Top 3 Strategies to Find Capital to Keep Your Business Going During Covid-19

If your business was forced to shut down due to Covid-19, you are not alone. businesses across America both large and small are all facing the same question, “How can we find a way to offer our product or service to customers to generate income and apply for a federal grant, SBA loan to make up the difference till this all ends.” The good news is, there is a lot of strategies and resources available to help ease the burden of this unforeseen event and many more in the works. The bad news, this is a real game of survival and only those who act fast and prioritize cash resources will survive. Treat this event like its a national natural disaster and you have to survive on whats in your bank accounts for the next three to six months.

1. First Get Real About Whats in the Business Bank Account

Cash forecasting is a reality that people must faced right now. You need to determine how much cash is in the bank and then forecast out how many weeks or months it will take before running out of cash if you continue paying all expenses with a limited or stopped revenue stream. If your business:

• Operates on thin profit margins
• Has only enough cash to cover 1–2 months of bills
• Is an invoice based business with more money owed to you than in the bank

If you fit into any or all of the categories above you need to start negotiating with landlords and suppliers today. If you have customers who owe large balances that are already late, chances are you can count that money not being collected till this crisis is over. Don’t waste too much time with them because if they were late payers before Covid-19 they are not going to prioritize your business now, so don’t go down that path of frustration right now. With these late paying customers talk to your attorney to make sure you don’t let any legal remedies expire like liens or statues of limitations. Focus on negotiating your biggest expenses like rent, utilities and any expense that may half whats in your bank account. The goal is to stay liquid for as long as possible. For those businesses that do have at least six months of free cash flow, don’t be a hero, you too should negotiate payment arrangements. Since you have a good cash base you should negotiate better payment terms, because only you know whats in your bank account and why should you be penalized for having a financial cushion. Also, you don’t know how long this will last so you may easily burn through your cash base without even realizing it.

Find out if your landlord deferred the mortgage payment (if they have one)and if they were able to defer a mortgage payment ask if you can be forgiven for a months rent, especially if rent is your largest expense. There should be a national rent forgiveness program for both residential and commercial rents. Essentially the government is asking business owners to close up for a month or longer, but continue to pay rent and all other expenses as if your revenue stream has not been affected. In my opinion, landlords with and without mortgages should be allowed to take rent that is not paid and be allowed to applied it as an expense deduction. This would solve the rent payment debate and allow businesses to focus their time and energy on reducing other expenses and shoring up income.

2. Get Creative with Generating New Sources of Income

For restaurants and food service venues this means going way beyond offering takeout orders. While your venue is closed to the public, now is the time to start to thinking about how to offer a unique experience to your customers. for example:

A one year cut the line pass (Priced accordingly)

Reach out to loyal customers via Instagram to book massive private parties at a discount (Kids still need to celebrate graduation parties)

Plan a massive food tasting for a seasonal menu to prebook now

Offer a unique solution that will blow away the competition

This is a great way to bank cash and get your customers excited and looking forward to when this house arrest ends. Also, be honorable and only take peoples prepayments if you can absolutely honor these offers in the future. Again, this is a great cash injection option if you successfully negotiate you expense obligations.

Once you negotiate your expenses down and come up with creative ways to generate new income streams there are several federal programs that act as a grant and do not need to be paid back if you follow the requirements.

3. Find and Apply for Federal Grant and Loan Based Programs

What is the Paycheck Protection Program and how do I qualify for PPP loans? You are eligible for PPP loans if your company has fewer than 500 employees and was in business as of February 15, 2020. Unlike with traditional U.S. Small Business Administration loans, nonprofits, sole proprietors, people who are self-employed, and people who make their income as independent contractors are eligible. The PPP loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.

What is an Economic Injury Disaster Loan, or EIDL, and how do I qualify? As part of its coronavirus aid efforts, Congress tweaked up this loan a bit while relaxing some of its usual requirements usually meant for businesses affected by hurricanes or other natural disasters. EIDL offers businesses affected by Covid-19 with low-interest, long-term loans of up to $2 million that borrowers can use on a variety of expenses, including rent. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.

Economic Injury Disaster Advance

In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000.

This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application. This loan advance will not have to be repaid.

Apply for the Loan Advance here.

State Grants for Small Businesses

New York City’s Small Business Service has compiled resources for small businesses affected by COVID-19, including a $75,000 zero-interest loan to mitigate potential profit loss, and an offer from the City to cover up 40% of payroll costs to help retain employees.

Washington’s Employment Security Department has adopted emergency rules making it easier for workers to secure unemployment benefits specifically for employees who have been asked to reduce their hours.

San Francisco’s Office of Economic and Workforce Development has assembled resources offered from a variety of the city’s agencies, including multiple city-based local funding sources, information on the City’s initiative to boost paid sick leave beyond existing policies by 40 hours, information on 60-day extensions for filing taxes.

Private Grants by America’s Largest Corporations

Facebook is has launched a program that will provide “$100M in cash grants and ad credits for up to 30,000 eligible small businesses” in over 30 countries. Additionally, they’ve launched a “Business Resource Hub,” which is providing small business owners free information about coping with COVID-19, best practices, and a downloadable self-assessment tool.

As businesses across Seattle suffer amid the new coronavirus outbreak, Amazon is offering $5 million in grants to the small businesses near their campuses. A release from the tech giant says qualifying small businesses are eligible.

Only small businesses qualify, and they must:

• Have fewer than 50 employees or less than $7 million in annual revenue
• Be service or retail establishments generally open to the public
• For example, dental establishments and corporate offices do not qualify
• Not be publicly traded corporations

Priority will be given to businesses close to Amazon campuses where there’s evidence of decreased revenue.

Businesses do not need to pay back the funding.

Although not a grant Google is offering $340MM in Google ad credits available to all SMBs with active accounts over the past year. Credit notifications will appear in their Google Ads accounts and can be used at any point until the end of 2020 across our advertising platforms.

Zero Interest Loans

The nonprofit Kiva has a track record that includes helping more than 2.5 million entrepreneurs access non-exploitative capital. For new applicants, Kiva can lend up to $15,000 at 0% interest, with up to 36 months to repay. For businesses whose timing has been ill timed — just starting up when the pandemic broke out — these loans don’t require a minimum credit score, nor years of cash flow documents.

In conclusion

If you have partners or help, one of you should focus on negotiating with suppliers and landlords and the other should focus on accessing as many loan and grant resources as possible. If you are a solopreneur, focus on getting all your loan and grant applications in first, then negotiate with suppliers and landlords. In both instances getting the applications in is priority number 1. Then you will know how to proceed in negotiating with creditors if you are approved or not approved. Either way you will have accurate answers for your creditors.

Right now there have been complaints about sites crashing and a banks making requiring that you must already have a pre-existing business lending and business deposit relationship with a bank as of February 15, 2020. A Business Credit Card, line of credit or loan may be the lending product used. Below is an example of Bank of America’s steps to applying for the PayCheck Protection Program:

1. At Bank of America, the federal Paycheck Protection Program will be administered online only.
2. Clients must have a Business Online Banking account. If you do not currently have a Business Online Banking account you must sign up for Business Online Banking as soon as possible.
3. Apply for the federal Paycheck Protection Program at www.bankofamerica.com/SBResources beginning on Friday, April 3rd.
4. After completing the application process, you will receive online confirmation of the submission.
5. Bank of America will process your application as soon as possible.
6. We will contact you with next steps and to collect any required documents. Do not proactively deliver or send documents to our Financial Centers or banking teams.
7. You will be notified of the status of your loan application through email communications.
8. Information about your application status will NOT be available through our Financial Centers or Contact Centers — due to the nature of this loan process and the steps involved.
9. To prepare for your application process, review requirements listed on the U.S. Treasury website. These include:

• 2019 Payroll — total payroll for full year 2019, by employee, as reported to the IRS
• 2019 Independent Contractor Costs — Listing of 1099’s-MISC for 2019 independent contractors, by person, as reported to the IRS (Note: Do NOT include 1099’s for services)
• Payroll report as of February 15, 2020 or closest date after that date, by employee
• Other information

The process appears pretty simple and straightforward on the surface, but the whole country is converging on these sites which is causing major frustration. These are only a few of the programs available to immediately help businesses. Congress is working on additional bills to support American businesses and employees affected by Covid-19. I will provide my feedback as each relief package is released. Dont panic. Be proactive and use this time to spend with your family, enjoy time outside and rethink your business strategy. Be Safe. We are all in this together.