The Devil is In the Details
Updated: Apr 5, 2020
With financial institutions, mortgage lenders, credit card companies, the SBA, etc. all rolling out aid programs focused on providing interim cash relief to small businesses owners impacted by the pandemic, it is hard not to jump on board and take advantage of the much needed cash.
However, there is no such thing as a free lunch. The devil is in the details.
Even in times of economic crisis and catastrophe, the age-old lending adage rings true. You should never borrow money unless you have a plan to pay it back.
Before you accept any assistance:
First, make sure that you understand what the terms are. What the interest rate will be, when you must start making loan payments, what the forgiveness terms are, what any deferments will do you your credit score, etc.
Then you need to think through and evaluate ‘how’ and ‘when’ your business is going to come back from the pandemic. Is that in 3 weeks, a month or more? Will your clients and customers come back in full force day 1 or will it be a slow gradual sales build?
Finally, seek a second option. The very best place to start is with your current bank or lender. Reach out and talk with them about what your options are. Reach out to your accountant or tax preparer to make sure that you understand the tax implications of any aid you receive.
As hard as the economic times are now for small business owners, you do not want to make your business recovery worse by increasing your debt burden as you are trying to rebuild your business.
I suggest that you start with a very simple cashflow analysis. It will give you insight to help you make the best decision for you and for your business.
Here is a link to download the spreadsheet we use.