Small-business owners face tough decisions as they wait for government loans to arrive - CNBC

Small-business owners face tough decisions as they wait for government loans to arrive - CNBC


Small-business owners face tough decisions as they wait for government loans to arrive - CNBC

Posted: 30 Mar 2020 11:11 AM PDT

Jeanie Wright was planning for a year of major growth in 2020 with her confection business, Alaskan Sweet Thing's. The company makes gourmet taffy, popcorn, fudge and more from glacier water, selling online and at its retail location.

A big part of her business comes from tourists traveling to Alaska, as the state has become a major cruise destination. Then the coronavirus hit, lobbing a major blow to the tourism that some 90% of her business relies on.

"The whole tourist industry in Alaska has just been decimated — there are no ships scheduled to cruise here until July. The season normally starts at the end of April. The border to Canada has been closed and air flights are severely impacted," Wright said. "I don't think most people want to get on a plane and come up here."

Wright, like many small-business owners on Main Streets around the country, is facing down impossible decisions — like whether to keep her four employees on board, one of whom is her older sister — as they apply for loans that might offer them a chance to stay afloat amid the disruption caused by the efforts to stem the spread of COVID-19. 

Outbreak-related travel restrictions hit hard for gourmet confectioner Alaskan Sweet Things, as the candy maker relies on tourism for some 90% of its business. Source: Jeanie Wright/Alaskan Sweet Things

Jeanie Wright | Alaskan Sweet Things

"We just had payroll yesterday," she told CNBC on Friday. "I've told my sister, as of today, she might want to start the process for unemployment. I just completed my Small Business Administration disaster loan application, but it is going to be three or four weeks before we get to see any money. It's very hard."

The National Federation of Independent Business said some three-quarters of small businesses have been hurt by the COVID-19 pandemic, experiencing everything from supply chain disruptions to slower sales and sick employees. Recent data from Goldman Sachs is even more dire — with 96% of small businesses saying they'd already been impacted as of mid-March. About 51% said their business would only be able to survive for between zero and three months.

The CARES Act signed into law Friday will throw small businesses like Wright's a much-needed lifeline in the form of billions of dollars in loans under the SBA 7(a) loan program. Up to $10 million in loans, based on payroll, will be offered up for things like mortgages, leases, paying staff and utilities. There's also SBA's disaster loan program, with smaller loans of up to $2 million, for businesses impacted in hard-hit areas. But the message from Main Street is clear — the capital is needed now.

"Small business owners are desperate to support their employees during this unprecedented crisis facing the country, and the capital access and tax credit provisions will allow them to do just that. Moreover, these provisions will keep more small businesses intact and help to ensure we have a small business economy once this crisis is behind us," Karen Kerrigan, CEO of advocacy group the Small Business & Entrepreneurship Council, said in a statement.

Jason Duff, founder of Small Nation, develops and revitalizes small towns, and has been working on the renewal of Bellefontaine, Ohio, for the past several years. Two weeks ago, the town was in the "best financial shape it's even been in," Duff said. Then Ohio Gov. Mike DeWine took proactive steps to send students home and close nonessential businesses in the face of the quickly spreading virus.

"As someone who develops properties, we saw 80% of our tenants be mandated to close," Duff said. "I think what was even scarier, and challenging, was the way that our small-business owners were having to lay off their friends and family. Employees really are family — it's figuring out what are we going to do to preserve cash? Can we stay open? Those kinds of decisions were not only traumatic, but challenging to work through."

Adam Rammel, a business owner in Bellefontaine, Ohio, has applied for small business disaster aid and is awaiting 7A funding to support Brewfontaine, his taproom and restaurant, and The Syndicate, an event space that was supposed to open in May.

Adam Rammel | Brewfontaine

Both Duff and his business associate Adam Rammel, owner of Brewfontaine, a taproom and restaurant in Bellefontaine, have applied for SBA disaster loans and plan to apply for 7(a) aid under the CARES Act.

Rammel has kept take out open at the restaurant, but the operation is down to a skeleton crew and running low on cash. After last week's payroll, the company has $20,000 in its checking account.

"I'm staring at a $7,500 sales tax number, you know, this past Monday, which I just decided not to pay," he said. "Right now, I'm only paying payroll, and food and beer vendors, until we get through this. We're doing everything we can, day in and day out, just to keep our head above water. This cash cannot come soon enough."

And while businesses await these essential loans and more details on the application process, David Barr, a franchisee and franchisor in myriad businesses ranging from Yum Brands' Taco Bell and KFC restaurants to TITLE Boxing gyms and Lash Lounge studios across the Southeast, said he's hopeful entrepreneurs will lean into borrowing to keep workers on their payrolls. Barr is former chair of the International Franchise Association, the industry's largest trade group.

"My hope is for those businesses that are open, that people will lean in on the employment side, that's what the [CARES Act] is intended to do. Doesn't mean necessarily that people are going to have to get back to 100% employment," Barr said. "But if all of us lean in, there is some patriotism to that."

Mark Cuban: How to avoid layoffs and other advice for small business owners during the COVID-19 pandemic - CNBC

Posted: 16 Mar 2020 10:40 AM PDT

This weekend, billionaire entrepreneur Mark Cuban took to LinkedIn to answer questions from small business owners about what to do during the escalating coronavirus outbreak.

Cuban, who has been vocal about the importance of supporting small businesses during this time, prioritized questions about how to avoid layoffs and hourly reductions. His post had over 6,000 comments by Monday, with many of his followers popping in with their own advice.

Experiment with new ideas

"If you can find other services to offer, do it," Cuban wrote in response to a question specifically about avoiding layoffs in the event industry, as trade shows, sporting events and concerts are being canceled. "Since you have holes in your schedule, it's a great time to experiment with new lines of business and see what sticks."

He also recommended brainstorming not only with your peers, but also with your competitors: "They are all in the same boat. Try to figure out the best way to reignite the industry. 

"Cities will want to recapture the business as well. I'm guessing that the cities who are not hit hard may be more aggressive and have more funds to try to attract shows and events. And of course work with the promoters and stay in touch with them." 

Really get to know your employees 

Cuban recommends CEOs and managers take the time to understand the individual circumstances of their employees, especially if they'll be cutting hours or initiating layoffs.

That way, "if you do have to change circumstances you can make decisions based on the circumstances of each employee," he wrote.

Clean up parts of the business you've been neglecting or haven't had time for

Private equity groups seek US small business rescue loans - Financial Times

Posted: 01 Apr 2020 02:01 AM PDT

Some of the most powerful groups on Wall Street are pressing the Trump administration to allow private equity-owned companies to access hundreds of billions of dollars in loan funds earmarked for US small businesses hit by the coronavirus pandemic.

White House and Treasury officials have been contacted about the issue by industry lobbyists and executives from major investment firms, according to seven people who advised on the discussions, or have spoken directly with the participants.

Congress last week authorised the Small Business Administration to dispense $350bn worth of rescue loans to companies with fewer than 500 workers that have been affected by the coronavirus pandemic. 

The Wall Street groups are taking aim at the so-called affiliation rule, under which small businesses can be barred from accessing the rescue funds if they are backed by a private equity firm whose portfolio companies collectively have a workforce that exceeds the 500-person limit.

In a letter to Treasury Secretary Steven Mnuchin, seen by the Financial Times, one industry body said federal "regulations effectively prevent the small business portfolio companies owned by venture capital or private equity funds from accessing" the rescue programme.

"We see no reason why being owned in a fund structure should result in these businesses having less access to the capital needed to keep their employees on the payroll," said the letter from Steve Nelson, chief executive of the Institutional Limited Partners Association, whose members include public pension funds that have invested in funds run by Apollo, Blackstone, and other big Wall Street firms.

The pleas echo a warning that private equity executives have delivered to officials at the Treasury and the White House, according to people familiar with the conversations: if their portfolio companies are locked out from the $2tn stimulus package agreed last week, they will be forced to dismiss millions of workers to salvage their own investments. 

"We need to act in the best interest of our own investors, which include pension funds," said an adviser to one large private equity firm. "If the government wants to limit funding for companies we own just to punish the private equity industry, we will have to take drastic measures . . . That means cutting costs aggressively, and restructuring."

The American Investment Council, which represents many leading private equity firms, said it would "continue to work with the administration, the Federal Reserve and Congress to request that federal programmes support all businesses, regardless of ownership structure, and their workers".

Democrats have largely been opposed to helping out private equity firms as part of the coronavirus rescue. Critics say funds aimed at saving mom-and-pop companies should not be diverted to companies backed by investment firms that are sitting on more than $2tn in unspent cash. 

But Nancy Pelosi, the California Democrat who serves as Speaker of the US House of Representatives, wrote to Mr Mnuchin on Tuesday to express concerns about helping small businesses backed by venture capital investors.

"Many small businesses in our district that employ fewer than 500 employees, particularly start-up companies with equity investors, have expressed concerns that an overly strict application of the Small Business Administration's affiliation rule may exclude many from eligibility" for the so-called payroll protection loans, wrote Ms Pelosi

The White House, the Treasury and the SBA declined to comment.

Rapid Cash-Flow Strategies For The One-Person Business - Forbes

Posted: 31 Mar 2020 07:54 PM PDT

Nothing is more pressing for many businesses right now than cash flow. 

Even one-person businesses can apply for aid under the federal stimulus package, but many in the small business community are concerned that the money won't make it to them quickly enough to keep them afloat. Alignable, a referral network, has determined that 37% of small businesses have less than 30 days' worth of cash on hand.

"They don't have much of a cash buffer," says John Waldmann, founder and CEO of Homebase, a time-tracking and scheduling software for small businesses. "The clock has been ticking."

With the rent due on April 1 for many businesses, that buffer will get smaller for many. "To me, what's important is not just the size of the stimulus but the expediency," Waldmann says. "We are going to enter a really difficult period over the next couple of weeks if businesses and workers continue without aid."

If you're hanging on by a thread at the moment, here are some strategies to deploy today to get cash flowing into your business. 

Get caught up on invoicing this week. It's easy to fall behind on paperwork in a crisis but getting invoices out to customers and collecting on them needs to be a top priority. 

Fundbox, an alternative financing provider, recently found that it takes small businesses, on average, 28 days to get paid. In some industries, payments are slower. Professional services firms wait 36 days, on average, Fundbox found. 

The clock doesn't start ticking until you send an invoice. One routine worth adding to your week is to set aside 30 minutes or an hour every Friday to send out invoices for orders and projects that are completed. Don't shut down for the week until you've sent out every invoice you can.

You may be able to borrow against your invoices later, once cash starts flowing again—but only if you actually have sent them to customers.

Send invoices at more frequent intervals. If you tend to do multiple projects throughout the month for certain clients, submit an invoice for each project as it's completed, instead of waiting until you have completed several. 

It's time-consuming to log into your invoicing software repeatedly, but in a downturn, getting cash flowing quickly is key. A client who is short of cash may be able to pay a small invoice right away but have to save up to pay a larger one.

You'll also detect signals that a client is running into cash flow challenges—and may not be able to pay you quickly or at all—if you invoice more frequently.

Offer creative solutions to your landlord. If you rent space outside of your home and can't make rent, now is the time to suggest creative solutions with your landlord. "If you can't get a rent deferment, ask your landlord if you can use some of your security deposit to offset part of your rent," suggests Waldmann.

Not all landlords have deep pockets. A solution like this may be a lifeline for a small landlord who needs to keep cash coming in to pay a mortgage. 

Keep your eye on local headlines about rents, leases and evictions. Some states are taking action to prevent tenants from being forced out during the crisis. 

Support other small businesses. Do your best to pay your own vendors, contractors and freelancers on time.

Average daily revenue at small businesses has declined dramatically since the crisis. You can see what it looks like for selected industries on this dashboard the CRM firm Wompley created. Some firms that are at risk of closing may able to make it if they have some cash coming in.

A coalition of companies in the small business space— Actual. Agency, Alignable, Business.com, Fundbox, Gusto, Homebase, SmallBizDaily, Small Business Edge and Wompley — launched an awareness campaign today called #paytoday to encourage big companies and government to pay small businesses on time.

There's no reason small businesses that are doing well can't keep cash flowing to their vendors and suppliers, too. It's a great way to pay it forward right now.

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