Small Business - Surviving an Economic Event (3/18/20)

Dear Friends,

This isn’t meant to be another message discussing COVID-19 medical issues, rather it is meant to discuss the business issues created by the pandemic. Specifically, unless you are in the business of selling medical supplies, groceries or toilet paper, you are probably seeing a major drop in your business volume while you counsel your clients to keep their head on straight and not sell into the downturn.

How are you approaching this unprecedented Economic Shutdown? I would like to raise the idea for you (and any of your clients that this may pertain to) to consider reaching out to your lenders, landlords and key suppliers TODAY if you will be experiencing a cash flow shortage.

In speaking with several lenders over the past few days, they have all indicated that while they don’t yet have a formal plan in place, they would find working with a customer much easier if that customer came to them prior to missing payments.

Similarly, while banks are aware that many of their customers will not make their loan covenants for the next 4 quarters, they would prefer and even expect you to come in now and seek a loan modification. Likewise, approach your landlord now if making your rent will be problematic. Work together to form modifications to your lease payments. Don’t miss your rent payments and then wait to see what happens. (FYI - Unless FINRA provides wholesale relief in the area of disclosures, you will need to report any compromises into FINRA.)

Be proactive, it will be greatly appreciated by lenders, landlords, and suppliers. They all know what is happening, and they know it is due to forces outside your control. They have indicated they will be much more willing to work with those who come to them now!

Here’s another example of how proactive communication can work to your benefit. I know of a client who had $500 million in real estate debt when the real estate crash occurred in late 2007. He immediately began meeting with each of his lenders on a weekly basis to update them, and he did this for over a year. Each lender expressed their appreciation to him and told him that he was their only borrower that came to see them.

In summary, communication is likely one of the keys to survival right now. Lenders and landlords may be more apt to work with you if you are willing to voluntarily communicate with them.

*Please note this is not advice, merely food for thought from a concerned small firm colleague.

Please take care of yourself and your family. Help your neighbors and support your community - our communities.

We will get through this together.

My very best,

Paige

Paige W. Pierce

(801) 949-5577 c

paige@paige-pierce.com