5 Smart Ways Small Businesses Can Rebuild Their Financial Health Post COVID-19
The COVID-19 outbreak will not be this way forever. This is a difficult time and too shall pass. The clouds of sorrow will wane eventually and a new ray of hope will once again bring light to the whole world.
Businesses will open again, we will go back to jobs as usual and the economy will gradually come back on track.
However, no one knows when this pandemic will end but it’s absolutely sure that life will never be the same after COVID-19. This pandemic has changed the way we live and work – jobs obliterated, businesses closed, employees working remotely, the economy has shrunk – It will take a long time for everything to become normal.
No one could have predicted something terrible like coronavirus, and even the most successful businesses around the world are facing enormous financial challenges. However, financial struggles for small businesses during this tough time is inevitable.
As a small business owner, you may be wondering how to turn your business finances around. Remember, the failure or success of your small business post lockdown will depend on how well you plan the financial strategy to rebuild your company and overcome financial difficulties.
When we eventually win the war against this disease, businesses will be left picking up the pieces and building their financial stability again. Here are our 5 tips for small businesses that they can follow to become successful & competitive in the new environment.
Table of Contents
- 1 Perform an Economic Damage Quantification
- 2 Consider Small Business Financing
- 2.1 Paycheck Protection Program
- 2.2 Economic Injury Disaster Loan
- 2.3 Traditional SBA & 7 (A) Loans and Microloans
- 2.4 SBA Express Bridge Loans
- 2.5 Business lines of credit
- 2.6 Business credit cards
- 2.7 Merchant cash advance
- 2.8 Business Term Loan
- 2.9 Short Term Loan
- 2.10 Invoice Financing
- 2.11 Equipment financing
- 3 Set Up an Emergency Fund
- 4 Revamp Your Business Budget
- 5 Final Thoughts
Perform an Economic Damage Quantification
The first step in rebuilding your business financial health is performing an economic damage quantification. Stop wallowing in your own despair and accept the reality. Honestly, determine how deeply your business has been affected by COVID-19 and evaluate where you are now.
A good approach for gauging where you are financially is taking a gander at your updated profit & loss, cash flow statement, and balance sheet. You can compare them to last year’s numbers to see how much your business may be down. Also, subtract your business liabilities from assets to calculate your company’s net worth.
It will help you to understand your organization’s current position and ultimately reach your final destination. And while there are a few industries that weathered the COVID-19 storm and are benefited from the considerable change forced on the society, it’s possible that your damage might be much less than expected.
Apart from this, it’s important to consider other factors that may have affected your bottom line. For example, you may have laid off some of your employees or cut your marketing budget down or borrowed a small business loan, you’ll need to factor those into your rebuilding plan.
All these new statistics will help you identify and managing risks, and eventually create an advanced strategy to rebuild your business.
Update Your Business Plan
The next step to do immediately after the lockdown is to recreate the financial strategy for your business. You would have enough profit and work pre coronavirus, but coming out of it mean that you may have to leave your comfort zone and reinvent your strategy to achieve your business financial goals.
Here are a few ways you can redo your business plan for a post-pandemic world.
Define Business Current Situation
Define your business current situation and re-evaluate your business’ strength, weakness, opportunity, and threats (SWOT Analysis).
Set Financial Goals
How much damage has been done? What needs fixing? And what steps should be taken to get recover and back to business as usual?
Perform Market Analysis
The next step is to perform an in-depth analysis of your industry, customers, and competitors to know if there are any gaps left by the COVID-19 outbreak. Identify how your industry has been changed after the pandemic, what is your customer’s wants and demands, and how industry experts predict it will grow in the future. Create a plan to provide a more tailored experience to your customers and stay ahead of your competitors.
If your small businesses previously relied on the traditional method of marketing to build brand awareness and customer relations, you may need to turn to digital advertising to reach a higher number of customers and boost your business revenue. Besides that, you can leverage the benefits of social media to generate brand awareness, drive more traffic, keep an eye on your competitors, develop trust with customers, and build brand recognition.
Prioritize Business Activities
You can prioritize the business activities and connect to your vendor and customers to understand the ground reality. You may think selling of stakes, lay off employees, and repayment of debt to boost financial immunity of your business.
Keep Your Business Afloat
Execute a plan to keep your cash flow positive and business afloat. Create a strategy to shorten your cash cycle and focus on cash flow for the short term profitability. Spend wisely, avoid late fees, and keep on top of receivables to maintain positive cash flow after the pandemic.
Consider Small Business Financing
You can consider several small business financing options to successfully jump-start your business. The government is working hard to approve emergency funding for small business owners to maintain the health of their businesses. In addition to traditional SBA funding programs, the State and Local COVID-19 Small Business Assistance and CARES Act established several new temporary programs to address the COVID-19 outbreak. If your small business is desperate for some to cash to stay afloat, here are a few SBA programs that can help rebuild your business’s financial health post lockdown.
This program provides 100% federally guaranteed loans to businesses to maintain their payroll and other operational expenses during the emergency. The maximum loan amount under PPP loans can be 2.5 times the average monthly payroll costs. PPP loans can be up to $10 million and maybe partially forgivable.
An Economic Injury Disaster Loan is a loan up to $2 million, is intended to provide financial relief to businesses caused by COVID-19 pandemic. These funds are intended to cover everyday business expenses such as payroll, rent payments, mortgage payments, accounts payable, and other operating expenses. Moreover, these loans include an up to $10,000 forgivable advance.
Whether you’re trying to scrape together money to purchase inventory, increase working capital or buy real estate, SBA’s extensive loan programs let you borrow money for a variety of purposes that can help you meet your small business’ unique financial needs.
SBA Express Bridge Loans
It enables small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly.
Other Best Post-Pandemic Small Business Financing:
This sought-after funding is the perfect financing option for the post-COVID-19 world. It can be used to finance capital expansion, purchase inventory, or deal with negative cash flow situations.
These loans are typically unsecured, means you don’t need to put any collateral such as real estate or inventory. However, some business lines of credit may require collateral, due to the larger amount of cash being lent.
Need to buy office supplies for your business? Want to take clients out to lunch? Or need to cover monthly costs? A business credit card can be your true post-COVID-19 companion.
You can use a business credit card to cover different business expenses and streamline their transactions, so make it easy for you to separate your business and personal expenses.
MCA is an easy and quick way to get funding for your small business post lockdown. With Merchant Cash Advance, you will get a lump sum advance, which is then repaid automatically using a percentage of your daily credit card or debit card receipts, along with an additional fee.
Whether you want to purchase new inventory, bridge the gap in cash flow, pay the debt, open a new location, or advertising, a Merchant Cash Advance can be used for a variety of business purposes.
A traditional term loan is a one-time lump sum of cash that your business then repay overtime in schedule installments with a fixed rate of interest. These loans can be either short or long term that’s is available for both start-ups and established companies.
After coronavirus, you could use a term loan to improve your business by expanding your business, refinancing busies debt, or purchasing inventory.
Short-term loan is one of the most flexible, handy, and easy to attain small business financing post-COVID-19. You can borrow a set amount of money that you have to repay, with interest, at regular intervals.
This short-term financing is designed to repay much more quickly than other types of loans, often within 3 to 12 months. Short-term business loans are versatile, with amounts ranging from $2.5K to 250K, while a larger amount is likely possible with a secured loan.
This is a type of assets-based funding solution that allows business owners to improve cash flow and working capital when having long invoice cycles.
This is one of the fastest and easiest ways to get immediate access to cash without needing a loan after the pandemic. You don’t need to wait for invoice payment and can make repayments when the money comes in.
Equipment financing is a type of business financing used to provide companies with the capital to purchase needed equipment. If you lack sufficient funds to purchase needed equipment after coronavirus, equipment financing can help.
You can acquire everything from tables to computers, trucks, heavy machinery, or virtually any other equipment for your business.
Set Up an Emergency Fund
Coronavirus has proved that we still are helpless in front of nature. The future is unpredictable and we should always be prepared for the worst. It has also taught us how important money is and we must have in place an adequate emergency fund.
It is always a great idea to set up an emergency fund to prepare for the worst. This emergency cash will help you keep your business afloat and cover unexpected expenses post COVID-19.
As a rule of thumb, one should save somewhere between three to six months of expenses in its emergency fund. You should start saving now so that you can have enough money to meet your business’ day-to-day liquidity requirements in the absence of regular income after the pandemic.
Here are some of the many tips for building your business’ emergency fund:
- Automate your saving
- Keep at least 10% of annualize revenue in the bank
- Save your tax refund
- Use cashback credit cards
- Save when the going is good
- Cut back on business trips
- Use cash flow management and forecasting
- Plan for the worst-case scenarios
Revamp Your Business Budget
Last but not least – revamp the business budget to manage your money effectively. Due to the COVID-19 outbreak, it becomes important to better manage and control the finances of your small business.
Coming out of the pandemic, you need to draw up a budget and track each penny that will come in or go out. It will help you ensure that you can spend money on different projects effectively. Also, it will enable you to meet business objectives and make confident financial decisions post coronavirus.
You may need to spend money to hire new employees, rehiring ones you had to lay off, or to buy inventory. Debt many need to be paid off, and you might have to rev up your advertising budget to bring the most out of your business.
Budgeting ensures that your money is allocated to those things that are important for your business post-COVID-19. A well-communicated budget will help you understand the priorities of your business and keep your finances on track. A good step you could take during this time is to cut wasted expenses. Let your newfound frugal mindset help you save a lot of money during this tough time.
Here how you can create your monthly budget:
- Plan the budget before the month begin
- Identify the income you’re expecting to receive during that month
- Identify all the fixed expenses
- Depending on the requirements, decide what items you should include in the monthly budget.
- Create different categories such as saving, non-saving and decide what will go in each category
- Try to adjust your budget throughout the month
- Save for large or unexpected expenses.
Building financial stability in your business post-COVID-19 is not a piece of cake. It requires strategic planning, careful execution, and a lot of hard work. The 5 tips above can help business owners to prepare for a post-pandemic world and build financial stability once again.
Get prequalified financing options from SME lenders in a simple and quick process that takes less than 2 minutes. Any business operating in the USA and Canada may qualify. You don’t need to provide a credit check and fee for funding quotes.
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