Business

December 17, 2021 By Joanne Bella

5 Ways Small Businesses Can Recoup Pandemic Losses

The COVID-19 pandemic has had huge impacts on businesses big and small. According to research conducted by Yelp, 60% of businesses have permanently closed as a result of the global pandemic, and more are still struggling to recover.

It can be hard for a business to pick itself back up after huge losses, but it’s not impossible. Here are five ways small businesses can recoup pandemic losses.

1. Review your business plan

Your business plan may have been designed to suit the conditions before the pandemic began, but we live in a different environment now. A review and revision of your business plan may be necessary.

For example, if you own a restaurant and have never had an online presence, you should consider setting aside funds for building a website that can take orders and offer delivery. This, and many other simple modifications, could ensure the continuity of your income despite the pandemic, thus helping your business recover sooner from its losses.

2. Evaluate your financial losses

Research has found that cash flow was the biggest problem for small and micro-enterprises during the pandemic. Proper cash flow management and assessment is key to mapping a recovery plan.

You can start with a detailed study of your cash flow — profit and losses — including records of all transactions, purchases, returns, inventory, rent, salaries, and so on. This will help you keep your eye on the goal to recovery, manage your finances carefully to make up for lost revenue and spend reserves wisely.

3. Hire freelance finance professionals

Many business owners might be hesitant about the cost of hiring professional accountants to help them sort out their finances. However, this is one case where the costs are worth it — and in fact, might not even be too expensive. Antenna founder Brendon Schrader notes that hiring a freelancer allows a small business to find targeted and better qualified talent to address their needs at a much lower rate.

Universities offer courses on finance and business administration online, and this has allowed more people to get the necessary training and qualifications to practice freelance accounting. With proper accounting, this will help you assess how to recover from your losses more accurately.

4. Plan your business expenses in advance

Small business owners need to plan in advance where limited funds will go next and how much can be allocated for certain business needs. Distribute a portion of the funds to go back into the business for capital expenditures, costs to restock inventory, expenses for planned maintenance, salaries, and maybe even funds toward an emergency reserve account for sustaining business operation — just in case another coronavirus variant develops. Planning expenses in advance can help you predict how soon you should be able to regain lost income, and whether full recovery is possible.

5. File for bankruptcy

Bankruptcy isn’t the only method to fix debt, but if you owe a lot of creditors, it’s often the most expedient way. As extreme as it sounds, bankruptcy offers a few benefits to belabored business owners. It can help your credit score go up, and the consolidation of debt can also be helpful. However, declaring bankruptcy and opting for consolidation isn’t a magic bullet, and can come with its own challenges. You can schedule an appointment and consult with us before opting for this route, and we’ll help you determine whether filing for bankruptcy is the best course of action for your business.

Everything in this life comes in cycles. With the worst of the pandemic behind us, it’s high time businesses started thinking about ways forward. The world has started to adapt to the new normal, and with careful work and recovery planning your business may be able to do the same.

Post solely for the use of jenleelaw.com

By Joanne Bella

This is just a basic overview and is not legal advice specific to your situation. If you have questions about your rights when it comes to debt and credit, you should speak with an attorney in your area for legal advice. If you live in California or North Dakota and would like to speak with Jen Lee Law regarding your situation, please schedule an appointment.

January 6, 2021 By Jen Lee

A Lesson in Internet Headlines

Yesterday (January 5, 2021), news websites reported the following two headlines:

PANDEMIC SPURS MOST BANKRUPTCY FILINGS SINCE 2009
The sky is falling, the sky is falling!

BANKRUPTCY FILINGS HIT 35-YEAR LOW THANKS TO GOVERNMENT PANDEMIC AID

Wait, what? I thought the sky was falling.

How can both of these headlines be true? Because the reporters cherry-picked statistics to make the most sensational headlines. As far as business bankruptcies go, it’s true that bankruptcy filings were way up in 2020. However, consumer bankruptcy cases were way down in 2020. So, it was the best of times, it was the worst of times.

To explain, businesses struggled with shutdowns and lack of funding to pay leases, payrolls, and expenses with no revenue. Many businesses have held off filing for bankruptcy to see what a recovery may look like before jumping into bankruptcy, but many were not able to hold off, which resulted in high business filings compared to recent years.

However, consumers and individuals are currently struggling with how to predict the future. It did not make sense in 2020 for most people to file bankruptcy without knowing what debt and income looks like going forward. Also, the pandemic unemployment helped many people stay current on bills. Finally, the eviction and foreclosure moratoriums, along with court closures, have made it less urgent to file immediately to stop those proceedings.

So, take your headlines with a big grain of salt these days. It also helps to remember that you are not alone in facing difficulties. Get advice for your specific situation and use the tools that are available to you.

March 30, 2020 By Jen Lee

The CARES Act and the Paycheck Protection Program: What You Need to Know

Lots of information out there about the new CARES Act and what it purports to do. It’s a huge document and has a lot of moving parts. In an attempt to pull out useful information for the average consumer and small business owner, we are working on a series of blog posts to help answer some questions.

One of the most interesting sections discusses a new loan program for small businesses that has an element of forgiveness involved. A chief complaint of SBA loans is that businesses were already saddled with debt and adding more debt may not make sense or even be feasible in the long-term. Enter the Paycheck Protection Program (PPP) loan.

The PPP is different than the disaster recovery loan that many have already tried to apply for in the past week or two. Applications are not available yet and documents, procedures, and communication with banks are still being established. The program offers cash flow assistance to small businesses with fewer than 500 employees.

The amount available is equal to 2.5 times the average monthly payroll costs or $10 million, whichever is less, and the average monthly payroll is based on 2019 payroll figures. Monthly payroll costs not only includes wages for employees, but also paid sick leave, health insurance premiums, payroll taxes, and other benefits. The loans are intended to cover payroll costs, business disruption, health insurance premiums, lease or rent expenses, and utilities.

A very important detail is that the loans will not be personally guaranteed or require collateral, which is very different than most SBA products previously on the market.

Now, the forgiveness part, which we should all be looking at to figure out the terms and conditions. Loans under the PPP may be fully or partially forgiven. Loan proceeds used to make payroll, pay utilities, rent, mortgage, and existing business debt may be forgiven, dollar for dollar. However, in order to receive the dollar for dollar forgiveness, employees need to remain employed and paid through the end of June.

Keeping complete and accurate records will be key to the forgiveness of these loans. You have to be able to show what the funds were used for, that those uses qualify under the program, and that you kept payroll going through the end of June. The better your records, the easier it will be to have the loan reduced on a dollar for dollar basis.

The PPP loans will be offered through local banks, not directly from the SBA. If you need connections to a bank offering these programs, please feel free to email me.