COVID-19 Support: PART 1 – Controlling Your Overhead

Keith McBride on April 14, 2020 in COVID-19

This is part of a three-part post on COVID-19 resources.

FEDC has been working with many small businesses and landowners through COVID-19 shut down, and have gathered a cache of information that, we expect, would be valuable to other businesses in Freeport and beyond.  Those discussions and conferences and the resulting research and info gathering to help with the concerns raised educates these posts.   However, we continue to meet with local businesses, and the situation on the ground is ever-changing, and therefore the information in these posts will be continuously updated and supplemented.

We will also be posting new information on social media.  Please don’t hesitate to reach out to FEDC directly with specific questions or concerns.  Call us at 207-865-4743 x117.

 

 

PART I –  Controlling your (non-payroll) Overhead Costs

Banks, utilities and landlords are well aware of the impact of COVID-19, and know that your continued patronage depends on your ability to stay open once the crisis averts.  With that in mind, many have been willing to work with their customers/tenants on solutions.

Talk to your lender/creditors

Start with the banks where you have had the longest, strongest business relationship.  Borrowers and account holders are being evaluated on a case-by-case basis.  Many are not taking calls or inquiries from non-customers, both because they don’t have the capacity to address their questions, and because their first priority is protecting existing customers and borrowers.

Have a plan/solution in mind.  Obviously, best case scenario is that you can have zero payments, zero interest, and zero fees until you re-open.  I have yet to hear of a  bank that is offering that, but would be glad to be proven wrong.  Think carefully about your debt load.  Banks have been willing to entertain forbearance/deferment (in which the borrower pays interest-only payments for a time and unpaid principal gets rolled into the remainder of the loan term), or re-financing.  Go to this meeting/discussion of what you can and cannot agree to.

WHAT FEDC CAN DO TO HELP:  

  • Lets put together a proposal that helps you meet with your banker fully informed and ready. What is your debt/income ratio and debt retirement schedule?   What type of interim forebearance/deferment or refinancing plan would work for you?

 

Talk to your Landlord

Tenants inability to pay is also putting strain on landlords, but in reality, they are all in the same boat.  Businesses need to stay open, and landlords need to keep their tenants.   The key here is finding solutions that help both parties, and some agreements/arrangements have been struck, but again, tenants are being considered on a case-by case basis.

Again, have a plan/solution in mind.  The same advice above for dealing with lenders applies.  In the worst case scenario, at least it gets the conversation started and lets your landlord know how dire your situation is.

Take a collaborative approach.  Granted, some landlords are more creative than others.  Some landlords have said that they’re reluctant to discuss rent relief until they have any clear guidance from their mortgage lender, tax collector, etc., that any relief on their costs are forthcoming.  Productive conversations have taken place when tenants and landlords have been able talk openly about financial burdens they’re both facing, and develop solutions that work for both.

WHAT FEDC CAN DO TO HELP:

  • Meeting Facilitation. We are uniquely positioned between landlords and tenants and understand (and are trying to address) pressure that both are facing in Coronavirus. If our involvement can bring the two parties together to find common ground, then that’s a win for everyone.
  • FEDC, Visit Freeport and the Greater Freeport Chamber of Commerce have collaborated to come up with an incentive package for landlords who offer rent relief.  The incentives include free Visit Freeport Map & Guidebook and Chamber Insider’s Guide listings and ad space, recognition from both groups’ memberships and in press releases, and others.

 

Talk to Utilities

This is the toughest nut to crack in this group.   Luckily, many have already implemented some safeguards for those unable to pay.  For example, Central Maine Power has suspended late payment charges, disconnections for non-payment and security deposits for new accounts.  Other utilities are offering to work with any customers who have concerns or problems, but it sounds like these are being considered on an “as needed” and case-by-case basis.

Protect your cash.  As this article  from Entrepreneur magazine points out (and also has some other great tips for protecting your business during COVID-19), “Cash is oxygen to a business. It flows in and out, keeping the company alive.”   Most businesses have nearly zero cash flow at the moment, and accounts receivable are unreliable.  Therefore, its good practice to hold on to whatever cash you have. The good news is that users have more control of their monthly utility costs and chances are, if your business is closed, you’re already using less electricity, heat and water, etc.  Take any efforts you can safely make to minimize these costs.

 

As always, stay safe and stay healthy.  See you in Freeport soon.