It’s no secret that small businesses are taking a hit right now. Most have shut their doors for the forseeable future and their owners are (understandably) starting to worry. The good news? There are actually a lot of things that entrepreneurs and small business owners can do to feel more financially secure right now. Here, two financial experts share their tips for small business owners during the coronavirus outbreak.
1. Get Clear on Your Numbers
While you should always have a good grasp on your business’s finances, it’s more important now than ever. “It’s also a really important time to be very clear on our numbers. With less revenue coming in or the threat of less revenue coming in in the future, we want to be clear on our expenses and what we have in our business reserves. Plugging these numbers into a business model template can answer really important questions for us,” explains Ashley Feinstein Gerstley, founder of the Fiscal Femme and author of The 30-Day Money Cleanse. It may feel daunting at first, but you’ll feel relieved to know where you stand, she assures.
2. Be Mindful About Your Spending
Regardless of your spending habits, there’s always opportunity to be more mindful about where each dollar is spent. “It’s really important not to make any assumptions about a timeline for when this will end, which means you need to be mindful of every dollar you spend both personally and for your business,” says Erin Lowry, author of Broke Millennial Takes on Investing. One easy way to do that? Save all of your receipts each week and make a spreadsheet detailing exactly which categories (ex. food, entertainment, household needs) your money went into. From there, you can identify areas you’d like to cut back in.
3. Consider Taking Out a Small Business Administration Loan
“Many businesses will need to take out a loan or receive some form of capital to stay afloat,” says Gerstley. “The SBA emergency loan offers that financial bridge at a very reasonable interest rate—2.75 to 3.75 percent. For many businesses, this will be a really important tool to help them get through the COVID-19 crisis.” Just remember that you’ll eventually have to pay it back, so it should only be used for the things you truly need to keep your business going. You don’t want to take on more of a future financial burden than necessary, Gerstley warns.
4. Stay Informed
According to Gerstley, there are a number of special measures being put in place for small business owners as we speak. For example, the Family First Coronavirus Response Act offers tax credits for small business owners who are now tasked with taking care of their children at home. Some states have also begun implementing measures that suspend mortgage payments and stop evictions for those who are financially struggling as a result of the pandemic. She recommends talking to your accountant about other tax credits and deductions available, as well as your credit card company since some are offering to waive fees and payments. “Congress is working on more relief packages, so hopefully there will be more to come,” Gerstley says.
5. Don’t Be Afraid to Dip Into Your Rainy Day Funds
“We build up our rainy day funds for emergencies like this so even though it doesn’t feel great to dip into them, this is what they are for. This is the time to use them if we need to,” says Gerstley. But remember, you’re trying to make this money last as long as possible, she points out. That’s why it’s important to keep a close eye on the numbers.
6. Don’t Touch Your Retirement Investments
“It's really important to try to leave your retirement accounts alone, especially because pulling your money out can both trigger a tax penalty (depending on your age) and means locking in your losses during a tumultuous market,” says Lowry. Gerstley agrees. “For those with access to capital, either through their rainy day funds and or loans with reasonable interest rates, it doesn’t make sense to sell off their retirement investments because they are going to be penalized, taxed and are probably earning a much greater return over the long run,” she says.
7. Lean on Your Community for Support
Gerstley notes that she’s been encouraging people to purchase gift cards, order takeout and even buy tickets to future events as a way to support their favorite small businesses. We’ve also seen a number of small business put calls out via social media offering to let people “FaceTime shop” or to deliver goods straight to people’s doors. Get creative and you may be surprised by how many people want to help out.