Earlier this week the President announced COVID stimulus on hold for now and that further negotiations on a comprehensive stimulus bill wouldn’t take place until after the election—just 25 days away (at this writing).
Although there has been a suggestion that some industry-specific relief for the airlines be pushed through, it’s doubtful that a second stimulus package for families or any additional money will be made available to small businesses until after the election. That doesn’t mean that there isn’t any relief coming for eligible recipients, or that another round of the CARES Act isn’t on the horizon, it just means that stimulus talks are on hold for now.
With COVID Stimulus on Hold, What Can Small Businesses Do?
Don’t put all your eggs in one basket.
Although any COVID stimulus is on hold for now, most economists, both the Democrats and Republicans in Congress, and the President agree that some form of additional stimulus will be required to keep the small businesses most impacted by the coronavirus pandemic alive, there are other options you can pursue in the meantime—and maybe even in conjunction with any future aid package. Although none of these represent a silver bullet, combining these four approaches can help you wait out the next few months as well as help you keep your doors open.
Get Past the First “No”
If you’ve applied for a loan, line of credit, or a credit line with a vendor, don’t accept the first “No” as the final answer. Most of the time the first credit review is based on the industry you’re in, which can be a problem unless you can show that your business is doing something different and you’re doing better than the average.
You might not know that if you don’t like the results on a credit application you can send in your checking account records and request a second review. Remember, data drives loan decisions and the more verifiable data you can provide to a potential lender that shows your business is performing better than the average, the better.
Pick Up the Phone
A phone call to a current creditor makes you a lower-risk borrower than someone who doesn’t make the call or refuses to pick up the call.
It’s not uncommon for credit card providers, during a recessionary time, to reduce credit limits or tighten up their credit criteria—this usually starts with dead credit cards (cards that never get used). Your phone call, along with occasionally using your credit cards to keep them active, will help keep you off that list so you can leverage your business credit cards in a pinch.
Additionally, avoid the temptation to revolve all your business expenses on your favorite credit card—even if it is the one that offers the best reward points. Make sure all your cards are active. Personally, I make sure my personal credit cards all at least pay for a tank of gas or a restaurant meal every month to make sure they are active and my credit limits remain intact throughout the recession—even though I maintain a zero balance at the end of every month.
Nav’s founder, Levi King, suggests, “You should also be reading the quarterly earning reports and the quarterly financial statements for your credit card providers right now. If one of them is experiencing some financial difficulty, they will likely be the card that gets pulled first. If you aren’t anticipating it, it could be a problem.”
Don’t Forget Your Friendliest Creditors
The suppliers you work with are motivated to continue doing business with you and will likely be the friendliest creditors you will ever have. In fact, I think it’s pretty safe to say they are almost as interested in your business’ viability as you are. Because of that, they are often willing to be more flexible when you are in a tight spot than other creditors.
Be straightforward with them. Don’t be afraid to ask for an extra 30 days if you need it. The worst thing they can do is say “No.” Which is where you are at right now anyway. I think you’ll find they will be willing to work with you and will offer you the most favorable terms they can.
Use the Credit You Have Wisely and Monitor Your Profile
I’m convinced that creative problem solving is the skill successful business owners share. It’s more important than money and it’s more important than experience. In reality, we have no real idea how long this pandemic-induced economic crisis is going to last, so before you access your credit line, swipe your credit card, or second mortgage your house, make sure you have exhausted all the other options to solve your problems that are available to you.
I’ve spoken with dozens of business owners over the last several months who’ve had to adapt the way they do business to navigate the business climate created by the pandemic. My favorite restaurant ramped up their ability to offer curbside service, a dance studio I’m aware of started doing dance classes online, a small business events company created a web-based marketplace so they could sell their goods over the Internet. These, and businesses like them, are the businesses that will not only survive the current economic hard times, they will enter the post-COVID world stronger and better able to compete in whatever business climate the new normal throws at them.
In general, there’s a higher likelihood of an error being reported on your business credit report than your personal report. Especially in times like these. Your personal credit score reflects what’s happening in real time, there isn’t really a credit file, and the information a creditor needs to report is more comprehensive than a business report.
Making an inquiry or notation on your personal credit requires your name, date of birth, social security number, and your address. It takes a least three out of the four data points to be accurate. With business credit, all you need is a business name and an address.
No two businesses are supposed to have the same business name, but it doesn’t always work out that way. Sometimes similar-sounding names can be confused, creating an error in your business credit profile.
A business that has never seen their business credit report doesn’t really know if it’s accurate—in fact, it could be inaccurate from the start and they might never know. For example, the differences between Jim’s Construction and Jim’s Construction and Excavation could get missed by a creditor submitting to the credit bureaus if these two separate small businesses are doing business in the same town. This can make qualifying for a small business loan difficult for Jim’s Construction and Excavation if their credit history is confused with Jim’s Construction and their in-the-toilet credit profile.
You should expect that underwriters will be more cautious than they were just a few short months ago, meaning you need to stay on top of your credit and make sure you understand what it’s telling creditors about your business’ creditworthiness. Nav can help you access your business and personal credit for free, click HERE.
COVID stimulus may be on hold right now and I don’t know when things will get back to normal, but they will. The goal for all of us is to be thoughtful and strategic as we face the challenges of the coming months. These four tips will help you weather the storm as you wait for the future stimulus that will be coming.
This article was originally written on October 9, 2020 and updated on October 19, 2020.