If we had to choose one word to best describe 2020 so far, ‘unprecedented’ would be a strong contender. The global Covid-19 pandemic reached US shores with much the same impact as in countries the world over. Lockdowns were imposed, businesses closed, and people were asked to stay at home. For small business owners, however, this is having a severe impact.
The loss of income is hard enough to face as an individual. As a small business owner, it simply depends that stress and concern. And, if you’re not able to meet your financial obligations such as loan repayments or utility bills, your lenders aren’t always quick to show a sympathetic face. Don’t worry – there are actions you can take if your business is feeling the financial strain.
The main challenges facing your business or organization
Covid-19 has created significant challenges and pressure points for many small businesses. It’s not just affecting the shuttered organizations either. Even those who can continue to operate in some form, most likely online, are affected. Supply chains are being disrupted, while customers may be buying less to reflect their own personal financial circumstances.
The effect is being most felt by those small organizations who operate on much tighter margins than larger competitors. Not to say that those larger businesses aren’t affected, however. Cash flow is always an ongoing concern for businesses. Now, more than ever, it’s in the spotlight. If income has slowed or even stopped, it’s unlikely that expenses have followed in kind.
Your immediate actions if lenders put you under pressure 242
Expert attorneys from legal firms such as Withers can put you fully in the picture if lenders and other creditors are now starting to put pressure on you. In some cases, this can actually break federal and/or state law for as long the Covid-19 pandemic continues to affect daily lives. But if you’re already experiencing financial hardship or see it coming, approach your lender first.
By having an honest discussion with loan providers, creditors or landlords, there’s potential for a short-term solution to be reached. All businesses, after all, are feeling the impact of Covid-19 – so you may find that lenders at least appreciate your position. It can also pay to be proactive in other areas too, which can prepare you for difficult conversations and decisions to follow.
Key actions you can take now to protect your organization
Withers outlines four key actions that you can take now to work out if your business can meet its obligations. But you need to be realistic about it to know what your options actually are.
The first action that Withers suggests taking is to gather all your loan and related documents – not just the ones that could cause issues. Be clear about the terms you agreed to and how this could affect one or more agreements. It’s also a good idea, as a second key action, to be clear of the named borrower on your loans – and whether any of them are (or could be) secured.
Action three is to map out your cashflow and what could disrupt it in the immediate future, as well as the longer-term picture. This can help you understand what relief you’ll need from your lender where possible. Lastly, don’t overlook or underestimate the tax implications of any loan renegotiations. Certain tax rules could come into force or be applied differently. It’s one area in which your attorney or financial advisor could bring extra clarity. But the main point about taking these actions early is that it can help your organization manage any risk and maybe even safeguard your business.
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