Covid-19 Cash And Financing Considerations

Big decisions about Covid-19 cash and financing considerations could be looming in your future. As bicycle retailers have been experiencing robust sales around the country this year, it is shocking to the system to pivot to a situation of preparing for some tough times ahead. All but the luckiest few will be impacted in at least some ways very shortly. More and more states are locking down how much we can and should be moving around with “stay at home” orders. Even if you are deemed an essential business, most shops operating under this scenario are going to see a decline in sales due allowing far fewer or even no customers in the store and taking orders over the phone, internet, or one at a time. Many are also pivoting to more of a service-focused business plan . Some have decided to close altogether. You will have fewer dollars coming into the business, and it is time to examine your options for having the capital you need below.

Cash

If you have enough of it, you can probably ride out the next 30-90 days. That’s the timeframe I feel right now makes the most sense to prepare to get through this crisis. No one has a crystal ball right now, but all the models show that is the case. After this passes, the economy will potentially come back very strongly, depending on several factors. But during the lead up to the peak of this people will become wearier and adhere more strongly to the distancing and stay at home orders. Cash reserves are always the best security blanket. If you do not have the cash, read on. 

Credit And Financing

 If you have a line of credit in place, be very careful with how much you tap early on so you have some reserved if this goes longer than any of you would like. Another consideration is to do some forecasting of what it is going to take to keep you in good standing with all of your accounts payable, so you are ready to get going as soon as things start popping. If you need to secure financing, get started by getting your financials cleaned up for February, so you have new P&L and Balance sheets ready to provide. Get your last couple of tax returns available as well. As of this writing, the federal stimulus package looks like it is a go. The devil will be in the details of how strict the requirements will be to access those SBA loans. Do not assume the banks will just be handing out money because you have a business. I guess that you will still need to go through some application and approval process, which hopefully is fast and painless, but be ready to have to provide at least some necessary information detailed above. Try to be realistic with your budgeting and forecasting to determine your exact needs based on your best guesses as to the time and severity of your business’s impact. 

Debt 

Consider how much you are willing to take on to overcome this crisis and set some limits for yourself. Taking on debt is a big decision, and you should project 12-18 months out to see what cash flow looks like and run some bad, functional, better, best style scenarios to verify you are comfortable being able to service the debt you may take on. 

Relief Options

Relief options are changing day by day and depends on what state and even county you reside in. I have seen sales tax holidays begin to be implemented for taxes collected in February and March in some places. There are going to be what appears to be an endless amount of different programs, and you need to keep up on those. One significant and excruciating way to preserve cash is to examine your most significant expenses. Payroll is the top of that list. While it is agonizing to begin cutting staff, it is also one of the first things you can do to preserve your cash. The unemployment and federal payments that apply to almost everyone at this point look like they should do an excellent job keeping your staff taken care of. Do not take any payroll expenses on that you can refer to these programs. 

Finally, stay on top of what is happening for ways you can weather this storm. Every small business will be going through these same things, and I feel confident that with some perseverance and use of available options to get through the following months, you can come out of this and move forward. Brandee Lepak, the NBDA President, put together this great list of things to do and resources to be aware of here. Be Well! 

Critical Covid-19 Resource Page

Words by David DeKeyser