by Scott Williamson, CFO of Big Rock Partners
Stating the obvious, the operations of almost every business is in flux right now due to the impact from COVID-19. And the big, yet practical takeaways for small business survival are those echoed many times before: cash is king, positive cash flow is necessary, and these are the most critical times to bolster balance sheets in order to keep the business going.
With that, everyone could use a little help. And so we have spent time compiling a list of stimulus resources for small businesses, including those for hospitality and cannabis. The list can be found HERE – and please feel free to share it with others who need a hand, too.
WHERE TO START
There’s a ton of chatter about stimulus options and loans for businesses, but let’s cut through the noise to focus on the immediate options available. In the first week of April, the Federal government implemented two massive stimulus programs which have been rolled out in connection with the Small Business Administration (“SBA”): first, the “EIDL”, or the emergency impact disaster loan, and two, the paycheck protection program, or “PPP” as it’s more commonly referred. The key distinction here is that the EIDL is a direct loan from the SBA whereas the PPP loans are issued by your bank, but underwritten by the SBA. So in order to see if you can apply for a PPP loan, you should reach out to your bank and use that relationship to access the opportunity. Note that the criteria to qualify may differ by institution and some banks are not participating in the PPP loan program.
Since the release of the CARES act, financial guidance has and will continue to be released and specifics will continue to evolve. At the current rate, you can expect an update or a change or an exclusion or an amendment almost daily. So first and foremost, for anyone that wants to pursue these programs, start by checking in with your CPA and/or your attorney.
WHAT ABOUT CANNABIS?
The truth is neither the EIDL nor the PPP options are available to cannabis companies. Since the loans are administered by the SBA, a federal agency, these loans are not available to cannabis companies or any affiliated cannabis companies. We here at Big Rock, with others in the industry, are campaigning for a chance and a change.
As cannabis has been declared by the State of California as an essential business, we are hopeful that the cannabis industry will be weighed equally as other industries when it comes to financial assistance. We’re currently in letter-writing mode, pushing the State government to implement similar programs at the State-level. Any business, licensed and approved by the State, who pays its taxes should have the support of its Government at this time. Especially given all the progress made to date in stamping-out the illicit, non-licensed, businesses in the industry.
BE PREPARED TO DO THE WORK
The good news is that the Government is working to push as much capital into the market as possible.
The bad news: when applying for financial assistance, be prepared to work for it! The burden is on you to prove your business’ ability to operate has been disrupted. That should not be too difficult given everything going on, but be sure to have your payroll filings and your financial statements in order. From everything we’ve heard, you should expect to wait and/or become frustrated in the process. Practice a bit of compassion when you’ve been on hold for an hour only to be transferred to a different person and be asked the same question.
When you speak with your CPA, be sure to inquire about the various tax-related benefits that have rolled out in conjunction with the CARES Act. While cash in the bank from a Federal loan is immediate, there are numerous tax advantages to be aware of related to quarterly and annual tax filings. Spend the time you need to ensure you get the maximum credits or to defer payments as allowed. This will be time well spent that should allow for extra room to breath.
LOOK TO THE PRIVATE MARKETS, TOO
There are some options on the private markets too, and we’ve included them in our resource list (HERE AGAIN). Many of these opportunities are in their early stages, but it’s great to see that there are a number of fortunate businesses and entrepreneurs out there publically and financially committed to supporting small businesses.
The summary here is there is a lot that can be tapped, but it’s up to you to work for it. Don’t hunker down and try to solve this yourself — we’re already isolated as-is given the pandemic. This is a time to talk to other businesses and entrepreneurs and get resourceful. Teamwork makes the dream work!