• Push the Pause - A Discussion on Small Business Survival

March 21, 2020

Listen to the special episode of Shining Bright now.

No matter who you are, where you are, what you do or how you do it, odds are you’re wondering what the future brings.  In the small business community, the world has changed overnight.  Customers have stopped coming, spending has slowed to a crawl and that in turn is forcing doors closed, layoffs and a very uncertain future.  Whether you are a small business owner, you work for a small business or use one in your day-to-day life (which is pretty much everyone) this is a topic that matters and needs attention. 

Cue a Facebook post from Daniel Winegarden, Lead Faculty at Goldman Sachs 10,000 Small Businesses in Iowa. I met Dan while going through the Goldman Sachs 10kSB program in 2019 and have much respect for his knowledge and outlook.  His post on Facebook (see details below) was straightforward and informational and just what I didn’t know I was looking for in this turbulent time.  To take it a step further we got on the phone for a special episode of Shining Bright and discussed in more detail about the Push Pause response he is advocating. 

Our discussion also focused in a little closer on the effects of this emergency on rural communities.  Realistically, while there are fewer people and potentially less spread for the actual virus, vulnerability due to far fewer medical resources is very real.  According to a Kaiser Health News report, more than half the counties in America have no intensive care beds, posing a particular danger for more than 7 million people who are age 60 and up.

Additionally, the majority of businesses in rural communities are small and thus much more susceptible to this emergency situation. Listen to our conversation here.

Dan’s original Facebook post was as follows:
“Coronavirus Business Response
Business owners need to push pause with lenders and other creditors and ask for forbearance through the emergency. Hold onto cash both personally and in the business for the essentials of food and healthcare. The Fed's near 0% bank lending rate is intended to help banks and creditors say yes to this. Forbearance doesn't require asking for or waiting for a new loan. It pauses payments on current liabilities.
Ask for any payments due this month to be added to the end of the loan or obligation. But you have to ask. And document the answer. Now is not the time to go quiet. Talk to your bank, landlord, or other creditors. Ask for forbearance.
Communicate with your creditors, customers, and employees more not less. Everyone understands this one is beyond our individual control. This won't last forever. But we need to survive through to the recovery. Protect the potential for future employment by keeping businesses alive.
Public health comes first. Protect each other by killing the transmission of the novel coronavirus (technically SARS-CoV-2, the resulting disease is COVID-19). #flattenthecurve#pushpause
The big lesson for lenders from 2008 mortgage financial panic? It is it's stupid to enforce collection rights in the middle of a panic because as a lender you further destroy the value of assets that secure your loans. So the right response for lenders in a panic is to extend or modify debt. Not force foreclosure or collections. Therefore, small business owners will almost certainly receive a "yes" when asking for "forbearance" when asking to not pay now and add the missed payments to the end of the loan. This is essentially pushing pause on loan (or rent) payments in the middle of an economy-wide cash crunch.
Forbearance is one of those magic legal terms. Use the phrase with the banks, lenders, and landlords.
Here's a script.
"Hello, Creditor. Due to the coronavirus emergency, a circumstance beyond both of our control, I can't afford to pay this month. I am asking for your forbearance. Add the amount due this month to the end of the loan or liability. [Avoids doubling up when payments resume.] We're both better off if my business [job] survives the emergency."
Ask forbearance for everything you can, loans, credit cards, rent, and more. They will have to do the same. The Fed is providing banks liquidity with 0% federal funds rate to encourage just this. Landlords will have to ask for the same forbearance from their lenders after granting it to tenants for rent.
It's not a new loan, it's suspending payment on existing loans and liabilities.
But you have to ask. And you have to document the answer. As the small business person note who you talked to. Their answer. For now, do it on a month-to-month basis. But this may go on multiple months.
Eventually herd immunity kicks-in or we have a vaccine. There's hope at the end of the tunnel."

I hope you enjoyed and found insight in my discussion with Dan.  You can check out his blog, Aging With Freedom, here.

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