need to be budgeting for and what you can cut to make the most of the revenue you do have coming in. The goal is to eliminate the monetary waste and get your operating budget as lean as possible so that when the chance to invest in growth comes up, you're able to take advantage of it.

An extreme step you could take during this time is deferring paying yourself a salary or taking a pay cut. Whether this makes sense depends on how well you're able to manage your personal financial obligations, depending on what you have in savings or from a spouse's income if you're married. But skipping out on paychecks in the near term could help your business to get back on its feet faster.

5. Develop a Time Line for Rebuilding

You may have several things you need or want to do to recover following COVID-19, but doing everything at once may not be realistic. What can help is having a time line to follow that prioritizes your most important actions first.

For example, your immediate goal may be securing funding for your business. Once you've done that, you can set a time line for rehiring employees, then restocking inventory and, finally, reopening your doors if your small business closed as a result of the pandemic.

As you take individual steps toward recovery, remember to track your progress. This is particularly important if you've secured capital to fund your business, because you don't want to waste time on activities that aren't delivering a solid return on your investment. In the initial stages of COVID-19 recovery, you may want to check in weekly to see what's working and what's not. Later, you can shift to reviewing your business financials monthly as things begin to stabilize.

6. Create a Contingency Plan for the Next Crisis

While the coronavirus pandemic may seem like a once-in-a-lifetime event, the reality is that an emergency can come along to disrupt your small business at any time. Using what you've learned during the current pandemic to prepare for the next crisis can help you insulate your business from future shocks.

For instance, building up liquid cash savings may be a priority for your business if you had little or nothing set aside before the COVID-19 outbreak began. You may choose to focus on paying down your debt and trimming nonessential spending to keep your budget in check. Or you may need to find ways to help your staff work more efficiently to cut operating costs.

The pandemic also may have taught you a thing or two about how important it is to be able to adapt and keep your business fluid so you can reasonably weather storms. For example, if your employees didn't have the option to work remotely before, that's something you may want to incorporate in your business model going forward.

The more outside-the-box thinking you can do to prepare for a worst-case scenario, the better. Having a Plan B (and even a Plan C, D, E and F) can help improve your business's odds of surviving—and eventually thriving again—during tough financial times.

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Wells Fargo, joins JPMorgan and stops offering HELOCs - Fox Business

Posted: 30 Apr 2020 03:32 PM PDT

In a move that is reminiscent of the 2008 financial crisis, Wells Fargo is halting Home Equity Lines of Credit, also known as HELOCs, as the coronavirus continues to hamper the U.S. economy.

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CORONAVIRUS MORTGAGE RELIEF TIPS

Ticker Security Last Change Change %
WFC WELLS FARGO & COMPANY 29.05 -0.95 -3.17%

"Wells Fargo Home Lending will temporarily stop accepting applications for all new home equity lines of credit (HELOCs) after April 30," the bank said in a statement to FOX Business. "The decision to temporarily suspend the origination of new HELOCs reflects careful consideration of current market conditions and the uncertainty around the timing and scope of the anticipated economic recovery."

Wells joins JP Morgan in the move, which is explained on the bank's website.

Ticker Security Last Change Change %
JPM JP MORGAN CHASE & CO. 95.76 -2.10 -2.15%

"Due to the economic uncertainty created by COVID-19, we're temporarily not accepting applications for new home equity lines of credit (HELOC). This will protect both you and the bank" which also advises customers who may need cash to explore mortgage refinancing options.

HALF OF WORKING-AGE AMERICANS MIGHT NOT HAVE A PAYCHECK IN MAY AS LAYOFFS SURGE

HELOCs, which are backed by the equity in the homeowners' property, can be used for renovation projects or simply cold hard cash, similar to a traditional line of credit at a bank. However, HELOC loan rates may be lower than primary mortgage rates but they still need to be paid back just like any other loan.

As of Thursday, 30 million Americans filed for unemployment and it remains uncertain how quickly, if at all these jobs will come back, as states and cities reopen businesses.

The collapse of the housing market amid the 2008 financial crisis nearly caused a massive collapse of the U.S. banking system as millions of borrowers were unable to pay their mortgages, nor sell their homes.

This time around bank balance sheets are stronger and the institutions themselves are better capitalized to weather a crisis.

Thus far the U.S. housing market appears to be holding its own amid the coronavirus pandemic as mortgage rates remain historically low with a 30-Year Fixed Rate averaging 3.23 percent.

Why are so many black-owned small businesses shut out of PPP loans? - NBCNews.com

Posted: 29 Apr 2020 03:24 PM PDT

Many black-owned small businesses are having trouble accessing the government's emergency Paycheck Protection Program loans, despite a fresh round of CARES Act funding that includes $60 billion in set-asides for minority and other underserved borrowers.

The coronavirus loan program, executed by the Small Business Administration, offers up to $10 million in loans per customer that can turn into grants that don't have to be repaid if certain rules are followed, such as using most of it for payroll, plus rent and utilities.

The program has been marred by administrative glitches and controversies since its hasty midnight launch on April 2. Funds effectively ran out in minutes as well-resourced companies — with the help of their bankers — muscled their way to the front, while mom-and-pop businesses were left wondering whether they even had a place in line.

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Despite good intentions, the government's emergency relief program leaves many feeling left behind. Black business leaders say the small-business programs need to do more to reach underserved borrowers.

"I hear a lot about making America great again. In order to have a great America, there has to be a great black America. In order to have that, we need great black businesses. We need access to capital," said Ron Busby, president of U.S. Black Chambers, which advocates for African American businesses and chambers of commerce.

Despite good intentions, the government's emergency relief program leaves many feeling left behind.

While the new set-asides are one step, some program rules leave out a large number of "community-development funding institutions" that could participate (the government maintains a searchable database of certified institutions here). There also needs to be funding for training and education in how to apply for the programs, Busby said.

Baltimore café owner Terence Dickson is desperately calling everyone he knows for some kind of help with his relief applications. He's down to his last few hundred dollars in the personal savings account he's been using to pay his staff. He has tried Bank of America, with which he has a business checking account; his personal bank; politicians who have used his café for campaign events; and even the Maryland lieutenant governor's office.

"The financial industry has shown me no love for 20 years," he said of his challenges qualifying for traditional bank loans. But he feels this program should be different. "It's our goddamn money. It's taxpayer money."

Terence Dickson is the owner of Terra Cafe, a restaurant in Baltimore that is embedded in the local community and offers food, music and arts to its clientele. He applied for the Paycheck Protection Program the first day it opened but is still waiting for relief.Andre Chung / for NBC News

At his Terra Cafe, a community-focused restaurant offering Southern comfort and soul food, along with an arts and events space, Dickson has been trying to pivot with the times since the coronavirus pandemic took hold. He's increased delivery operations and tried to get the hang of Instagram and social media marketing, but sales have still plummeted.

Dickson is well aware of the numerous other programs besides PPP, such as the Economic Injury Disaster Loan, another type of relief offered through the SBA, as well as state, local and philanthropic grants. But neither he nor his fellow business owners in the "Black Wall Street" of Baltimore have had any success.

"I'm tired of hearing about the money. I want to see the money," Dickson said.

Following inquiries from NBC News, Bank of America discovered that Dickson's PPP application didn't appear in the system, and it added him in.

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Experts say the differences in access, while not intended by the program's drafters or executors, are the results of social and economic inequities that must be taken into account by policymakers.

"There is a structural flaw in this program. It uses banks as middlemen. Any time you create a big program and give banks the ability to choose which customers it prioritizes, you're going to have disparities," said Mehrsa Baradaran, a law professor at the University of California, Irvine. "Credit disparities are where past injustices lead to present disparities."

According to data from the payroll and human resources company Paychex, the top five industries hit hardest among black-owned businesses in terms of wages are accommodations and food services; arts, entertainment and recreation; manufacturing; construction; and transportation and warehousing.

Devon Mack, Juan Nance, Themar Long and Terence Dickson prepare free lunches at Terra Cafe. Andre Chung / for NBC News

Last Friday, the White House organized a call with African American stakeholders, lenders, business owners and community leaders after President Donald Trump signed a bill authorizing additional coronavirus relief funding.

With over 700 participants listening in nationwide, Ashley Bell, regional administrator for the SBA's Southeast region, acknowledged difficulties with the PPP program's design when it came to reaching black businesses.

Those that qualify need to apply quickly, Bell said, and reach out to their SBA regional directors if they need a list of nearby participating banks, including those taking new customers.

"You want to make sure you call your bank today," he said. "If you want money tomorrow, call today."

Devin Guinn, who owns a landscaping company in Dallas, is a black business owner. He and his crews are still out there planting trees and installing greenery for municipal and business clients. He was able to apply for a $10,000 advance loan but is still waiting to hear about his PPP application. He disagrees with the approach of a public program run through private banks that favored those with existing relationships.

"It's completely unfair. This is an economic disaster affecting people no matter what race, religion or socioeconomic level," he said. "That's a form of discrimination that plays into the history of America."

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