In times of economic uncertainty, small businesses bear a lot of the burden. As communities continue to stay quarantined with only essential businesses open, a huge financial strain is compounding on many of the nation’s smaller businesses.
These events are largely outside of your control. COVID-19 is here and our economy is in for some rough times ahead. With so much happening in the world, it can seem like your business is getting lost in the shuffle, but you do have options. Acting quickly and carefully can mean the difference between closing your doors and seeing this disaster through to the other side.
The CARES Act
You may qualify for a loan from the U.S. Treasury. The Coronavirus Aid, Relief and Economic Security Act is designed to help America’s small businesses weather the coronavirus pandemic and resulting economic downturn.
This loan program is intended for small businesses and generally requires that a company have 500 employees or fewer. The primary purpose of the CARES act is to help small businesses retain employees, and so the government may forgive loans if your business retains payroll through the crisis or reestablishes payroll soon after. You may qualify for a federally-guaranteed loan if you are:
- A sole proprietor
- A small business of fewer than 500 employees
- An independent contractor
- A qualifying veteran, tribal or nonprofit organization
How to apply
There is a cap on this program. The administration plans to provide a total loan amount of no more than $349 billion, so while applications may be submitted until June 30, latecomers may be denied if the loan allotment has run out. The Treasury’s website provides updates on this program, further information about business qualifications and instructions on applying.
Readjust your business strategy to minimize spending
One of the more uncomfortable aspects of economic troubles is how they force difficult decisions. This is unfortunately a time when your business will need to hit the pause button on a lot of exciting possibilities.
New programs, software, and even hiring should all be put on a temporary hiatus. If it comes to salary cuts, look at your top-paid employees first and talk with them about the possibility in an open and honest manner.
You might need to scale back entire aspects of your business. This is a time when many businesses may need to retreat back into themselves, returning to a smaller and more focused state.
Creating a cash-flow budget
Before you start cutting or freezing any expenses, you’ll need to get organized. Your business already has a budget, now it’s time to organize your costs into what’s known as a cash-flow budget.
Do this by separating your recurring and planned expenses into two categories: fixed and variable. Fixed costs are the ones you need to pay to keep the lights on and the company’s name in the yellow pages. Everything else is variable. Start looking at your variable costs and ranking them based on priority. Can you order fewer raw materials? How can you scale back on labor and production costs?
Delay your tax payments
Normally, taxes are something you don’t wait to pay, as penalties can be stiff and deadlines are rigid. Yet the federal government has issued an unprecedented three-month extension of the tax deadline, moving tax day from April 15 to July 15. While you should still file your taxes immediately, you may be able to delay paying any taxes owed.
Small businesses qualify for this tax extension if they owe $1 million or less ($10 million for C-corporations). This relief measure only applies to federal income taxes, so make sure you are still up to date on any state or payroll taxes you may owe.
SBA Disaster Assistance
Similar to the CARES Act, you may qualify for a disaster loan from the Small Business Administration. The SBA is a federal agency dedicated to helping advance the interests of small business owners. In the wake of declared emergencies, they offer low-interest loans to small businesses, homeowners and renters.
Applications for COVID-19 Economic Injury Disaster Loans are available to all small businesses in every state, Washington D.C. and all U.S. territories. This program provides working capital loans of up to $2 million dollars. Visit the SBA’s website to apply or view more information about qualifications.
The actions you take now will have a great impact on your business’s survival. It’s unclear how much longer we will be in this situation, so prepare to buckle down for the long haul. The economy will recover, and with careful strategizing, your businesses will recover with it.