From OneClickAdvisor to you. Stay safe, comply with instructions from authorities and experts, keep your hands clean, and prepare for the inevitable recovery.
It remains to be seen whether or not our worst fears about coronavirus come true. Or if the unprecedented measures in place slows the spread of the virus to a point where it is quickly under control. Either way, major disruption has already happened and further disruption is unavoidable.
Likewise, governments, institutions and businesses introduce new measures almost daily. Governments are throwing everything possible at the problem to slow the spread of coronavirus and to ease the economic impact, which is significant. The rapidly deteriorating economy has resulted in pain and uncertainty for consumers, employees, and businesses. However, it has also provided some real bargains.
Do you need to borrow money for personal and business purposes?
If you or your business are in a position to borrow money, and anticipate uninterrupted or increased income, the current economy presents opportunities.
Buy a car? Federal interest rates are about as low as they are going to get; approaching zero percent. You could take a personal or auto loan to buy a car (check your options here). Or, the “Big 3” automakers are financing auto loans at close to or at zero percent, if you qualify.
Whether or not you buy a new car, you will be pleased to find a significant break at the gas pump. As of March, 2020, a price war and low demand has crude oil prices plummeting to price levels common in the 1950s and 1960s.
Get or refinance a mortgage? Since interest rates are low, it is a good time to get a mortgage, or refinance a prior mortgage. If your home is worth more than you owe, you can pull out some cash and possibly pay a lower interest rate. Check your options here.
OneClickAdvisor recently published a guide on using mortgages and credit cards to finance a business. That is available here.
Direct business lending
Conventional or SBA loans? If your business is U.S.-based, has been in operation for at least one year, with revenue and at least fair credit, you may, in some circumstances, be able to get some form of credit without personally signing for it. Some loans may be backed by the U.S. Small Business Administration (SBA) and some may not. Using Fundera‘s business lending platform, you can check your options without affecting your credit by completing one form.
Disaster relief? In March, 2020, SBA disaster relief loans were made available because of coronavirus. The money comes directly from the taxpayers and state governments approve the loans. The rates are capped by Congress at 3.75 percent. Paying off prior loans, such as a credit line used to recover from a disaster, is an approved use of disaster loan proceeds. If your business has been affected by coronavirus and you wish to apply for relief, apply here. The stated reason must be “economic injury”.
Emergency disaster loans from the SBA and states ARE NOT GRANTS or free money. Nor are they easy to get. You must demonstrate based on historical financial performance that you can repay the loan. If you cannot show that you can repay the loan, you are unlikely to be approved. While the rate is 3.75 percent, expect the terms and conditions to provide for penalty rates for default and referral to the U.S. Department of the Treasury for collection through the IRS. Default rates in recent disaster loan programs have been as high as 12 percent. Therefore, if your business was in financial difficulty prior to coronavirus, this program may not be suitable.
On March 27th, 2020, Congress passed, and President Trump signed a $2 trillion economic stimulus package. Details, and what this package may have available for you and your business are available here.
Whether the business loan is a conventional loan, an SBA loan, or a disaster relief loan, you will need records of the financial performance of your business. Gather three years worth of profit/loss statements, balance sheets, and cash flow statements. Also, gather three years of business tax returns. If you have been in business for less than three years, gather the records you do have. If you have not kept books, get caught up using book keeping software. QuickBooks is widely used and accepted and offers a free trial, which is available here.
Direct business grants
As usual, federal grants are available through the Small Business Innovation and Research/Small Business Technology Transfer (SBIR/STTR) programs. SBIR/STTR is intended to assist small businesses that are engaged in vital technological, scientific, or medical research. Research and development are common uses of SBIR/STTR proceeds. This program is independent of coronavirus, but if your business is engaged in finding a cure, apply!
Other ways to get and save money
Personal and business.
Defer bills…it’s ok. Keep things in perspective. If you just lost a job or business, you have more important things to worry about other than losing that 800 credit score. In fact, as the rest of the world shuts down around you, so will many of your bills! You can defer and modify mortgages if federally insured. Your bank has probably made similar provisions for this, as well as your credit card payments. Same with rent, as pressure grows on landlords due to some states such as California, New York, and Washington imposing moratoriums on evictions. Also, look for utilities to ease or suspend collection efforts.
Leasing equipment instead of buying it keeps debt off your balance sheet and conserves cash. The owner assumes the depreciation and pays any debt associated with owning it. On the other hand, do you own a piece of equipment you could lease to someone else?
Asset-based loans (factoring) is not a loan. It is the sale of a receivable, such as an invoice. The invoice could be due from a large creditworthy customer, but not due for 30 days or more. A factoring company (commonly known as a factor) may buy the invoice at a discount, providing cash now. The factor then collects the invoice from the customer for the full amount, keeping the difference.
Licensing. In short, you invent something, but someone else manufactures it for you. This saves you manufacturing, marketing, and other major overhead costs. Licensing agreements can be complicated, so use an attorney.
Supplier credit. You can negotiate terms with suppliers, and during hard times, this is vital. Consignment is an example of supplier negotiation. Floor planning is another. One way to negotiate with suppliers is to ask for easy terms, say…45 days. In return, after six months, you will pay five percent over invoice for another six months.
Coronavirus is a major issue of the day. If it doesn’t affect your health or the health of someone close to you, it is affecting your personal and business finances. With some planning and re-positioning, you can navigate our perilous times and recover faster than competitors. As always, consider OneClickAdvisor a resource.
For more information, contact us anytime.