PPP Loan Explained

You’ve received the PPP Loan, what are you next business steps?

Congratulations on receiving your PPP Loan…

Now, what should you do?

I’d like to share a few Strategic/Financial Management ideas that I believe will help you to navigate through your financial challenges and move forward in this time of COVID-19.  

In this article, you’ll find the necessary steps business owners should take immediately to plan for the future. Throughout this article I’ll share my perspective- that of a CFO with 15 years of experience- on the current economic uncertainties facing most businesses across country.

Where we’ve just been

We’re all aware that the current Pandemic has created the equivalent of an economic earthquake and, as a result, the ground beneath us has shifted and is no longer stable- the aftershocks continue.

The Pandemic came crashing down on us in mid-March and, I expect, many of you have taken one or several of the following steps to take control of your business:

You’ve…

    • Taken out a PPP Loan and are working to take full advantage of its forgiveness feature; or taken an EIDL (Economic Injury Disaster Loan)
    • Reduced staff and cut expenses
    • Negotiated with vendors and landlords on payments and terms
    • Reviewed your major contracts
    • Requested Loan Forbearance from your bank
    • Collected or tried to collect account receivables
    • Explored submitting a business interruption claim –Viruses are almost always an exclusion – Stay connected with your Broker for Litigation updates  
    • Asked your Broker to review your “Insurance Coverage Limits”  
    • Stayed in close contact with your CPA for updates on the Cares Act’s continually changing rules
    • Monitored Governmental announcements on Safety and Employment Rules for compliance and a safe re-opening
    • Watched the news for travel rules and supply-chain impact

If you’ve completed these tasks, kudos are in order. Your head, like mine, may still be spinning but we carry on. 

Where we are now

As if the Pandemic wasn’t bad enough, we’ve had several more shocks to the system with political conflicts, social unrest, and global disputes, adding greater instability. Of course, if you’re in a business or organization that provides services to these various areas, then these might be high times, and your new challenge is merely keeping up with demand.  

So, what do we know about the future?  

  1. We know we do not know when this 2020 economic upheaval is going to end
  2. We know we do not know if the situation is going to worsen and require further restrictions
  3. We do not know the impact of nearly 40 million unemployed citizens on our consumer-driven US economy and our ability and timing to reemploy them
  4. However, we do know the US Government and US Fed have been taking monumental actions to prop up the economy and seem willing to continue as needed (this is helpful)

If this article resonates with you, I invite you to contact me for a free 30-minute evaluation at EdMusmon@ineedacfo.com.

Going forward

  • A Shorter Time Horizon

It’s clear that right now, there is more that’s unknown than is known about the depth and length of the economic fallout. This means you must continue to do all the tactical, crisis management things you’ve been doing and simultaneously reevaluate your overall business strategy. Now is the time to create a continuous feedback loop with your management, staff and all contingencies as you fine-tune your strategy.  

Pre-COVID-19, Strategic Planning was done with two, three, or 5-year horizons. Budgets were done on an annual basis, and re-forecasting might be done semi-annually or quarterly. Things have changed. COVID has flipped the typical planning and analysis procedures on their head. Now, we’re forced to re-plan and report and analyze faster in order to adjust our business approach in real-time.

  • Adjust your Strategic Plan

In the last several months you’ve likely asked yourself one or several of the following questions:

  • What happened to my market?
  • Are my customers the same?
  • Do I need to deliver my service or product differently?
  • Do I require new suppliers/vendors?
  • Has my competition changed?
  • What are my competitors doing to adapt?
  • Do I need to change my pricing or distribution approach?
  • Has the sale cycle shortened, and can I meet a new timeline?
  • Has the sale cycle lengthened, what’s my cost of new business acquisition?

In order to assess these items you’ll need to bring your leadership team together to gather data and consider options. Engaging your sales, marketing, production, and other disciplines etc. is vital. Simultaneously, your finance team can help pull the information together to help assess plan options while forecasting the financial outcomes.

III. Keep your Communication Open

The remote workforce adds new challenges for you, your team, and your customers. I recommend reviewing all your processes that are normally done in your regular business setting and can no longer be done in that manner. Going through your handbook, policies & procedures, and staff roles & responsibilities should help you identify gaps or blind-spots. Be sure to ask your team for their input: not only will you no doubt get useful information, it will make them feel valued.

One casualty of working remotely is the loss of informal communication that happens in your workplace.  When you’re communicating with your team it’s important to ask yourself: Who cares about this and who will be impacted by my communication? Your answer may reveal other parties have an interest beyond the obvious. Teamwork is more difficult in a remote setting. Taking this added step will keep remote staff engaged and will often lead to additional ideas and solutions from your employees.

You should consider sending an email update to your customers to let them know of evolving changes in your service. However, there is a right way and a wrong way to do this. Before you email your customer base keep in mind many people have been flooded by automated emails from brands sharing too- frequent updates on information that is not pertinent to them- use your opportunity to reach your customers wisely. You should email them with any updates on how they should reach you (don’t forget to forward your calls to your personal phone if you haven’t already) and how you’re incorporating safety protocols into your actions upon reopening. Add this critical information to your website and social media accounts as well.

  • Spending/Financing and Investments:

Keep a close watch on your Cash and actively manage its sources and uses. Experience tells me businesses can weather financial losses, but not cash shortages. When the cash is gone, things grind to a halt.

Other things to consider: regarding your finances

  1. Employees have rights: you must have the funds to pay them and cover vacation accruals
  2. Do you need to change spending authority levels?
  3. What expenses can be foregone or delayed?
  4. Who are the critical vendors? 
  5. Can you renegotiate terms?
  6. Where do you stand on access to vendor credit and bank debt? – Can you get more?
  7. Do your investors have the ability and interest to invest further?
  8. Are you in a position to raise equity – What would you need to do?

In this article, I have outlined four ideas, which I believe will be critical to successfully navigating your business in 2020. I hope you’ve found it thought-provoking. I leave you with four key takeaways of which I’m certain:  

  1. The Time Horizon has compressed- demanding increased speed and frequency of planning & analysis
  2. You must reevaluate your Strategic Plan and make it an ongoing process
  3. Communication is key to the new work model, and approaches need to change
  4. Watch your Cash ever so carefully, conserve and have contingencies for funding

About the Author:

Ed Musmon is the Principal and Founder of I Need A CFO. I Need A CFO provides Fractional CFO services to a wide array of small-to-mid-sized businesses.

In my practice, I am helping my clients with the actions described above. If this article resonates with you, I invite you to contact me for a free 30-minute evaluation at EdMusmon@ineedacfo.com.

Featured Photo by Andrea Piacquadio from Pexels

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