Cash Flow During COVID-19: How Small Businesses Can Survive In This Economy

By now, COVID-19 has affected nearly all small businesses in one way or another. Whether your small business temporarily shut down, partially closed, or simply felt a drop in sales and demand, it’s natural to think about how you can keep cash flow smooth during the coronavirus pandemic.

cash flow during coronavirus

Managing Cash Flow Problems During COVID-19 

Cash flow management is one of the largest challenges that business owners face, in both promising and difficult economies. In a nutshell, cash flow is all of the money moving into and out of your business.

On average, most businesses only have enough cash to cover expenses for a month. For comfortable breathing room, experts recommend much more—enough cash to cover approximately 3-6 months.

During the coronavirus, managing cash flow can be even more challenging.

Without normal income, managing payroll, operating expenses and other costs can be a challenge—but it’s not out of your hands. You can overcome cash flow problems during the coronavirus with strategic cost-cutting, government funding and adapting your business to the new norm.

Cutting Costs During an Economic Slowdown: How to Trim Your Expenses

If the coronavirus is cutting into your cash flow, the obvious place to start is trimming your expenses. But how can you do that without compromising your business?

Start by accounting for all of the expenses your business has—from payroll, to operating costs like rent, equipment, inventory, supplies, and more. Then, consider which expenses are most important for your bottom line.

During normal times, you might be hesitant to cut out expenses altogether. However, when your cash flow is suffering during the coronavirus economic slowdown, you have to think differently.

Try to keep your cash flow smooth by putting cash into expenses that will generate revenue. Hold off on discretionary costs like office renovations and new staff that might not be essential to your core operation. Instead, prioritize your spend on costs that will help you bill customers or clients.

If you’re currently renting an office space but working remotely, consider staying at home to save money. Pump the brakes on paid advertising and take advantage of free marketing options, like social media, to drum up new business.

Once the economy picks up, you’ll be able to continue investing in the long-term future of your business. But for now, your main goal to keep cash flow going while recovering from the coronavirus shutdown should be to drive revenue.

Defer Rent Payments, Mortgage Costs, and Other Debts (When Possible)

Fixed costs can be some of the heftiest expenses weighing down on your business. Even if you’re locked into contracts with your landlord, bank, lender, supplier, or another entity, you’re not out of luck.

Given the present conditions, many are open to extending payment terms or delaying interest payments. The same goes for suppliers, who rely on you for business in the same way you depend on them.

Instead of suffering needlessly, inquire about any relief or extension programs. Even a few weeks might give you the buffer you need to get back to business.

Cash Flow Solutions From The SBA

Cutting costs will inevitably help, but your business isn’t standing alone. You can also mobilize your business again with help from the federal government in the form of a PPP loan.

PPP loans, part of the CARES Act, are designed to help small businesses like yours through this crisis and help you retain your workforce. The SBA’s Paycheck Protection program gives your business funding to continue paying your employees, as well as other costs, such as rent, existing debts, benefits, and more.

This program is available to businesses with 500 or fewer employees.

Crucially, this government assistance program is 100% forgivable, provided that you follow the SBA’s guidelines. The money must be used within an 8-week window, and 75% of the funds must be put toward payroll. To learn more, check out our blog post about how the PPP loan works.

As this funding requires congressional approval, it has been available to small business owners in waves. You can apply for a PPP loan through your SBA lender.

Another option you might have is the SBA’s Economic Injury Disaster Loan Program. The EIDL is an appealing option for self-employed business owners. Up to $2 million is available, and up to $10K can be considered a grant. 

Creating a Coronavirus Business Continuity Plan

Consider how you can alter your business model, procedures or systems to keep cash flow going during the coronavirus shutdown. A coronavirus business continuity plan sets a new direction for how you can generate revenue despite the circumstances.

If you can still accomplish what you need to virtually, then continue to stay at home. Not only will a virtual office help keep everyone safe, it will also help lower in-office costs like supplies, air conditioning, and more.

During this hectic time, reevaluate who is performing what functions within your business. If necessary, shift employees into different or new roles to maximize efficiency and drive cash flow. While you may want to bring all employees back full-time, it may also make sense to, initially, rehire some employees in a part-time capacity.

Also, be sure to account for all of your expenses. Map out your upcoming costs, and keep a close eye on how far out that cash will take you.

Draw From Your Business Line of Credit (If Possible)

If you have an existing credit line, then now’s the time to draw from it. Taking advantage of this funding can help your business push through the uncertain times ahead, and get back to a stable, profitable place. If not, then explore other financing options, like small business loans, which will be available after the covid-19 pandemic.

When it comes to managing business costs to drive cash flow during a crisis, you want all of your cash accounted for. Instead of taking on this burden yourself, capitalize on cloud-based bookkeeping software that helps you better manage and save money.

National’s bookkeeping software offers top-notch capability of Quickbooks, except we do all the work for you. You’ll know exactly how cash is flowing inside and outside your business, and come tax time, you’ll have all the information you need.

Get started improving your business by applying now!

National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.

Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.

We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!

About the Author, Joe Camberato

Joseph Camberato, President at National Business Capital & Services, developed a passion for business at a young age. Joseph has a true respect for anyone who owns a business and enjoys engaging them in discussions of how they “made it happen.”


Dislcaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital & Services and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.