As of mid-July, several municipalities and states are experiencing upticks in coronavirus cases, and it seems that a prolonged first wave, or even a second wave, may become a reality. While we can’t predict what that will look like for small businesses, there are ways that you can prepare your business in advance, should another round of closures or other business setbacks occur.
We’ve put together a list of steps that you can take now so that your business stays strong and by taking these steps, you’ll move forward with confidence through the work of reopening and growing again.
Here are our top four recommendations:
1. Have sufficient cash flow to carry you through full or limited closures
Financial security, in the form of sufficient working capital, provides you with breathing room for the immediate term as well as the ability to relax a bit as you examine your options to move forward.
In the first round of business closings, business owners that had funding in place well before the pandemic were much better positioned to weather the storm. For example, Saratoga Paint & Sip owners, Catherine and Mark Hover, turned to Pursuit prior to the pandemic to secure a $50,000 loan that helped them build resilience and revenue. With enough working capital to cover several months of closure, they were able to pivot their business as well as leverage new opportunities. As a result, they’ve broadened their audiences and created new income streams that will last beyond the pandemic.
There are several ways to improve cash flow. When business revenue is uncertain, using a mix of the options below is often the best approach. Even the use of one method can help tremendously:
- Get a loan for working capital. Working capital is essential for healthy businesses – so much so that a lack of sufficient working capital is the leading cause of small business financial distress. With a loan for working capital, you can rest easier knowing that day-to-day expenses are covered and funds are available to strengthen your position when you’re ready to grow again.
Keep in mind, too, that the COVID-19 recovery-related government loans were specific to things like payroll and rent and didn’t cover items like inventory. Working capital loans cover inventory and more, so they’ll help you round out your funding needs.
- Open a business line of credit. While a working capital loan provides financial peace of mind, a business line of credit is especially helpful when unexpected expenses arise and you need access to cash quickly to cover them. You may never need to use it, but in these uncertain times, you’ll be glad you have it.
Unlike a loan, which you get in a lump sum and pay off in regular installments for a predetermined length of time, when you have a business line of credit, you have a set limit and can borrow up to that limit as needs come up. In most cases, you will be required to pay interest on the borrowed balance, and when you repay the borrowed amount you may borrow from it again as long as the line of credit remains open. Your commercial bank can help you open a line of credit, and while you’ll need to meet the bank’s credit requirements, you typically don’t have to pledge collateral for a business line of credit.
- Consolidate high-interest business debt into a lower-interest loan. If your business carries debt, one of the easiest ways to improve cash flow is to refinance. This consolidates high-interest business debt into lower-rate loans with better terms. In fact, many business owners like Glenn Read, owner of Glenn Read Enterprises, have found that they free up anywhere from several-hundred to several-thousand dollars every month by refinancing.
2. Ensure that you’re ready to apply if another round of government loans becomes available.
With the Paycheck Protection Program (PPP) extended again, even more small businesses can access capital to pay for staff, rent, and other expenses. In addition, if businesses have to scale back reopening or fully close down due to a second wave, it’s likely that additional government loans will become available to help small businesses.
In order to protect your business, be sure you’re ready to apply. Based on the first rounds of funding, you’ll need the following:
- Information for your business checking account (if you don’t have one that’s entirely separate from your personal account, be sure to open one as your first step)
- Your financials, particularly your most recent business and personal tax returns
- A copy of a government-issued identification for owners, such as a state driver’s license or a U.S. passport
- Copies of any state or local business registration paperwork and licenses that are required in your line of work.
We suggest you scan your state or local business paperwork or licenses so that they’re ready to download should the need arise.
3. Stock up on personal protective equipment and related essential items.
Unless there are large-scale closures again, most businesses will resume some measure of function. This means you could have employees and customers onsite. By stocking personal protective equipment, like face masks and disposable gloves, you’ll be taking precautions against the spread of COVID-19 while meeting state and local requirements. Also, be sure to keep plenty of hand soap and sanitizer on hand.
4. Continue to improve your digital marketing and ecommerce capabilities.
In addition to sufficient working capital, many businesses found technology was key in making it through the last several months. Online platforms allowed businesses to conduct virtual meetings and ecommerce allowed businesses to sell and purchase goods, generating revenue and earning customer loyalty.
As you reopen, hone in on your online presence using digital marketing. This ensures that your website and social media sites provide status updates that promote the availability of goods and services and keep customers directly informed and engaged. Should the need arise to go back to business primarily (or only) online, preparation now will ensure a smoother transition.
Contact Pursuit: We can help you prepare and set you up for success
If you need small business funding or are simply interested in learning more, contact us today.
For more than 65 years, our team has helped thousands of small businesses get the funding and other assistance they need to launch and grow. We’re committed to helping small businesses, including those that may not meet traditional lending criteria. We provide access to more than 15 loan programs and a range of additional services to help you grow, from financial-management assistance to marketing consultation and more.