Many small businesses are facing a big cash crunch these days due to the COVID-19 pandemic. As a small business owner, that’s bound to make things seem stressful and out of control, but you do still have options. With the right strategy, you can address your low cash flow and potentially find ways to bring in enough money to get by until the pandemic eases and business returns to a more “normal” level.
Here are six tips to help stay the course during this trying time.
1. Reduce or Eliminate Any Non-Essential Costs
Among the first areas of focus during a cash crunch is to stop as much money as you can from leaving your business. If you have costs that aren't essential to the survival of your business, it's time to cut them out or reduce them as much as possible. You may be able to return to your previous levels of spending after the crisis has passed and business has returned to normal, but for now you should do everything you can to cut out any non-vital costs.
2. Think Creatively
Don't wait around for things to get better, or for help and support to fall into your lap. The truth is that you may need to “think outside the box” in order to keep your business afloat. Having a cash crunch isn't fun, especially for a small business that's operating without a massive budget, but the sooner you make a new plan and get to work on it, the better off you'll be. Whether that means pivoting to offer new services or products, expanding your online presence while storefronts are shut down, or switching to a delivery or “curbside” model, getting creative in order to position your business for future success is critical right now.
3. Be Prepared for Asset-Based Lending
As a small business owner, you’ve likely heard about PPP (Paycheck Protection Program) loans, which are federally-guaranteed loans to small businesses that don’t require collateral. However, once funding for the program is exhausted, there is no guarantee that the government will replenish it. What this means, is that many small businesses may be left out. The good news is that lenders are still offering small business financing outside of PPP loans, but they might not be lending money as freely as they once did. There’s a very good chance that you’ll need to back up the loan amount you want with strong assets. By offering up collateral for your loan, you'll be more likely to get the help you need to keep your business moving forward -- or at least not going backward -- until the world returns to a more normal routine.
4. Take Advantage of Extended Tax Deadlines
You don't have to pay your taxes until July 15th this year, and that means you could potentially use some of the money you have set aside for taxes, for critical business payments if necessary. That money could help keep your business afloat, but remember to only use what you need to pay important bills. Using that money right now is certainly not ideal, and you’ll still owe your taxes in July, but it may be a solid option if the survival of your business depends on it.
5. Look Into Emergency Funding and Disaster Loans
The SBA and other agencies are offering a lot of disaster loans and emergency funding options during the pandemic, and there are also grants available from many places. Ask around, do your research, and apply for everything you can. If you cast a wide net with your applications, you'll have a better chance at securing the funds you need to get your business through these tough times.
6. Maintain Good Relationships With Lenders
If you can't pay make a loan payment on time, make sure you contact your lender before the due date. Explain your situation with them, and ask about any deferment options that may be available to you. Many lenders are willing to work with their customers right now, because they understand the hardships that COVID-19 is causing small businesses.
Even if you've done all the things on this list already, don't give up looking for additional options for assistance. New opportunities become available all the time, from more loan funding to additional grants. If you keep searching, you'll likely find even more things you can apply for in the coming days and weeks. Your small business can get through this pandemic and its associated cash crunch, with some smart decisions for the future.