4 steps to getting your business through COVID-19
This is a sponsored post from Bench, the online bookkeeping service that pairs you with a dedicated bookkeeping team and elegant software to do your books for you.
With the effects of COVID-19 rippling through the economy, it’s easy to feel overwhelmed. Many businesses are being forced to shut their doors temporarily. What should you do first? As a freelancer, what can you do to protect your finances in a volatile economy?
Understand your current financial position
It’s always a good idea to have a handle on your numbers, but this becomes doubly important during times of economic uncertainty.
A clear understanding of your financial position lets you immediately see where you can cut costs, what expenses you can justify, and what debts might need to be renegotiated or deferred. Evaluate current assets and loans and see what can be leveraged during this time.
Bookkeeping in times of recession is more important than ever — having financial statements on hand are often necessary for payment deferrals or loan applications. If you’re behind on your bookkeeping and you’re not sure how you’ll get financial statements together, Bench can help.
Apply for disaster loans or financial relief
Nobody was ready for the heavy-hitting impacts of COVID-19, but the government has stepped up and is rolling out new programs and loans to help you stay in business. All of these programs are open to freelancers and sole proprietors, whether you've incorporated as an LLC or S Corp or not. You will
Here are some of the latest options to take advantage of:
SBA Disaster Relief Loan. The U.S. Small Business Administration (SBA) has approved low-interest federal disaster loans for small businesses suffering substantial economic injury as a result of COVID-19.
- The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million.
- You can use this loan for typical day-to-day expenses such as mortgage payments, payroll, accounts payable, utility payments, or vehicle payments.
- You cannot use this loan to refinance existing debt, to replace lost sales or profit, or fund purchases of equipment, vehicles, and supplies.
- Loans that exceed $25,000 must be secured by collateral. The SBA will not decline a loan if you don’t have enough collateral but will ask for whatever collateral is available, which may include real estate owned by a business’ principals.
Further reading: How to Get an SBA Disaster Loan
SBA Express Bridge Loans. Applied for an SBA disaster loan but need cash, now? The Express Bridge Loan Pilot program authorizes SBA Express Lenders to provide emergency loans in amounts up to $25,000 while your small business applies for and awaits long-term financing through SBA’s direct Disaster Loan Program.
There is a catch, though — you must have an existing business relationship with an SBA Express Lender. Check with your banking institutions to see if they offer SBA Loans.
- The small business must have an existing relationship with the funding bank prior to March 13, 2020.
- Up to $25,000 in funding.
- Fast turnaround.
Further Reading: Express Bridge Loan Pilot Program Guide
Paycheck Protection Program. The Paycheck Protection Program is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This program is intended to provide American small businesses with eight weeks of cashflow assistance through 100 percent federally guaranteed loans.
- The funding is meant to help retain workers, maintain payroll, and cover rent/mortgage/utility expenses.
- Small businesses, sole proprietorships, independent contractors, and self-employed individuals can all qualify.
- The loan covers expenses dating back to February 15, to June 30, 2020.
- The loan can be forgiven and essentially turned into a non-taxable grant.
Further Reading: What is the Paycheck Protection Program? (A Simple Guide)
The CARES Act (Coronavirus Aid, Relief, Economic Security). The government just passed one of their biggest financial relief bills yet — the CARES Act (Coronavirus Aid, Relief, Economic Security). $350 billion is being dedicated to preventing layoffs and business closures while workers have to stay home during the outbreak.
- Expanded Family and Medical Leave Act benefits for employees who are unable to work due to COVID-19.
- Forgivable loans and tax credits for businesses that keep their employees for the duration of the crisis.
- Deferment of an employer’s 6.2% share of Social Security taxes based on employee wages.
- Expanded write-offs for improving property for retailers, restaurants, and hotels.
- Expanding unemployment benefits for small business owners, self-employed individuals and gig workers.
- Option to carry back net operating losses to offset taxable income in prior years.
- Extension of time to file and pay 2019 taxes.
Further Reading: The Coronavirus Relief Bill: Every Benefit for Small Businesses
File your taxes sooner rather than later
If your tax filing deadline is April 15, good news: The IRS has officially extended this deadline to July 15, 2020. This extension includes making payments on any taxes owed, so you can defer without penalties and interest.
But just because you can put off filing your taxes doesn’t mean you should. If you’re owed a refund, the IRS is encouraging taxpayers to file as soon as possible. Most tax refunds are still being issued within 21 days, which could mean some much-needed cash back.
Even if you owe money, it’s still in your best interest to file sooner rather than later. A lot of lenders or relief programs want to see an up-to-date business tax return. By filing now, you’ll have this important document on hand and ready to go — and you’ll still have until July 15 to make a payment for any taxes owed.
If you’d rather have someone else handle your federal income tax filing, check out BenchTax. It’s optimized for remote working conditions, and gives you the support you need to navigate changing deadlines and tax environments.
Consider pivoting your business strategy
Even if you’ve made all the right moves for your business during COVID-19, there are still some things that are out of your control. A dip in sales is one thing, but what if your customers or revenue disappear altogether?
Consider an alternative, temporary revenue stream. Create an ecommerce site for your brick-and-mortar store. Or, if you run a fitness studio, stream live classes. If you run a salon or spa, sell gift cards for future services. Loyal customers are eager to help out their favorite small businesses if they can, so staying connected and empathetic to your customer base right now goes a long way.
Further Reading: Leading a Small Business Through a Recession: Five Best Practices