No doubt you're watching the progress of the stimulus bill as I am and wondering how it may impact your business. There's a lot of speculation out there on just what could be a part of the final version, who will qualify and how much it will truly help. Even if it does pass soon and without significant changes, many of the stimulus provisions will take weeks or longer to reach your business with any real impact.
But things are changing now, so what can you do?
1. Apply for a SBA loan
You don't need to wait for the additional small business loan provisions of the stimulus package to be finalized. You can apply now for an Economic Disaster Recovery Loan. On March 19th, the Small Business Administration approved an Economic Injury Disaster Loan declaration for Arizona that will help small businesses impacted by COVID-19. Individual businesses can be eligible for up to $2 million through the program. For more information, visit the SBA website, the office of the Governor website, or click here to apply.
If you expect your business is one of the many that simply needs a temporary cash infusion to make it through a difficult couple of months, then beginning the process of a SBA loan is well worth your time. It can take weeks or months to be approved, so getting your documents together now will help speed up the process.
A word of caution: these are loans, not grants. Do not count on meeting the currently vague criteria for having any of these loan balances forgiven in the future. Go into it with open eyes expecting to repay this debt.
2.Consider the impact of layoffs vs tax credits
You have some hard choices to make: Whether to lay off employees now, or keep your staff and navigate the changing parameters of various labor related tax credits. Obviously, if you need to cut staff in order to adapt to reduced demand or temporarily closed doors then your options may seem pretty clear.
However, if you're on the fence and wondering which option is best for your business and your employees please feel free to reach out. The choice you make now will impact your business in the near future. If you lay off a large section of your workforce they will invariably file for unemployment, which means next year and for several years following you will be seeing much higher unemployment tax rates for all wages you pay. If, on the other hand, you choose to keep some or all of your staff you'll need to have a clear understanding of what types of tax credits and tax postponements you may be eligible for to help offset the cost.
See the IRS News Release IR-2020-57 here for some plain language on the already passed tax credits for paid leave. Keep in mind the official IRS guidance on the "how" of these provisions, specifically addressing questions such as eligibility for business owners/employees, forms to be filed, or elections to be made, has yet to be issued.
Also remember there's language in the pending stimulus that states some of the terms of small business loan forgiveness expressly require retaining employees during this time.
3. Build up your personal reserves
Leading financial experts have consistently recommended we each have 3 - 6 months of living expenses set aside in an emergency fund. But who's had time for that? You've been reinvesting any cash surplus in your business, right? Besides, it's the business' survival you're concerned about.
So why is this important now? We all make better decisions when calm. Give yourself the breathing room to make sound, well considered choices about operating, funding, scaling or closing your business. When you can see your choices from a place of (relative) security more options appear. Often ones you're not seeing while in a panic.
This may be easier said than done, especially if the business has already slowed down and you're concerned about taking any compensation out. Again, some hard choices may be on the table. Consider personal household budget cuts. What would you have considered a necessity 2 weeks ago that now may be viewed as a luxury (gym membership anyone)? Are there assets you can easily convert into cash? It is tempting, but try to avoid including available credit as part of this "cushion." To be a true emergency fund it must be in cash, easily accessible with no strings attached.
You might also want to check out Dave Ramsey's "A Message of Hope” which aired Thursday March 26th and is still available on his site. It is said to include "answers to your top questions on money, career and life during this time of uncertainty."
Again, if you have questions about small business resources, tax credits and offsets, budgeting, financial forecasting or planning during this time please reach out. When the stimulus bill comes in I will no doubt be posting on the aspects which impact small business the most.
Take care and be safe.