Client Memorandum – Steps For The Short Term

March 23, 2020

This Update deals with short term solutions for cash flow problems in your business. It
encourages a bias for action (talk to your lender and landlord early and often) and creative ways
to partner with your suppliers and vendors to weather this storm.

6 Steps to Take When You Can’t Pay Bills for Your Small

1. Talk to your lenders.

Your lenders don’t want your business to default on payments. If your business can’t pay its
bills due to coronavirus, they may be able to work with you to restructure your debt temporarily.
If you’re facing the prospect of not being able to make payments, reach out to them sooner rather
than later.
If you have certain SBA loans, the following relief may be available:

  • SBA 7(a) loans: lenders may defer payments for 90 days or up to six months (depending
    on whether the loan has been sold on the secondary market).
  • SBA 504 loans: lenders may defer up to six cumulative monthly payments or 20% of the
    original loan amount, whichever is less.
  • SBA Microloans: microloan intermediaries may make deferments for up to six months
    but deferment may not cause the life of the microloan to extend beyond the maximum six
    year maturity.

Some lenders are proactively working with small business borrowers to help them through this
time. Many lenders have rolled out a range of measures to help existing borrowers impacted by
COVID-19. These measures include providing impacted borrowers with forbearance and other
repayment flexibility, electing not to report borrowers as “late on payment” to the credit bureaus,
and waiving late fees for borrowers in forbearance due to the COVID-19 pandemic.

2. Call your landlord.

If you are having trouble paying rent for your business location, don’t ignore your landlord. Call
and email the landlord as soon as you can. Explain how COVID-19 has impacted your business
and ask for what you think you need, whether that’s rent abatement for some period of time, or
readjusting your payments. For example, one client’s landlord has agreed both to reduce the rent
and to take half that reduced rent on the 1 st of the month and half on the 15 th . Some will be able
to be more flexible than others, but no landlord wants empty space. There’s a good chance that
your landlord will work with you to avoid having your space sit empty. Offer to take
responsibility for preparing any lease amendment, to save the landlord that cost.

3. Look into short-term financing.

Your business may be able to access some of the following forms of financing:

  • SBA loans including funds expected to become available through the SBA Disaster Loan Assistance program
  • Low-rate credit card offers, including balance transfers
  • Lines of credit or term loans

Have a clear, specific plan for how you’ll use the funds and how those funds will help you stay
in business and return to profitability.

4. Negotiate with your suppliers and vendors.

Your suppliers and vendors know what’s going on. They are as concerned about the crisis as
you are. They may be able to work with you to negotiate lower payments or longer payment
terms for a period of time. If you stay in business, it helps them in the long run. It’s in their best
interest to help you stay in business and survive the crisis, particularly if you are a small
distributor for a larger manufacturer.

5. Consult a credit counseling agency.

Non-profit credit counseling agencies, such as those who are members of the National
Foundation for Credit Counseling, can help you evaluate your situation. You may be able
eligible for reduced payments on some of your credit cards (personal credit cards only). Visit or call 1-800-388-2227 for a free consultation.

6. Consider debt settlement options.

When you fall behind on payments, your debts are often sent to collections. At that point, you
may be able to negotiate lower payoffs to resolve the debt. This option has drawbacks, including
late fees and interest, or even potential lawsuits from creditors. It does help some individuals
and small business owners who can’t pay their debts in full but for whom bankruptcy is not a
good option.

If your business can’t pay its bills due to coronavirus, explore your options sooner rather than
later. If you wait too long to get advice, you may make expensive mistakes that could have been
avoided. While we all hope that this situation remedies itself before it has significant impact on
the small business community, it never hurts to take precautions to protect your business.

We’re happy to work with you to find short terms solutions to cash flow problems. If you’d like
advice or suggestions on how to approach your landlord or lender, we’re here. Please call or
email us with your questions about ways to weather a short term cash flow crunch or any other
business issues. We know these are difficult times – we’re here to help in any way we can.

Take care and stay safe.