The coronavirus has had significant economic consequences for businesses in a variety of industries. Your financial situation likely looks much different today than expected, but there are proactive ways to adjust business plans or take advantage of new support to create the best possible scenario for the remainder of 2020.
Revise your 2020 budget. The environment your business is operating in today is likely not what you’d anticipated when a 2020 budget was created. Forecasted profit should change as circumstances do, and don’t wait until too late in the year to reduce non-essential costs wherever possible.
Check insurance policies for business interruption coverage. Many policies will not include special coverage for national emergencies, but it’s wise to double check. Use this time to identify gaps in your insurance.
Wait to pay 2019 taxes to enhance short-term cash flow. As of March 20, the IRS moved Tax Day to July 15, 2020, which means businesses have additional time to file and pay without interest or penalties.
Take advantage of small business loans or grants created by the CARES Act. Congress created a $350 billion fund to help companies with fewer than 500 employees navigate losses related to COVID-19. The historic stimulus package includes:
- Economic Injury Disaster Loans: These low-interest resources can be used to offset physical and economic damage caused by a declared disaster. The U.S. Small Business Administration has made EIDLs more accessible for many businesses by removing requirements for loans below $200,000 made in response to COVID-19. You no longer have to supply a personal guarantee on the loan, prove that a business has been in operation for one year, or demonstrate that credit was sought elsewhere but denied. You can request an advance of up to $10,000 to help provide paid sick leave, maintain payroll, or other immediate operating expenses. Funds will be paid within three days and aren’t required to be paid back even if your EIDL is denied.
- SBA Express Loans: The SBA has expanded and accelerated small business loans through the end of the year by increasing limits from $350,000 to $1 million.
- The Paycheck Protection Program: SBA-approved lenders can offer forgivable loans up to $10 million to help small businesses maintain payroll, pay rent or mortgage interest, and make utility payments. This S. Chamber of Commerce fact sheet outlines who qualifies and how they can be forgiven, and the borrower’s guide and loan application can be here.
Collaborate with your accountant to take advantage of new tax benefits. The CARES Act also created some tax breaks for businesses such as refundable payroll tax credits, delaying social security payroll tax payments, increasing net interest deduction, and allowing businesses to claim retroactive net operating losses to offset taxable income. As your wealth advisor, it’s important we be in communication with your CPA to help maximize financial advantages available to you.
During times of crisis, it’s more critical than ever to have a clear plan, to explore your options, and make wise decisions that won’t create additional hardships for you later. Our team would be glad to help.