Critical Finance Tips for Small Businesses During COVID-19
Lower Your Financial Risk in This Pandemic
The impact of COVID-19 to American small businesses can’t be understated. Almost half of small businesses are likely to be directly impacted negatively by the pandemic if not already. Out of 5.3 million surveyed in one Pew Research study, 2.4 million confirmed the same.
And the basis of that information is dated coming from the federal government, so the impact is probably higher. Of the affected population, 1 million are in the worst situation being in consumer services like tourism, restaurants, retail and accommodation. All of these have been practically shut out of their markets by social distancing.
The Small Business Toolbox for Risk Reduction
A number of options still exist, however, for many small businesses to weather 2020. They range from reshuffling the capital funding deck to diversifying income channels as follows:
- Consider short-term financing with a plan. Yes, every business class out there recommends against it and to shift towards long-term financial for stability. However, short-term financing can be very effective in getting through a rough patch until a small business has bolstered up its income again and can produce reliable cash flow. Everything from SBA loans to credit lines are possible. However, before pulling the trigger, have a clear target on how the additional debt will be paid; don’t borrow blindly.
- Crowdfund. It sounds like an Internet fad but it literally can be free cash funds your business might need to get through a pinch. Multiple sites allow individuals and businesses to ask for help via crowd charity. The worst that can happen is that no one helps. That’s not a loss at all, and if there is a donation, it’s more than the business had yesterday. Kiva, LendingClub and Mainvest offer crowdfunded loans, but GoFundMe provides charity outright.
- Go Online With Your Business. The Internet is an amazing platform for generating income without the cost of a full brick and mortar store. And with today’s cloud technology and a bit of IT smarts, a business and produce an entire new operation online it never had before with the same services and product. If there was ever a time to engage in e-commerce, it is now. The income profitability is high for the right offering and costs can be kept extremely low. GoDaddy, and Squarespace both make beginner business website building easy, including online order processing.
- Adjust Your Payments. Paying everything on time up to the penny? Right now you need cash flow to get through the COVID-19 desert. So, consider utilizing minimum payments and longer payment periods to increase your cash flow and reduce your immediate liability cost.
- Renegotiate Your Terms. Whether it’s your landlord or your long-term lender, they are all people whom you can engage with to renegotiate your payment terms and see if an easier schedule is possible. The worst they can say is “no,” and if they agree it is likely to improve your financial situation again.
How Debt Consolidation Can Help
One of the more creative yet practical ways to improve your cash flow is to take revolving debt and short-term liabilities off your back with new debt consolidation.
A key problem that can overwhelm a small business can be too many deadlines and minimum payments stacking up with high interest. By consolidating, all those multiple charges can be bundled into one loan with a longer payment schedule life, lower interest, and lower payment per month.
That frees up immediate cash flow now. Yes, you may end up paying more for the totality of the loan, but it can also be effective in getting through 2020.
How Mortgage Modification Can Help
As a small business owner, it’s possible to leverage your personal home mortgage or your business property mortgage for increased liquidity as well. Interest rates are rock-bottom and a refinance can easily generate critical cash flow freed from equity.
Alternatively, you could work with your lenders for a mortgage modification and lower monthly payment as well, again increasing your cash flow. Both are viable tools for financing pressure reduction.
How to Save Your Business if All Else Seems Useless
The above tips and a lot more are still possible if you take a creative approach to your business and not just get stuck in one path, one function and only one way of generating income.
Get creative with the Internet, create new business ideas within your existing one, and push the envelope on every angle to reduce your spending and increase your income. Delay costs, sell multiple ways, create new products and service, and pay only what you have to.
It’s a process and challenge, but you can get through it. The worst thing to do is just sit and wait for something to happen, it won’t. You have to go out and get your opportunity for a turnaround. And if it seems all useless, sleep on it, and try again the next morning. You’ll be amazed what you can think up for new ideas with a good night’s sleep.
You can schedule a free consultation with one of the knowledgeable bankruptcy lawyers at Berneman Law Firm. Just call 888-200-4443 or fill out the contact form on this site.