The Coronavirus Pandemic Financial Assistance for Business Owners – Serious Thinking Encouraged – This Apparent Fruit Might Instead be a Poison Pill
The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a package of measures in response to the COVID-19 pandemic providing a wide range of financial relief options for small business owners nationwide (see, e.g., https://www.sba.gov/disaster-assistance/coronavirus-covid-19
* The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
*Immediate advance up to $10,000 under certain conditions https://covid19relief.sba.gov/#/
*Highly modified business loan opportunities including immediate payroll support, see, e.g. https://www.sba.gov/funding-programs/disaster-assistance
The pandemic has resulted in full scale shutdown of portions of the US economy with reverberations that have and will continue to affect everyone – business owner and entrepreneur alike.
The question for every business owner/entrepreneur is what to do about it?
Answering that question however requires “real world business context” – it’s called the facts:
* Pre pandemic, despite record numbers of new business starts, even booming indicators for small business across most sectors “in fact” little had changed? The failure rates, first through 5 years and beyond have changed very little. According to the Small Business Administration (SBA) (Office of Advocacy’s 2018) only about half of small businesses survive passed the five-year mark, ranging from 45.4% to 51% depending on the year the business was started. Beyond that, only about one in three small businesses get to the 10-year mark and live to tell the tale.
*The obvious question is why?
* No matter what the research sources/studies the fundamental answers are always the same – wholesale deficiencies in requisite best business practices (the knowledge most especially the requisite financial acumen) and glaring inabilities for “reasoned thinking”.
*Whether it was market misdiagnosis, not enough or improper use of capital (or lack thereof) , wrong team or management , competition pressures, pricing issues/miscalculations, and the like, in almost every case there existed a total lack of preparation for the real challenges in that market place/time. See, e.g., https://www.forbes.com/sites/forbesfinancecouncil/2018/10/25/what-percentage-of-small-businesses-fail-and-how-can-you-avoid-being-one-of-theem/#3345ac6543b5) . In virtually every instance the business owner was merely reacting not planning or managing the enterprise.
*Simply put business owners do not know what is required and even worse, do not know what they do not know!!!
There existed instead continuing arrogance in failing to properly and intelligently seek out those answers or re educate themselves – with downright gusto adapting sheer tenacity with consequent adverse endings.
*The basic definition for ignorance – one lacking of knowledge, education, or awareness. The basic definition for stupidity – the quality or state of being dense, mindless, dim wittiness, weak minded, and/or senseless or foolish.
Perhaps ignorance and stupidity and/or both have been the prime influences driving the lack of requisite knowledge and experience?
*The simple fact remains – statistically “the real world context” within which this pandemic has arrived and exists is founded upon continuing deficiencies for requisite knowledge, best business practices, and financial acumen. Few if any within small business had properly prepared for this or any other equally challenging interruption of cash flows and business impedance/shut downs – albeit temporary but still measured in months.
Accordingly in the face of this pandemic every small; business owner should honestly seek immediate self appraisal. Brutally candid evaluations of the enterprise and its prospects going forward should be instituted.
There exists only one “real world” treatise providing the full scope of requisite best business practices along with the complete encyclopedia on small business financing –“The Ultimate Financing Guide – . http://www.ultimatefinancingguide.com/ All are highly urge to immediately download to get the requisite knowledge before making the necessity critical enterprise decisions. Get your copy http://www.ultimatefinancingguide.com/get-your-copy/
“This is clearly the prime gold standard on small business financing. This is a masterful work which offers everything one would ever want to know to confront the real life challenges of timely getting necessary funding. . . I highly recommend this work as an essential part of the business journey – don’t leave home without it!”David Albanese – Highly Successful Entrepreneur/Businessman/Consultant Spanning Multiple Industry Sectors
Time for Honest Introspection
Regardless of any alleged governmental or available privately sourced financial support, the straight forward precept should be paramount – “there’s a time to ‘hold’em’ and a time to ‘fold’em’”.
Perseverance is a double edged sword. Waiting for the ‘fat lady to sing” might sound noble but it might also be exceedingly foolhardy?
The urge for perseverance needs to be revisited and re evaluated by every business owner and entrepreneur. More often than not failing to meet desired goals becomes a valuable lesson allowing one to re start, correcting mistakes of the past, and succeeding anew.
“Success is not final, failure is not fatal: it is the courage to continue that counts.” Winston S. Churchill
“The ability to adapt to an unfortunate turn of events and perform under pressure is a highly desired skill. But is too much resilience a bad thing? https://getpocket.com/explore/item/the-dark-side-of-resilience?utm_source=pocket-newtab; see also, https://www.psychologytoday.com/us/blog/owning-pink/201009/resilience-display-strength-or-denial-in-disguise;https://tracom.com/blog/resiliency-advantages-disadvantages
Borrowing from Clint Eastwood’s movie character “Dirty” Harry Callahan “one has to know one’s own imitations”!
“The art of being a winner is knowing when enough is enough. Sometimes you have to give up the fight and walk away, and move on to something that’s more productive.” Donald Trump
“It’s fine to celebrate success but it is more important to heed the lessons of failure.” Bill Gates
*In those evaluations (owner introspection and enterprise survival ability) it is essential to have the “financial acumen” to properly gauge how and to what extent any of the offered financial options (governmental or private) will or will not work given “the real world context” in play – brutal honesty is highly encouraged!
*In those evaluations one must consider the “character” of the funding source/provider. It pays high dividends to know exactly with whom one is crawling into bed? Will this entity be there if things start to go south?
If not, what consequences will follow?
When it comes to the SBA (government direct or indirect via financial guarantees with banks/financial institutions) one it is highly recommended that all read and review “The First Independent Objective Investigation of the US Small Business Administration (a seven part series published nationally by “VetLike Me” https://vetlikeme.org/; (series e.g., https://vetlikeme.org/is-the-small-business-administration-in-the-cross-hairs-of-small-business-and-our-economy/; (the complete series at http://www.americanempowerment.org/the-first-independent-objective-investigation-of-the-us-small-business-administration-in-effect-all-the-federal-agencies-seven-part-series-cumulative-version-complete-text/
Beware – SBA is not a traditional direct source of money or lending. It traditionally only offers guarantees instead utilizing banks and other institutions to do the lending. There are solid reasons for that – see all the reasons comprehensively covered within the above “VetlikeMe” referenced national series of articles (independent investigations)
SBA is simply not equipped in any manner to be a credible, effective, efficient, or trustworthy partner to properly manage or monitor business funding/financing.
Also be aware and be warned. The SBA guarantee bank and other financial conduits are traditionally extremely low risk debt only lenders. These institutions do not deal equity or equity based financing (exception receivables financing which is form of secured debt).
By definition to the extent any “pandemic financing offered” is allegedly “debt to be forgiven” be aware of all terms and conditions. This type of product is not one the government has any experience in providing and certainly not banks (low risk debt only). One must seriously question the effectiveness and efficiency of offering these products through banks where they make little or no money from the transactions (never forget banks are for profit institutions with shareholders).
*In those evaluations it must equally stressed that certain fundamentals regarding types of funding/capital must be properly understood – misuse or misapplications can be fatal to the enterprise.
*Generally speaking (except for traditional receivables/inventory financing) debt funding (regardless of its type or character) is best utilized only for capital investments (e.g., buildings, facilities, equipment, tools, inventory, etc.) (terms and costs tracking one to the other). Any and all business type expenses/cash flow are typically only to be covered by equity type funding mechanisms (there are hybrid financial tools (debt and equity components);
* This pandemic by all measures has primarily eradicated or disrupted “cash flow” and related “cash flow” items (payrolls, benefits, rent, utilities, cost of production, etc.). Attempting to remedy with debt or debt type funding mechanisms is a misapplication of capital, creating high risk to the enterprise and eventually resulting in costly maintenance burdens that can become fatal.
*If pandemic relief were to be properly created (governmental or private) it should ideally be exclusively of equity types or hybrids. Otherwise the so-called relief becomes a potential “poison pill”.
*Typically debt funding by banks and other financial institutions require secured collateral and owner personal guarantees to ensure repayment (low risk lending only). Two absolutes are highly recommended for all business owners:
a. Never mix personal finances and business funding – each should always to be kept distinct and separate.
b. To the maximum extent possible it is recommended to not commit or allow securitization with/of personal property or assets (it must be stressed that on the downside historically the government has tended to be an aggressive, no compromise, ruthless creditor taking everything regardless of consequences to the owner, family, or any others – bankruptcy typically will not erase the personal liabilities to the government ).
The Last Ingredient – “Ethically Grounded Reasoned Thinking”
Once one has the requisite “real world” knowledge for best business practices and matching financial acumen, the cement that binds both to achieve best results/outcomes is “ethically grounded reasoned thinking” – an absolute necessity given the critical nature of the issues being faced with this pandemic.
It sounds like an easy proposition – doesn’t everyone think? Actually not really – ethically grounded reasoned thinking is an art, a science – it has to be learned and practiced to achieve desired outcomes!
In fact for most folks thinking rarely occurs – instead most are merely reacting emotionally (non thinking) much like an automatic spring trap door using embedded prejudices as a substitute for thinking.
“A great many people think they are thinking when they are merely rearranging their prejudices”. William James
When one takes time to think things through, you’re less likely to make emotional decisions. https://dariusforoux.com/20-80-rule-of-effective-thinking
*Thinking is in fact hard work. It requires a focused and disciplined mind. Most folks seem inclined to seek “short cuts”. There are none. Take the short cuts and one gets commensurate results – always short of the desired.
“Rarely do we find men who willingly engage in hard, solid thinking. There is an almost universal quest for easy answers and half-baked solutions. Nothing pains some people more than having to think”. Martin Luther King, Jr.
“Critical thinking is the key to creative problem solving in business.” Richard Branson, CEO and Founder, Virgin Group
“We cannot solve our problems with the same thinking we used when we created them”. Albert Einstein
Fortunately for every business owner there is a readily available “real world” treaties that provides a detailed blueprint on how to achieve desired results as well personal/business successes via “ethically grounded reasoned thinking” .
Get your copy – http://www.americanempowerment.org/get-your-copy/)
Woodrow D. Wollesen
Chairman, American Empowerment / http://www.americanempowerment.org/
One the nation’s foremost experts/authorities respecting small business operations/capital/financing/entrepreneurship/ ethically grounded reasoned thinking – serial entrepreneur/businessman – Military veteran – former SBA Financing Champion – former Executive Officer Officer/Board of Directors/Instructor, National Women’s Business Center, Washington, DC , former national law firm partners/litigator/appellate counsel before the highest courts/tribunal s in the country including appearances