Three Critical Financing Steps to Take Now During the Coronavirus Crisis
Keeping your family and your employees safe is clearly your first priority right now as a business owner. Once you have that under control, I recommend that you focus on 3 critical areas:
- Cash flow Management
- City, State and Federal Support
- Lender Relationships
Manage Cash Flow Prudently – Treat each dollar in your operating account as if it were your last. Manage vendor relationships and operating expenses carefully, reducing anything which can be viewed as discretionary in this environment.
Develop a daily 90-day cash flow forecast with a couple of scenarios and update your projections frequently as this crisis unfolds.
Look for city, state and federal support – Start with a determination if your state and your business qualify for an SBA Disaster Assistance Loan. These loans are provided directly by the SBA, not through private lenders. You can get the details and apply at this SBA disaster loan info link.
Each state has business and economic development agencies, and many are offering direct support to small businesses impacted by COVID-19. You can search for resources for your state at this federal economic assistance link.
Make sure you follow the Federal Government efforts to provide economic and tax relief to small businesses. The components of the relief package change daily, but be sure you’re up-to-date on what may become available to you.
Talk to your lenders – In times of stress, the natural tendency is to avoid your lenders. But the better approach is to engage your lenders early and be transparent about how you’re being impacted by the economic shutdown.
Some lenders have provided temporary payment relief and most lenders are open to some type of forbearance. The key is to engage them early and to provide full transparency about the steps you’re taking to address any weakness.
How we can help.
Speritas Capital is eager to help clients navigate through this crisis. We would be happy to review cash flow projections, review SBA Disaster Loan applications, and discuss lender strategies. Our advice is always free.
And as always we’re available to discuss financing options. ABL, accounts receivable, purchase order and real estate financing can be quick and useful options in this environment.
I invite anyone with questions to call or email me directly to discuss your specific issue or situation: email@example.com / 203-247-4358
Interested in learning more about financial relief efforts for businesses? Read our previous post:
Preparing for Short-Term & Long-Term Economic Weakness as a Result of COVID-19 Disruptions
These are difficult times for all of us, personally and professionally.
On the professional front, businesses are facing uncertain customer demand, difficult supply relationships, and tight cash flow issues. Business owners need to consider the cash flow implications if this economic weakness lasts longer than currently anticipated.
Lenders may show some flexibility in enforcing loan agreements.
The federal bank regulators have urged supervised banks to “work constructively with borrowers.”
The Coronavirus Preparedness and Response Supplemental Appropriations Act (H.R. 6074) signed into law last week provided the SBA with a small amount of support, likely funneled through their disaster loan program.
Hopefully, this flexibility and support will provide meaningful relief to businesses managing very tight working capital situations.
The good news is the cost of borrowing has gone down.
The Fed cut short-term interest rates by one-half of a percent and as a result LIBOR-based and Prime-based lending rates have fallen. These rate cuts affect not only asset-based lending, but term real estate and SBA loan rates too.
Asset-based lending, including accounts receivable, purchase order, and inventory financing are effective ways to leverage business assets during tight cash times. M&E and real estate collateral can be used to generate term loans as additional sources of cash infusions.
As a trusted advisor to businesses and commercial real estate investors, Speritas Capital offers advice based on our experience and relationships with our broad lender network. We can help clients think through their financing options and identify options which address the current weak environment and allow for growth and success when demand strengthens.
Jeff has over 25 years of experience in the financial services industry. After graduating from the Columbia Business School, he joined the New York Federal Reserve Bank as a senior staff member in Bank Supervision, leading the Bank Analysis department. From the nation’s central bank, Jeff moved into the private sector, working at senior levels in commercial banking, retail banking and risk management. He has also played senior founding roles in several start-ups. Learn more about Jeff.
About Speritas Capital Partners
Greenwich, CT based Speritas Capital works with small to lower middle market businesses and commercial real estate investors to provide financing solutions for difficult credit, collateral and cash flow situations. We have relationships with over 90 national lenders and private investors that give us the product breadth to assist clients in identifying funding options that go beyond what a traditional lender can typically provide.
We can arrange financing for a wide range of products: asset-based lines of credit, accounts receivable finance, purchase order finance, equipment finance, SBA and USDA guaranteed loans, Fannie Mae/Freddie Mac loans, FHA/CMBS loans, and bridge/construction and permanent commercial real estate loans.