Helping Your Business Stay Afloat: A CFO’s Perspective

Owning a small business is full of inherent risks. It’s a tightrope you walk every day–making enough sales to clear overhead, manage payroll, and keep up with the market. The pandemic has put a massive strain on even the most stable of companies, and the harsh reality is, the main concern for many businesses now is just keeping their doors open. Recently, we touched on some proactive steps entrepreneurs should be taking for survival, such as trimming costs, reducing payroll to a minimum, and liquidating any non-essential assets. We reached out to seasoned CFO, David Worrell of Fuse Financial Partners in Charlotte, NC, to get his advice on the biggest financial concerns entrepreneurs are facing now as the government opens things back up. Here are our biggest takeaways:

What’s the biggest risk for small business owners right now?

The biggest concern for most business owners will be running out of cash due to drastically reduced sales. Bank loans and office leases present the biggest risks because they are likely personally guaranteed, meaning that business owners are responsible for paying even when the business cannot. This can quickly wipe out your personal savings.

What steps can business owners facing financial difficulties take?

Good cash management may not be enough, but it’s crucial. To extend your runway as far as you can, evaluate each bill before paying it. Ask, “Can it wait?”.  What will the vendor’s (or lender’s) reaction be if this particular bill is unpaid? Communication is the key to working through this challenging time with creditors. Making consistent, smaller payments goes a long way.

Here are six specific steps you can take to help your business stay afloat:

  1. Communicate with lenders and banks.  Let them know exactly what you’re going through and what your plan is for making everything work. The more you communicate, the more flexible they will become.
  2. Make small payments to key vendors. Even when you can’t pay the whole bill, pay part of it. Vendors who see some activity are more likely to continue letting you run a tab.
  3. Forecast what the business will look like with sales contractions of 10-50%. Many business owners are facing the difficult decision of whether to operate at a loss or close down completely. Either way, if rent or loans go unpaid, you’re likely to end up in personal bankruptcy, so forecasting is a key action step. 
  4. Look for relief wherever you can. The SBA’s many programs for Debt Relief, loans, and grants are a start. Loan forbearance from banks and finance companies is also worth pursuing. And tapping into retirement savings — while not always ideal — has gotten easier thanks to the CARES Act and other legislation.
  5. Approach your landlord for a compromise. Consider asking for a deferral on your lease (to be paid back incrementally over 6 months or so), half-off your current rent, etc. If the landlord has received the PPP loan or relief from a mortgage lender, they may be willing to extend some of those benefits to you.
  6. Get something rather than nothing. While we hope it doesn’t come down to this, private equity buyers are out there looking for deals, even in this crazy climate. If you have to shut down, getting “something” may be a lot better than “nothing”.

No one was prepared for these unprecedented times, but Supportedly is here to help. We provide access to free training that can help you pivot your business, connect you with support programs in your area, keep you up-to-date on COVID-19 relief programs, and more. If you’re in NC, one of the best resources available is your local Small Business Center. Check in with them. They have a wealth of experience and can help connect you with the financial and legal help you need to determine your best path forward. And best of all, it’s free!

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