After months of lockdowns that required many companies to cut back hours, pause production or close completely, restrictions are starting to lift, and small businesses are starting to slowly and cautiously open back up. But when they do, they’ll be opening their doors to a different world than when they had to close them.
With an uneasy public, a struggling economy and a virus still lurking, it can be difficult to even know where to start when it comes to reopening your business after COVID-19. Most companies have been hit hard with the reality as restrictions ease up on many states in the country, and many business owners have realized their need for financial help to reopen the business after COVID-19.
While every business currently wants to open as fast as they can, many are facing financial hardships in order to reopen after COVID-19. The good news is that financial help to reopen does exist.
Evaluate COVID-19’s damage to your small business
You’ve likely been keeping an eye on things and have a general idea of how your small business has been impacted, but now is the time to really dig into everything to see how deeply COVID-19 has cut.
Look at the numbers and ask yourself some hard questions:
- What is your profit and loss?
- What is your revenue this year compared to the same time last year?
- What is your current cash flow?
- How many employees have you had to lay off or let go?
- How many customers have you lost to competitors?
- Should your business apply for disaster relief funding?
Don’t just focus on your business; assess the damage at an industry level, as well. How has this impacted the industry in which your small business specializes? Knowing the damage on a smaller and larger scale and what it’ll take to recover for both will help prepare you for the next step.
This will not only help you prepare for the upcoming months, but it also will allow you to get a good understanding of what is needed to reopen your business and how much capital you need at your disposal to ensure success.
Related: Everything You Need to Know About Small Business Financing
Consider financial help to reopen your business after COVID-19
You may incur additional costs for reopening your business after COVID-19 restrictions begin to slowly ease up. These expenses may include redesigning your office, providing PPE for employees and additional cleaning costs. You may need capital to pay your rent, purchase supplies or a delivery car, purchase merchandise to resell, pay bills that have been stacking up or just pay off some debt you owe from trying to keep your business afloat during the pandemic.
The key thing to note is that your sales will not match the numbers you were seeing pre-COVID – at least not right away. While we truly hope that is not the case, reality is that it may take months to get back there, so you’ll need to be prepared.
When faced with the financial obstacles you’ll experience during and directly after the reopening of your business, ask yourself the following questions:
- Will you need to redo your budget (cut costs, add in loan repayment, etc.)?
- Do you have an online credit card processing system in place?
- Will you need to hire new employees?
- Will you need to provide delivery services? If so, do you need to purchase a vehicle to do so?
- Will your supply chain change? Will the prices stay the same or go up as businesses are desperate to stay afloat?
- Do you need to raise prices?
- Will you have more employees work from home? If so, do you need to purchase tools to allow them to do, such as technology?
- Can your company afford sick leave or paid vacation?
- Are your products or services less relevant at this time? Are there other products or services you can offer that are more in-demand right now? If so, do you have the capital to purchase them?
- If sales don’t immediately increase, do you have enough capital to secure employee payroll for at least two months?
- Do you have enough capital to cover part of the benefits that the company is responsible for, such as health insurance?
- Do you have to pay rent? Do you have enough capital saved up to afford rent the next two months?
- If there is another wave, is your company financially stable?
If some of these questions have left you with some uncertainty, you should get moving on identifying the company’s strongest and weakest points to determine if you need financial help.
The good news is, financial help to reopen the business after COVID-19 exists. From private to non-private loans, companies do have various loan options available.
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Small Business Administration (SBA) Disaster Loans
SBA Disaster Loans come in a few different forms, including the Economic Injury Disaster Loan (EIDL), SBA Express Bridge Loans and the Paycheck Protection Program (PPP). With the PPP, you can ensure your staff gets paid while your business finances recover and your sales return to normal, hopefully even better, numbers.
The SBA Economic Injury Disaster Loan (EIDL)
This loan is provided to small businesses through the government. The SBA Economic Injury Disaster Loans provide up to $2 million in assistance with an interest rate of 3.75 percent for-profit companies and an interest rate of 2.75 percent for nonprofits.
The loan terms range up to 30 years, and there are no upfront fees or early payment penalties. This loan is ideal for companies that are in need of a more long-term loan to payback, however, companies that need a short-term loan can also benefit from this type of loan. The use of capital can vary, so it is best to check out this website for more information.
Paycheck Protection Program
The Paycheck Protection Program provides small businesses with funds to pay up to eight weeks of payroll costs, costs related to group health care benefits during periods of paid sick, medical or family leave, and insurance premiums.
The fund can also be used to pay interest on mortgages, rent and utilities and interest on payments on any other debt obligations that were incurred before February 15, 2020. If in the questions mentioned previously, you were in need of securing payroll for the upcoming two months, hire new staff, or pay rent, then this might be a good loan option for you.
Lines of credit
There are also non-SBA relief options, including lines of credit. A line of credit can be a good option for covering business expenses for the first few months of reopening because it offers a revolving line of credit that you can use whenever you need.
You’ll likely encounter unexpected expenses as you work through the reopening of your business, and having that quick access to funds can be extremely helpful. While you have a max amount of money you can borrow, you don’t have to use the full amount. Whatever amount you choose to borrow is the only amount you’ll have to pay back with additional interest.
A line of credit can be very beneficial to purchase new inventory, supplies, a delivery vehicle, technology and so much more. You only borrow the amount you need, which means if you end up spending less or getting a better deal, even better!
Merchant cash advance
A merchant cash advance is also a private financing source, unlike the SBA Relief loan. The way a merchant cash advance works is that the business receives an advance that is paid back based on future credit card receivables. In other words, the advance gets paid back through a percentage of the company’s future receivables. Many business owners love this option, as it allows for flexible payments and has easier requirements that must be met in order to be approved.
Why this is ideal for the COVID-19 situation? You receive an advance to cover the costs needed to reopen, and a percentage is taken off of future receivables. This allows the advance to go at your company’s own pace. Since the upcoming months will be more unpredictable than usual, an advance does offer more stability for many business owners.
Next steps for your business
During a pandemic, it is more crucial than ever to take certain financial precautions to ensure your company stays afloat. Now that that you know some of the financing options available, the next step for your business is to understand how the next few months will roll out, and ask yourself what in these next few months will require additional capital or will require having capital saved up two to three months in advance.
We’re here to help your business succeed in good times and bad.
For more information relating to COVID-19 and small businesses, read more on the Rapid Finance Blog or contact us with your questions.
Supported by Rapid Finance
The post Need Financial Help to Reopen Your Business After COVID-19? appeared first on StartupNation.
via https://www.AiUpNow.com/ by Rapid Finance, Khareem Sudlow
