If you’re like many small and medium business owners, you probably spent last weekend completing an application for the Payroll Protection Program (PPP). While the PPP is a great first step, your COVID-19 response plan doesn’t end when you hit “submit” or receive funds. Rather, focusing on the following will help put your organization on more stable footing in the weeks and months to come.
Five steps to consider after applying for the PPP:
- Build (or update) Your 13-Week Forecast
A 13-week cash flow model outlines the timing of your receipts and expenditures for the next three months. An accurate and well-constructed model helps identify if/when urgent operational actions are necessary and the effect of delaying expenses and expediting your accounts receivable process. Without a good forecast, you’re flying blind through a storm. If you need help getting started, check out this article, or give us a call.
- (Over) communicate With All Stakeholders – Especially Your Banker and Employees
In times of crisis, you can’t communicate too much with key stakeholders. Employees want to know their status on a regular basis (last week we created some tips which are available on our LinkedIn page), while suppliers and vendors want to know the effects of the crisis on your business operations, and vice versa. Your board will want to hear about your business continuity plan and will want to review your revised forecasts. While all of these stakeholder groups are important, it is critical you stay in touch with your banker, especially if you are in danger of breaking covenants on your loan. You will want to be able to make an analytical case that your financial issues are a direct result of the COVID-19 crisis, not an underlying flaw in your business model. It’s important to be proactive and transparent in your communications. It’s much better to initiate a difficult conversation than to default on your loan.
- Make Sure You Understand the Provisions of the PPP Loan Agreement and other Government Programs
There are several relief programs available through the Small Business Administration and other Federal entities. In addition, there may be other state and local programs for which your business qualifies. Regardless, make sure you understand all the legal provisions of the loan or grant before you sign. We’ve broken down the key similarities between the Economic Injury Disaster Loan and the Payroll Protection Program here. Be sure to complete a similar level of analysis on any other programs you are considering. Know your obligations, reporting requirements, and timing conditions contained the loan agreement.
- If Your Organization is in Distress, Call Your Attorney and Financial Advisor
In the words of Ben Franklyn, “You may delay, but time will not”. If your organization is facing financial crises, the smartest thing you can do is contact your attorney and financial advisor immediately. They will be able to council you on legal and financial options and may be able to recommend resources and/or work with your lender to help plot a path forward. Putting this conversation off will only limit your options as you continue to deplete cash.
- Double-check Your Organization’s Safety Protocols
If there was ever a time to focus on safety, this is it. In addition to making sure your organization is in compliance with all industry-specific OSHA regulations, now is the time to put additional measures in place to protect the health and safety of your workers, supply chain and customers. Be sure to document and communicate these new or enhanced measures to all affected parties. Ensuring a safe work environment helps maintain productivity and workforce morale.