By Jay DesMarteau
COVID-19 strongly impacted small businesses as many were forced to temporarily close, limit hours of operation and pivot to online/ecommerce as state and federal restrictions evolved. However, as the vaccine rollout quickens and the economy reopens more broadly, things are looking up for small business owners (SBOs). According to TD Bank’s 2021 Small Business Survey, which polled more than 750 SBOs nationwide with less than $5 million in annual revenue including sole proprietors with home-based businesses, professional services and retail, 41% expect to grow their revenue in 2021 while only 9% anticipate a decline. Additionally, 57% expect to expand their hours and/or operations and 9% will add a location in the next 12 months.
Despite this more positive outlook, SBOs still face challenges in the year ahead including the health of the national economy (43%), COVID-19 and associated operational restrictions (41%) and a decrease in revenue or sales (39%).
However, there are steps SBOs can take now to help ensure the future health of their business.
Work with your banker to understand financing options for business growth. While 78% of respondents are most confident in handling the financing and accounting for their business, SBOs are less confident in knowing when to seek additional credit or financing (66%) and when to grow their business (63%). By working closely with their bankers, SBOs can learn more about potential financing options to use to expand their business and the benefits different types of lending may offer including the advantages of a traditional loan or line of credit compared to an SBA loan, which may offer more flexibility, but require a personal guarantee. By holding open and candid conversations with their bankers, SBOs can gain a deeper understanding of the best available financing solutions.
Consider implementing online, mobile or contactless payment processes. As a result of the pandemic, consumers now prefer payment methods that limit face-to-face interaction and the use of shared devices. According to the Visa Back to Business Survey, 65% of consumers say that post-vaccine, they would prefer to use contactless payments as much as, or even more than, they are currently. However, according to TD’s survey, a surprising 66% of SBOs still primarily process payments by collecting cash and check, making these physical transactions the most popular payment method, which is creating a gap between the payments experience consumers desire and the one small businesses offer. If they have not already, SBOs should consider implementing online, mobile and/or contactless payment solutions that cater to consumer preferences and provide SBOs with instant access to funds and a more holistic view of the business’ health.
Document PPP expenses to maximize loan forgiveness. Sixty six percent of survey respondents stated that PPP and the SBA’s Economic Injury Disaster Loan program provided necessary funding for small businesses or were helpful, but need more funding to really make an impact and 21% of respondents took advantage of PPP prior to March 2021, when the study was fielded. Because many SBOs have secured this critical funding, it’s now important that they pay attention to SBA guidance related to loan forgiveness. SBOs should document their use of PPP funds in order to track if they qualify for full forgiveness, essentially turning the loan into a grant. PPP loans may qualify for full forgiveness if during the 8- to 24-week covered period following loan disbursement, employee and compensation levels are maintained, and loan proceeds are spent on eligible expenses, including at least 60% of loan proceeds on payroll and related costs and taxes.
While COVID has certainly challenged the strength of small businesses, by working closely with their bankers and other trusted professionals, SBOs can plan for a more certain future.