Push Pause for the Coronavirus

Coronavirus Business Response — Push Pause

Business owners need to push pause with lenders and other creditors and ask for forbearance through the emergency. Hold onto cash both personally and in the business for the essentials of food and healthcare.

The Fed’s near 0% bank lending rate is intended to help banks and creditors say yes to this.

Forbearance doesn’t require asking for or waiting for a new loan. It pauses payments on current liabilities. Ask for any payments due this month to be added to the end of the loan or obligation. But you have to ask. And document the answer.

Communicate more not less

Now is not the time to go quiet. Talk to your bank, landlord, or other creditors. Ask for forbearance. Communicate with your creditors, customers, and employees more not less. Everyone understands this one is beyond our individual control. This won’t last forever. But we need to survive through to the recovery.

Push Pause

Protect the Future

Protect the potential for future employment by keeping businesses alive. Public health comes first. Protect each other by killing the transmission of the novel coronavirus that emerged in Wuhan, China but is now worldwide pandemic. It’s no longer far away. (Technically the virus is SARS-CoV-2, COVID-19 is the resulting disease).

2008 Panic Schooled Creditors

The big lesson for lenders from 2008 mortgage financial panic? It is it’s stupid to enforce collection rights in the middle of a panic. Because as a lender, you further destroy the value of assets that secure your loans.

So the right response for lenders in a panic is to extend or modify debt. Not force foreclosure or collections.

Push Pause = Forbearance

Therefore, small business owners will almost certainly receive a “yes” when asking for “forbearance” — when asking to not pay now and add the missed payments to the end of the loan. This is essentially pushing pause on loan (or rent) payments in the middle of an economy-wide cash crunch.

Forbearance is one of those magic legal terms. Use the phrase with the banks, lenders, and landlords.

Telephone Script

Here’s a script, “Hello, Creditor. Due to the coronavirus emergency, a circumstance beyond both of our control, I can’t afford to pay this month. I am asking for your forbearance. Add the amount due this month to the end of the loan or liability. [Avoids doubling up when payments resume.] We’re both better off if my business [job] survives the emergency.”

Push Pause on Everything You Can

Ask forbearance for everything you can, loans, credit cards, rent, and more. They will have to do the same. We’re all in this extraordinary moment together.

The Fed is providing banks liquidity with near 0% federal funds rate to encourage just this.

Landlords will have to ask for the same forbearance from their lenders after granting it to tenants for rent.

It’s Not a New Loan

It’s not a new loan, it’s suspending payment on existing loans and liabilities.

But You Have to Ask

But you have to ask.

And you have to document the answer. As the small business person note who you talked to. Their answer.

For now, do it on a month-to-month basis. But this may go on multiple months.

This Won’t Last Forever

Eventually herd immunity kicks-in or we have a vaccine. There’s hope at the end of the tunnel. For now, push pause.


Additions/Updates

Shining Bright | The FarmHer Podcast (3/20/2020)

Small Business help during COVID-19 Crisis | Shining Bright Special Episode (3/20/2020)

16 Comments

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  1. Thanks for sharing such kind of valuable information.

  2. Seriously, I’m really scared.
    This coronavirus(COVID-19) issue is really making me sick.
    it has collapsed so many businesses and tearing apart so many economies.
    I really hope a vaccine is found soon

    anyway, I love your blog post.
    I thing friends on Facebook are going to love this post my do you mind if I share?

    • Not at all, feel free to share with attribution. #PushPause is what we need for the economy.

    • Samuel Tay, @activitiesgh.com Feel free to share. The coronavirus is a real challenge both to our individual health, but also to many businesses. This may kill off a lot of traditional senior living communities that now look like 19th-century hospitals. It’s a real black swan that no one was looking for. Will change retirement for boomers and will change working careers for the younger generations. Thanks for the feedback.

  3. This is a very helpful idea that should start from the beginning.

  4. Indeed a very helpful idea about how to start having emergency money. Thanks for sharing

  5. This should be on everything. Since a lot of people have no jobs and are dying somewhere.

  6. Fencing Contractors

    April 20, 2020 — 4:13 pm

    This should be what the government should push until everyone can go back to work.

    • US Government is encouraging forebearance or loan modifications pretty hard. They are required where government guarantees are involved like FannieMae and FreddieMac backed home loans.

  7. This is very helpful, Thanks for sharing

  8. So important! Thanks for all the work you’re putting in!

  9. This could provide some relief to the homeowners as lots of them are seeing a reduction in their monthly income and this forbearance would help them cope in this situation.
    John Gatesby recently posted…COVID-19 (Coronavirus) and Exercise, Diet, and AntioxidantsMy Profile

    • Wide variation in lender responses so far. Can’t imagine this not affecting future real estate values, John Gatesby. We’ve been following the statistical analysis and medical investigative lines around COVID-19. Appreciate reading about potentially protective diet and exercise interventions. We do intermittent fasting. And the emerging evidence of the role of the microbiome in health is compelling. Both have left us wondering about what non-medical diet and exercise interventions might be positively correlated with better coronavirus outcomes.

  10. Its not just our health that has been at stake now that corona virus has strike world wide but also had emptied our pockets because most of us has no work and no work mean no pay. Though there has been a push pause for mortgages, credit cards and other financial debt but the question still lingers of what will happen to all of these when covid season ends.

    • R Killen, appreciate the feedback. A lot of uncertainty around what recovery from the COVID-19 shutdown looks like worldwide. I’ve heard the current situation compared to putting the economy into a medically induced coma. Big question is can we awaken the economy back up from the coma? Worried that we will lose a lot of small businesses, farmers, and ranchers even if most of the big businesses survive. The accumulated private and public debts are not a free lunch. I see overly burdened balanced sheets as a real risk, especially if consumer demand is slow to revive.

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