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Surviving COVID-19 as a Small Business

Surviving COVID-19 as a small business might seem like an impossible task right now, but you can get through it with the right mindset and a solid plan.

The more cash reserves you have, the more likely your business is to make it through. Financial experts typically recommend keeping three to six months of operating expenses on hand. However, this varies widely based on your stage of business. During periods of rapid growth, you may have less cash on hand.

The time a business can operate before running out of money refers to your burn rate. If you have less, or no, income because of the coronavirus pandemic, your burn rate will rise.

Slow the cash burn by educating yourself on how to free up capital and use the government programs in place to help small business owners stay in business during and after the pandemic.

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Step 1: Re-evaluate your business strategy in light of the pandemic.

It’s not easy for most business right now, but those with a plan have a better chance of survival. First, look at your expenses for the immediate future. Do you need to furlough employees or lay people off?

As businesses are starting to re-open in some regions, it’s time to determine how you can make it through a recessionary economy. What does your cash flow look like for the next six months? What will happen if you re-open? Or if you can’t?

Can you:

  • Cut expenses?
  • Increase marketing to drive more people to your business?
  • Establish e-commerce or remote operations so that you can continue operating even if social distancing continues?

Step 2: Consider a best-case and worst-case scenario.

Now that we are more than two months into the global pandemic and the shutdown of all but essential businesses in most states, you should be able to evaluate where things stand if the shutdown continues.

If businesses start to re-open, will you be in one of the earlier categories to re-open? If not, how can you slow your burn rate, minimize expenses, and possibly even bring in revenue without opening your physical doors?

If you are slated to re-open, how can you do so safely? And how much will it cost to re-organize your storefront or restaurant or set up your business so that it is safe for customers? Can you rearrange aisles, displays, employee desks, or tables to enable social distancing if there are more than a few people in your building?

If you run the numbers and determine you still need financial help paying your mortgage, lease, or payroll, there are alternatives to explore.

Step 3: Explore ways to get a cash infusion.

If you realize your business won’t make it through the rest of the pandemic without assistance, it’s time to evaluate your options for a cash infusion.

You might consider invoice factoring, or borrowing against accounts receivable to get the money you need now. However, invoice factoring is rarely a good idea and worse in uncertain times. If your vendors don’t pay their bills, you still have to pay the invoice factoring company. Such measures can put you further behind on your finances.

You may also qualify for FICA deferrals. Under this program, introduced to help businesses in need during the pandemic, you can defer your portion of payroll taxes to free up working capital. You must pay 50% of the taxes owed by December 2021, and the balance by the end of 2022.

Finally, see if you qualify for the Employee Retention Credit. Under this program, you can receive a fully refundable tax credit equal to 50% of qualified wages up to $10,000 per employee. In essence, you may be eligible to receive up to $5,000 per employee that you keep on payroll during these challenging times, if you have experienced a decline in gross revenue in any quarter of 2020 compared to the same quarter in 2019.

Step 4: Apply for a loan through the Paycheck Protection Program (PPP).

You can see if your business qualifies for a loan under the Paycheck Protection Program (PPP). The PPP was included in the Coronavirus Aid, Relief, and Economic Security act (CARES). It offers forgivable loans to businesses with fewer than 500 employees to cover operational expenses, including payroll, lease or mortgage payments, and utilities.

Up to 25% of the funds used to cover operational costs may be forgivable and the entire amount of payroll may be forgivable as long as you use at least 75% of the money for payroll.

Loan forgiveness will be reduced if you decrease your full-time employee headcount or decreases salaries and wages by more than 25% for employees that made less than $100,000 annualized in 2019.

The loan will be forgiven if you retain or hire back your work force to 75% of its full amount (between February 15 and April 26, 2020) by June 30, 2020. PPP loans carry no fees and you can apply through a participating lender for as long as funds are available.

Step 5: Understand government bankruptcy protection programs.


Multiple laws have recently been passed to make the COVID-19 pandemic easier for small businesses to survive. Back in August 2019, the Bankruptcy Code was modified to include the Small Business Reorganization Act (SBRA). In February 2020, the SBRA went into effect.

It gives small business owners more time to pay off their debts when filing for Chapter 11 Bankruptcy.

While the protection program won’t bring in any revenue, it does allow you to restructure your debts.

It’s also worth noting that you can still file for bankruptcy after filing for and receiving a PPP loan. However, you can’t apply for a PPP loan after filing for bankruptcy—timing is very important when using these options together to save your business.

That said, what did the SRBA change?

Debtors with up to $7,500,000 in debt are now eligible to apply for bankruptcy. Before the CARES Act, only debtors with less than $2,725,625 were eligible. The SBRA also added Subchapter V to Chapter 11 of the Bankruptcy Code.

Subchapter V makes some significant changes that streamline the bankruptcy process and greatly increase the chances of successfully retaining your business ownership.

As long as you commit all of your company’s projected “disposable income” to paying creditors over a 3- to 5-year period, the remainder of your debt will be discharged, and you’ll keep your company. Unlike with a traditional Chapter 11 case, a disclosure statement is also not required, saving costs and substantial time.

Additionally, your payment plan will not require the approval of any of your creditors if it meets the other requirements for confirmation under Bankruptcy Code, eliminating a substantial impediment to plan confirmation.

Chapter 11 Bankruptcy under Subchapter V also presents with lower upfront costs as administrative expenses are paid over the life of your payment plan rather than at plan confirmation.  

The biggest advantage of filing for bankruptcy after you receive your PPP loan, however, is that your creditors must stop attempting to collect payments from you. You will have time to renegotiate your credit terms, making it easier to survive the current economic crisis and keep your doors open.

If you’re considering filing for bankruptcy, you should always consult with a lawyer before taking action. Every attorney at The Pope Firm is an expert at filing for business bankruptcy in East Tennessee. We identify the best course of action for your small business and walk you through your options.

This pandemic has not been easy, but small business owners across Tennessee have plenty of options as the state begins to re-open. Don’t give up now. Talk to the experts at The Pope Firm to determine your best chance to thrive as a company as we face this new world.

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Knoxville, TN 37918


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404 East Watauga Ave.
Johnson City, TN 37604




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