Small businesses are dealing with unprecedented struggles in the wake of the coronavirus outbreak. Never before have so many small businesses had to deal with a sudden cash crunch of this scale at the same time. This is no ordinary downturn in the market, after all.
Many businesses, due to a loss in revenue from government restrictions or loss of foot traffic, will have a hard time making payments to the various suppliers, vendors, credit card companies, and lenders that help keep their ventures up and running.
As the market free fall from the coronavirus outbreak continues, bills will still come due, and repayment schedules will continue as planned. If you’ve been affected by the coronavirus and don’t have the cash on hand to make these payments, it’s time to negotiate.
Here’s an overview of how to talk to the people you owe:
Whether you have a term loan, line of credit, or other financing product out from a bank, alternative lender, credit union, or other lender, there is one universal truth: Your lender does not want you to default on your loan.
You and your lender are similarly incentivized for you not to miss payments or default entirely, and so to the best of their ability, they are going to want to work with you. That could mean deferred payments, or reduced payments (typically correlated with how much revenue has dipped since the outbreak).
Keep in mind that whether you reduce, defer, or default entirely, you will eventually need to repay your loan in full. These decisions could also impact your business credit or your personal credit (if there was a personal guarantee on your loan). This will all depend on your lender’s policies, what type of loan you have, and other factors—so it’s important to understand possible consequences as soon as possible.
In this situation, the best point of contact is the lender itself, as they may be able to work something out. Look to see if your lender has a coronavirus-specific hotline; otherwise, contacting customer service should get you to the right place.
(Note: If you obtained your loan through Fundera, contact our support team at 240-623-2118, so we can direct you to the specific number for your lender.)
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Each conversation will of course depend on each situation and lender, but approaching your lender as quickly as possible to explain your position is the best way to secure a positive outcome.
Credit Card Companies
Credit card companies will have a similar outlook as lenders: It’s in their best interest that you remain a loyal, happy customer, even through this difficult situation.
Reaching out to your credit card provider to see how they can work with you to lessen your current financial burden is a must. Every issuer will have different terms, but no doubt that reaching out proactively rather than waiting to miss a payment will make a stronger case.
Credit card issuers such as American Express, Capital One, Citibank, and Chase have all recently indicated their willingness to work with small business owners and other customers affected by the coronavirus. That could mean waiving late fees, return check fees, and interest charges; as well as helping find solutions for travel plans made with that card.
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No matter who your credit card issuer is at the moment, they are no doubt crushed by the number of people reaching out to them for customer support. American Express, Chase, and Citibank, for example, will all have customer service channels through their mobile apps, or even their online chat functions. Conversing through digital channels right now, rather than over the phone, is the fastest way to talk with a representative.
Your credit card issuer will be well aware of the situation, and should look to work with you to provide some kind of short-term financial relief. Approach the conversation tactfully and respectfully.
Vendors and Suppliers
If you have trade credit with vendors and suppliers that you are now in danger of missing payments on, it’s also time to get on the phone with them to discuss adjusted terms.
Hopefully you’ve maintained a positive relationship with your vendors and suppliers, so going to them with an ask will be met with understanding.
Some business owners may find that pausing a relationship with a vendor—rather than canceling the current agreement outright out of fear of not being able to make payments—is amenable to both sides. Assuming the supply chain for your products has not been disrupted, suppliers will want to continue providing you with resources and inventory if business picks back up again in the near future.
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This is not the time to play hardball with a supplier or vendor that you have a good relationship with. Working with businesses that may also be struggling is the best move. That doesn’t mean, however, that you can’t take some time to research other suppliers and vendors and see if you could be getting a better deal elsewhere.
Approaching your supplier, for example, with the information that a competitor has better prices and terms than they are offering and asking what they can do to keep your business in this difficult time is not the same as playing hardball. You are simply presenting the facts and doing what’s best for your business. Save threats of litigation or canceling your orders for if things turn ugly for whatever reason.
Making rent is an ongoing consideration for brick-and-mortar small businesses, as this payment is often a massive portion of overhead.
If you’re worried about making rent this month or next, it’s worth looking into whether your city has suspended evictions and late fees, reduced city business taxes, or taken other steps to help alleviate this pressing issue. Los Angeles is looking to introduce legislation to do all of the above; New York lawmakers also want to offer rent forgiveness and to work with smaller building owners if their commercial tenants can’t pay rent.
If the above doesn’t apply to you, approaching your landlord yourself and working out a deal is your best bet. Keep in mind that as much as you don’t want to go out of business, your landlord likely won’t want to spend time, money, and resources looking for a new tenant to move in and immediately make up lost income.
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Look into legal aid and recourse from your local government, as well as from the state or federal government. If that hasn’t become available yet, working with your landlord on a short-term solution is a common option here.
Other Contractual Obligations
Small businesses enter into contracts all the time with a variety of other businesses and organizations. Perhaps you were slated to cater a recent corporate event. Maybe you’ve been paying for a robust point of sale service complete with hardware and software. How can you break your commitments without losing money?
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If you have a contract, review your force majeure clause and understand whether a pandemic like the coronavirus outbreak falls under that clause. Every contract and every state’s enforcement of those contracts will differ, so your best bet if you think your force majeure close should cover you (e.g., an “Act of God”) is to give notice of force majeure in a convincing, thorough, and respectful way. If you end up needing to settle this matter in court, making a compelling case up front will improve your chances of success.
Otherwise, approaching this other party and asking for a pause, postponement, or other break so you can reassess the viability of continuing the contract in a few weeks or months will go a long way toward giving you breathing room.