These challenging times are a stress test for all companies. As the owner of a debt mitigation company, I have never seen such a wide variety of issues plaguing the fiscal health of small business owners. Some businesses are open, while others are closed but trying to reopen while the remainder are waiting for the government to allow them to reopen. My company has helped almost 2,000 businesses and we have seen every issue a struggling business might face. Patterns emerge, and the top five mistakes we see small business owners making again and again, are:
- Failure to Access Small Business Administration (SBA) Programs – The majority of businesses owners do not full advantage of the programs the government is offering. Our nation’s small businesses are facing an unprecedented economic disruption due to the COVID-19 outbreak. In March 2020, President Trump signed into law the CARES Act, which contains emergency relief resources for American workers and small businesses. On June 15, the SBA resumed accepting new Economic Injury Disaster Loan (EIDL) applications from all eligible small businesses. Sifting through the SBA programs and diligently applying to the appropriate ones can be time-consuming but it is a worthy endeavor that few small business owners should ignore.
- No Dialogue with Commercial Landlord – Some small business owners would rather pretend their landlord doesn’t exist than pick up the phone and look to renegotiate terms. However, if significantly less revenue is being earned in the business, paying the rent on an active lease demands that small-business owners negotiate. With the record number of unemployment claims, loan defaults and bankruptcies, landlords are more open to lease negotiation because they need revenue, even if it is less, to pay their own mortgage bills. Small-business owners will want to negotiate for better terms and rates, payment deferments, permission to sublet or subdivide a space, waive late fees, or consider lease buyouts.
- Hiding from the Internal Revenue Service – As ‘nothing is certain but death and taxes,” there’s no use hiding from the IRS. Small businesses with tax debts face the intimidating IRS and the various methods that the agency can use to collect overdue taxes — many of which could spell the end of one’s business. However, communication is key as most small businesses that are behind in taxes can work something out with the IRS. It is possible for a small business to make a deal with the IRS to settle a tax bill for pennies on the dollar through the offer in compromise process. Requesting an offer in compromise requires the business to complete an IRS form, provides detailed information about its difficult financial situation, and request that the IRS accept only a portion of what the business owes.
- Failure to Consolidate Debt at Lower Interest Rate – With businesses, particularly during the pandemic, cash flow isn’t always a constant. Sometimes you need to pay for unexpected expenses, make payroll or fund new equipment. If you don’t have the cash on hand to afford those things, you might be accessing a business loan or credit cards. Keeping track of different due dates, interest rates and balances can be onerous and some business owners can successfully consolidate their debt at a lower interest rate.
- Failure to Tap into Digital Tools to Optimize Productivity for Home Workers – With social distancing precautions, many companies require that their employees to work from home until further notice. This allows many companies to continue business as usual — but they need to have the right tools in place to make remote work a success. Working from home is very different than working in an office, so what works when everyone is in the same space might not translate when everyone is in their respective homes. It’s important to do a comprehensive review and analysis to use the optimal digital tools that work for each individual business.
According to a survey from Tech.co, 80% of small business owners accepted that COVID-19 has hurt their businesses. However, 55% of these businesses feel positive for the future. At some point, the pandemic will be over but the lessons learned may be ever-lasting. There are no reasons why small business owners should stop innovating during the pandemic. It is prudent for small business owners, who sometimes lag behind in technology innovations, to reach their customers through digital channels.
About the author: Based in Newport Beach, California, Joseph Meuse, is Founder and President, Business GPS which was founded in 2013, with offices in the Washington DC area and in Southern California. Business GPS is a debt mitigation service which is helping hundreds of businesses get government loans, decrease their commercial rental payments, negotiate their loans to better terms – all on contingency!