Hear from Michael Marcucci, Santander's Chief Credit Operations Officer, Business Banking on how to lean on banks for support during the coronavirus.
The Current Environment
The coronavirus pandemic has created unique and rapid economic turmoil. When faced with this challenge from a personal and professional perspective, it is easy and natural to feel anxious and scared. For many small business owners this may be the first time they’ve experienced an economic fallout; however, our nation and economy have weathered multiple recessions, like the crash of ’87 or the great recession of 2008. While all are different and caused by dissimilar triggers, they have one thing in common: We endured them together and the economy recovered.
Economic disruption is just that, disruptive. But, how small businesses manage and prepare for the fallout can indicate their chance for survival. I anticipate we’ll see three business categories:
- Survive: Mature businesses will have lived through the aforementioned recessions and may have already established recession plans. They’ll be more prepared to ride out the loss of revenue by having liquidity and a better understanding of how their business can operate in uncertain times. This may mean staying open with a reduced staff, changing operating hours, or closing entirely and depending solely on e-commerce business.
- Thrive: These businesses will pivot to make the most out of the current environment. We are already seeing this with manufacturers and textile companies helping to make PPE for healthcare providers and independent gym owners switching to online classes or offering one-on-one coaching to their clients. These businesses will be able to continue generating revenue to keep the proverbial lights on.
- Struggle: Some businesses will struggle and this is to be expected. The suddenness of this event combined with a business in the early stages of development will find owners who are less able to adapt or with limited liquidity to help them navigate a new economy.
Immediate First Steps
I would advise all business owners, mature or otherwise, to first reach out to their banker and understand what debt relief is available. This will help on a number of fronts, loosening up necessary liquidity and providing time to plan for the new normal. Consult with your CPA and attorney to understand all implications, but in general, I’d recommend using any payment deferrals even if it’s not necessarily needed. We don’t know the extent of the pandemic time frame and the economic impacts will be felt long after we’re allowed to be social. It is more difficult to catch up on payments after you’ve fallen behind, and ruined credit will be an additional hurdle to jump as the economy recovers.
Business owners will also need to plan for that new normal. Even as the economy reopens, consumers will behave differently. This will be specific to each sector and industry, so it’s a good idea to understand the trends and put strategy behind how your specific business will match those new behaviors.
How Can Businesses Manage the Fallout?
The good thing is that banks, including Santander, and the government are putting strong programs in place to help small business owners weather the storm. The relationship with your business’ bank will be your first line of defense as your banker can partner with you to establish new payment structures or possibly increase cash flow.
The recent CARE Act was passed to enable banks to provide relief in addition to individual bank relief programs. SBA support and CFDI loans are also available with lending options to increase liquidity. Small business owners should reach out to their suppliers and negotiate payments if needed.
If you haven’t already, communicate to your customers to help them understand how the coronavirus environment may impact your services or deliverables. I’d also recommend reaching out to any trade associations or networking groups. The small business community is strong and being able to learn from and lean on each other during this time will be helpful to navigate the uncertainty.
How Can Businesses Prepare Support Requests?
As you examine your business’ situation with your team, it may be determined that your business needs funding. In order to help the efficiency of your application, you’ll need to be as prepared as possible. You’ll need the following:
- Most recent set of financials
- 12 months of bank statements
- Projections for the next three months
- A sound plan on how the funds will be used and a strategy that showcases how the business will survive the current turmoil and economy reopening. Stated simply, “What will I do and how will I recover”.
- A list of steps the business has already taken to address the current situation: cut overhead, personal resources, negotiate with suppliers, etc.
Remember, each program may have different requirements. Review each carefully as you prepare your materials. There are 30 million small businesses in America and most will need support. You may experience slow load time on websites or long wait times on the phones; be patient and keep trying.
In It Together
It is perfectly natural to feel scared and uncertain. Santander is working aggressively to help our customers and community and our goal is always to help businesses succeed. We are all impacted by the pandemic, whether as employers, employees, parents, children, or community members. As we navigate these times together, we must strive to be kind and respectful to each other. If you have questions about how we can help, please reach out to your personal banker and visit our coronavirus resource page for additional support.
Readers should consult their own attorneys or other tax advisors regarding any financial or tax strategies mentioned in this article. These materials are for informational purposes only and do not necessarily reflect the views or endorsement of Santander Bank.
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