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Ships on the ocean use stabilizers to help ensure they remain upright during a storm. Businesses need stabilizers too. COVID-19 has unleashed a massive economic storm upon the business community with some business sectors hit harder than others, but as this pandemic prolongs its impact, more industries will be adversely impacted. Below you will find some ideas for you to consider implementing in your business to withstand the short term economic shock related to COVID-19 and position your business to seize the resulting opportunities at the end of the rainbow at the other side of this storm.

Our team at Manning Fulton is here as your legal advisors to help you work to implement these and other strategies you may develop.

1. Remember, Cash Is King.

  • Cash Preservation. During a crisis, cash preservation and cash flow planning are of paramount importance. You should review your operating budget to develop a tiered strategy for cash flow preservation based upon how long COVID-19 continues to adversely impact your business. What initiatives can be deferred or delayed without adversely impacting your business operations in the long term? Consider discussing with your bank availability of SBA disaster recovery loans or other financing options.
  • Economic Injury Disaster Loans (EIDL). Governor Cooper sought and the Small Business Administration approved the Governor’s request for a disaster designation, so businesses may now apply for EIDL here. Those small businesses operating outside North Carolina should check to see if their state also has been approved for a disaster designation. Here is some basic information on EIDLs from the Small Business Administration:
    • The U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19). Upon a request received from a state’s or territory’s Governor, SBA will issue under its own authority, as provided by the Coronavirus Preparedness and Response Supplemental Appropriations Act that was recently signed by the President, an Economic Injury Disaster Loan declaration.
    • Any such Economic Injury Disaster Loan assistance declaration issued by the SBA makes loans available statewide to small businesses and private, non-profit organizations to help alleviate economic injury caused by the Coronavirus (COVID-19).
    • SBA’s Office of Disaster Assistance will coordinate with the state’s or territory’s Governor to submit the request for Economic Injury Disaster Loan assistance.
    • Once a declaration is made, the information on the application process for Economic Injury Disaster Loan assistance will be made available to affected small businesses within the state.
    • SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
    • These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
    • SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
    • SBA’s Economic Injury Disaster Loans are just one piece of the expanded focus of the federal government’s coordinated response, and the SBA is strongly committed to providing the most effective and customer-focused response possible.
    • For additional information, you may visit here, or call the SBA disaster assistance customer service center at 1-800-659-2955 .

2. Consider Lender Forbearance.

Unlike 2008 when banks had an adversarial relationship with their customers due to their own undercapitalization, thus far, many lenders have exercised great restraint and willingness to work with borrowers. They understand the current financial impact is not a function of a deficiency in the borrower’s business model, but the results of a pandemic. Accordingly, our sources tell us for SBA loans, the SBA has given banks the ability to forebear monthly payments for up to 90 days without the SBA’s approval. When requested, we understand for conventional financing some lenders are willing to delay or reduce payments and that the FDIC and other applicable government agencies have signaled through dramatic rate cuts and reduced capital requirements such flexibility will be permitted.

3. Adapt Your Business Model.

Adm. John S. McCain, Jr. one said: “Life is run by poker players, not the systems analysts.” During times of change those who adapt will survive. If your business model has been disrupted, you need to determine how to disrupt the disruption, which may involve the gamble Adm. McCain referenced. Restaurants whose dining rooms have been closed have been doing this through pushing delivery or curbside pickup. While these alternate operations may not provide long-term profitability, they may provide sufficient cash flow to allow the business to survive. Adapting to survive is the key.

4. Reach Out To Suppliers.

Work with your suppliers to extend payment terms, accept partial payments, or other creative solutions to address cash flow management. It is in their interest to keep customers in business as longstanding partners after the present difficulties have passed.

5. Review Business Interruption Insurance.

If you have not already, you should review your business interruption insurance policy with your insurance broker or experienced insurance coverage attorney to determine whether the current situation constitutes a covered loss. The applicability of business-interruption coverage to the COVID-19 outbreak will be considered on a case-by-case basis and will depend largely upon the language within a particular policy, including possible exclusions. For example, many commercial property policies provide coverage resulting from business losses resulting from a “civil authority” prohibiting or impairing access to the policyholder’s premises. The restaurant and bar ban in some jurisdictions may trigger this provision. Insurance policies often have strict notice provisions so care should be undertaken to comply with those provisions.

6. Communicate With Your Customers.

If you have closed to the general public, you need to let your customers know that you have closed to protect them and look forward to serving them when the storm has passed. If your customers are businesses, let them know how you can service them remotely and, how they can continue to pay their invoices. Remember your customers may be hurting for cash, so strategies #1-2 become even more important.

7. Hold Virtual Shareholder Meetings.

Many clients are looking to have virtual shareholder meetings. If you need to implement virtual shareholder meetings, please contact me to discuss the process for doing so. Alternatively, annual meetings can be accomplished through unanimous written consent in lieu of a meeting.

8. Comply with OSHA Requirements.

COVID-19 is considered a recordable illness if an employee is infected as a result of performing their work-related duties. OSHA requires covered employers to record workplace injuries and illnesses on their OSHA 300 log. If you have concerns about these requirements, Manning Fulton’s employment law attorneys can help you navigate the record keeping requirements.

Manning Fulton stands ready to help you and your business successfully navigate the COVID-19 crisis, and be well-positioned to thrive once it comes to pass. If we can be of assistance to you now, or at any time, simply contact Ritchie Taylor or your Manning Fulton relationship attorney.

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