During times of economic crisis, it’s important that business owners understand what options they have in terms of business financing.
Here’s an overview of what is available, as well as some tips for managing cash flow during this difficult time.
Financial Management During a Crisis
All businesses face ups and downs, and it’s important to have a contingency plan in place during a crisis.
But no one could have been prepared for the magnitude of this particular situation we are currently facing with COVID-19.
So if you weren’t prepared, it’s okay — none of us were.
Still, businesses can benefit from taking extra care in the way that they access and manage funds currently — here are a few suggestions.
- Avoid acting impulsively.
- Ask about forgiveness programs.
- Stay in touch with your local small business community and associated organizations.
- Expect to be constantly re-evaluating your plan for the coming months.
- Keep scaling back what you can.
- Try to avoid layoffs.
- Don’t rush back into business at the first sign that things might be getting back to “normal”.
- Keep raising startup capital.
- Apply for aid through reputable (SBA) lenders.
- Create a 12-month financial forecast which includes best and worst-case scenarios.
Consider hiring a business law expert to help you redefine your business plan, make important financial decisions, and develop new business goals that make sense in today’s economy.
Related: Employer Rights: What Are My Options During a Pandemic?
Small Business Financing Options
Paycheck Protection Program (PPP)
Small businesses and self-employed workers can get federal loans through the CARES Financial Relief Act and Paycheck Protection Program.
Note that PPP loans may be forgiven, but if you lay off your staff you may not have as much freedom with regards to loan forgiveness.
Some information about the PPP:
- It will cover up to eight weeks of payroll costs including benefits
- It will cover basic fixed costs mortgage, rent, utilities
- It’s meant for small businesses (with less than 500 employees), nonprofits, veterans organizations, and tribal businesses
- It also covers self-employed people and independent contractors
Apply through SBA 7 (a) lender
For this type of business financing, make sure you are prepared to demonstrate why conditions relate to your need for support, for instance, by including payroll tax forms and 1099 forms.
Payroll costs include salary, vacation, medical, group health care, retirement benefits, and taxes.
Find more detailed information at the US Chamber of Commerce website and the US Treasury website.
We’ve also written a more detailed analysis of the Payroll Protection Program here. With new funding recently passed by congress, this is still a viable option.
Economic Injury Disaster Loans
The eligibility for these loans is similar to what is mentioned above for the PPP loans. In addition, it is possible to refinance an SBA economic injury disaster loan to a PPP loan.
These loans have a fixed interest rate of 3.75 percent and are meant to directly support issues to help with costs and revenue loss related to COVID-19.
Usually, an advance (which will not need to be repaired) will be available within days, so long as the application is complete and accurate, and eligibility standards are met.
Visit the Colorado Small Business Development Center’s resource page for more information on business financing.
Other Options for Financial Relief
Business financing goes beyond just acquiring loans. There are other ways that you might want to consider cutting costs, if even temporarily.
For instance, you can look to municipal or regional organizations that specialize in helping local businesses, and look for industry-related funding options at both state and federal levels.
You can also get relief on penalties for using retirement funds, find interest relief programs for mortgages and other loans, and defer payroll social security tax payments.
Here are some other suggestions for Colorado businesses to acquire additional funding:
- Small Business Emergency Loans (various regions in CO).
- Resilience Loans.
- Kiva Loans.
- Small Business Emergency Relief (Denver).
- SBA Express Bridge Loans.
- 1st Southwest Community Funds.
- Denver Microloan Program.
- Colorado COVID relief fund.
- Arvada Emergency Business Recovery Initiative.
- Centennial Small Business Loan Fund.
Find a comprehensive list of small business financing support in Colorado here.
What happens next?
The next few months will be telling and set the pace for the coming years as your business adjusts to the “new normal.”
Nobody knows what will happen next, but we do know that being cautious and smart about your business financing and management is more important than ever.
If you need business support, employment law, or general business planning, we’re here for you.
Call us at 303-780-7333 for a free 30-minute consultation, or schedule an appointment today.
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