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.
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.
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.