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Survey on The Impacts of Post-COVID Funding

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By Debbie Gregory.

LinkedIN Debbie Gregory VAMBOA VAMBOA Facebook VAMBOA Twitter

 

 

To overcome the economic impact of the COVID-19 pandemic, many small businesses are being forced to seek external funding through alternative funding sources, government grants, and loans from traditional banking institutions.

You may whether small businesses normally applied for loans or is this a new behavior in response to the pandemic?

Earlier this year, Small Biz Ahead surveyed small business owners across the country to learn exactly how the pandemic was affecting their use of both traditional and alternative funding. Here is what the survey found:

Starting a New Business:

Prior to the pandemic, most small business owners were hesitant to use external funding sources.

  • Less than 1% used a federal or state grant to start their business.
  • 60% of all small business owners used their own personal savings to start or run their businesses.

Running an Established Business:

  • 85% of small businesses sought zero external funding in the last three years.
  • 28% of small business owners use their personal credit cards to pay for business expenses.
  • If the business did need money, they were more likely to seek out traditional funding sources as 41% stated they would go to their main bank first.
  • 25% stated that they would simply use credit cards or existing funds.

Does age affect the business owner’s thoughts on external financing?

They found that younger generations tend to be more open to applying for financing or loans though they are still a bit hesitant. However, they do typically turn to friends and family for loans first. The study found that about a third of small business owners between the ages of 18-34 currently use friends and family as their main source to finance their business. This drops dramatically for generations older than 34, just over 10% of 35-44 year olds and less than 2% of 45-54 year olds stated that they seek out loans from friends or family.

What do small business owners look for when selecting a financial provider?

The small business owners surveyed:

  • 38% stated that interest rates are the most important factor in choosing where to obtain funding.
  • 38% stated that the terms and conditions were the most important factor.
  • 34% prefer a financial provider who they know and have a relationship.

Does gender affect where the business owner will look for financing?

The study found that men (38%) are much more likely to view an existing relationships as the most important factor when selecting a financial provider, whereas women (41%) typically go out of their way to look for less expensive funding and lower interest rates.

How Does Age Impact Funding Choices?

There was also a clear divide between the age groups:

  • The 18-34 age group favored institutions that offered easy applications,
  • The 35-64 age group favored institutions with less expensive loans and more competitive rates
  • The 65 and over age group favored institutions that they had a prior financial relationship.

What about alternative funding (such as crowdfunding or peer-to-peer)?

According to the study, alternative financing is not used very often by small business owners in the USA:

  • 2% of small businesses have used equity financing.
  • 4% have used P2P (peer-to-peer) lending.

However, this is changing. Many small business owners (42%) stated that they were open to the possibility of using alternative financing in the future should the need arise. The 18-34 age group were the most comfortable with alternative financing options:

  • More than 10% stated that they have used P2P lending.
  • A bit over 5% stated that they have used crowdfunding.
  • All in this group stated that they would consider using alternatives to traditional finance in the future.

VAMBOA, the Veterans and Military Small Business Owners Association wants to learn your opinions on financing and small business funding.  Have you needed to turn to external financing to survive the pandemic?   Please let us know by emailing us:

info@vamboa.org

If you are not yet a member of VAMBOA, we invite you to join.  There are not any fees or dues and you may use our seal on your collateral and website.   Below is a link to register to become a VAMBOA member:

https://vamboa.org/member-registration

 

By Debbie Gregory.

LinkedIN Debbie Gregory VAMBOA VAMBOA Facebook VAMBOA Twitter

 

 

The federal Small Business Agency known as the SBA has a few new ways to help small businesses stay in business while we all navigate the COVID crisis. Thanks to H.R. 748 the SBA has been able to expand their loan programs with new offerings for small businesses as well as some specific options for large corporations.

 

What Other Assistance does H.R. 748 Provide?

 

The program also provides $17 billion dollars to small businesses that have existing SBA loans. These funds can be used to pay six months of principal and interest payments on existing SBA loans.

 

1.) Additionally, the program provides $10 billion dollars for disaster loans and emergency grants. Each of these types of loans are limited to $10,000 per small business. These types of loans are quite like the Paycheck Protection Program or PPP described in part one of this mini article series.  They can be used for other operational expenses beyond payroll, mortgage or rent, and utilities.   In theory, any small business that applies for an economic injury disaster loan receives an advance, within 3 days, of $10,000 regardless of whether they eventually are approved for the loan. This $10,000 advance does not need to be repaid either. The loan itself can be for up to $2 million dollars at a low interest rate (currently it is 3.75% for small businesses and 2.75% for nonprofit organizations). Repayment terms vary. You can apply for this loan directly from the SBA here> https://covid19relief.sba.gov/.

 

2.) The program also provides $265 Million dollars for SBA business development services. The SBA offers Small Business Development Centers (SBDCs) that provide no-cost services for small businesses and entrepreneurs that will assist in critical business areas such as:

  • Consulting
  • Mentoring
  • Training services
  • Business development services
  • and much more

 

What Other Financial Assistance Programs Have Been Added for Businesses that Do Not Qualify for Other SBA Programs?  

 

The COVID-19 pandemic is having severe economic consequences all over the United States. Many larger businesses are ineligible for SBA programs. However, the goal of H.R. 748 is to assist large employers as well. Some of the additions that can help larger companies include:

 

1.) H.R. 748 states that the Federal Reserve can now make loans, as well as loan guarantees, to businesses not covered by other programs.  They can also now make loans to state and local governments. Unlike the SBA programs for small businesses, the Fed cannot forgive these loans and borrowers must repay them.

 

2.) H.R. 748 also provides the federal -19 pandemic. The funds are as follows:

 

  • $25 billion for loans to passenger air carriers
  • $4 billion for loans to cargo air carriers
  • $17 billion for loans to businesses critical to maintaining national security
  • $32 billion for additional financial assistance to air carriers and related employers (such as caterers and airport contractors)

 

Small Business or Large Corporation – if you need help to keep your business afloat while the COVID-19 pandemic continues to rage across the United States, then check out what is available to you from the SBA and H.R. 748.   We advise that patience is in order.

 

If you are not yet a member of VAMBOA, the Veterans and Military Business Owners Association, we invite you to join.  Please be advised that there are not any dues or fees and you can use our seal on your collateral and website.   You may register for membership here:   https://vamboa.org/member-registration/ ‘’

 

Everyone stay safe and healthy!

 

By Debbie Gregory.

LinkedIN Debbie Gregory VAMBOA VAMBOA Facebook VAMBOA Twitter

 

Did you know that the Small Business Administration (SBA) helps small businesses obtain the loans they need? The federal SBA provides a wealth of financial assistance, and other services to small businesses across the United States. Recently they have added quite a few new programs to help thanks to H.R. 748.

 

How does the SBA determine whether or not your business is considered a small business? The SBA determines whether you are a small business using either your revenue numbers or your employee headcount (the headcount varies by industry).

 

The main SBA program most business apply and qualify for is a loan guarantee program. The SBA may repay a portion of the amount borrowed by qualified businesses in cases when the small business borrower cannot repay the loan. Loan guarantees reduce the overall risk to the lender, thus enabling the small business to obtain more favorable terms, such as a lower interest rate or longer term.

 

The SBA also directly makes low-interest loans to businesses and nonprofit organizations following declared disasters. A disaster loan may be for either covering repairs and replacement of physical assets damaged in a disaster or covering small business operating expenses after a disaster.

 

What is new?   H.R. 748 is!

In general terms, H.R. 748 provides $349 billion dollars for forgivable small business loans. This program is called the Paycheck Protection Program (PPP) and was designed to subsidize small businesses so that they can continue to pay their employees and overhead costs while their revenues have been reduced due to the COVID-19 pandemic.

 

Unlike a typical SBA loan, businesses will not be required to repay these loans if the money is used exclusively to pay:

  • Employee wages
  • Employee benefits
  • Mortgage or rent for the business’s location
  • Utility bills for the business’s location

 

Instead, the loans will be forgiven after eight weeks. The business is required to clearly document how the money was used to ensure adherence to the loan program’s rules. If the business has not properly documented spending the loan money, or spent the money on other things, they will be required to pay all of it back in full at an interest rate of four percent (4%).

 

Is $349 Billion Enough to go Around? 

The program has enough to provide every eligible employer a forgivable loan for up to 2.5 months of payroll.   With this said many are receiving so much more including businesses that you might not characterize as small businesses.   For example, large public companies and major sports teams have received PPP funds and the the money has been depleted once already and refunded.

 

Who is Eligible for Assistance? 

All businesses and nonprofit organizations with fewer than 500 employees are eligible. There are also a few businesses that will qualify even though they have more than 500 employees. For example, a business may have more than 500 employees per location. Some sole-proprietors and self-employed people are also eligible for relief. Loans are available on a first-come, first-served basis.

 

How Much Money can you Get? 

You can qualify for about 2.5 times your average monthly payroll, or up to $10 million dollars. You do not even need to prove that you could potentially pay back the loan; instead, you simply need to prove that you have been running your business prior to February 15, 2020. This sometimes translates into the money going to businesses that don’t need it and there has been some widespread fraud.

 

Stay tuned for part 2 of this mini article series.   Part 2 will provide information on other assistance programs that H.R. 748 provides. There are even a few programs designed for specific types of large corporations.

 

VAMBOA, the Veterans and Military Business Owners Association believes that small veteran and military business owners should benefit first.   They made huge sacrifices for our nation.  We are disheartened to see huge corporations receiving this money and the program running out.

 

If you are not already a member of VAMBOA, the Veterans and Military Business Owners Association, please consider joining.  We do not charge dues or fees and members can use our seal on your collateral and web site.   Here is a link to register to join:  https://vamboa.org/member-registration/

Should you consider remote work for employees?

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By Debbie Gregory.

LinkedIN Debbie Gregory VAMBOA VAMBOA Facebook VAMBOA Twitter

 

There has been a huge surge in both business owners and employees working remotely from home because of the pandemic. This change has been well received all around.  Projections show that remote work may be here to stay. Employees are still able to effectively communicate, productivity has not gone down, employee satisfaction has gone up, and businesses are saving quite a bit of money on overhead such as office space rent.

While there are a lot of benefits of remote work for both the employee and the business, there are also a lot of concerns and challenges to address. We are all exploring new issues with productivity, boundary setting, and personal relationships. Employers are worried their workers at home are too easily distracted with everything going on in their home life. They worry they do not have as much control over their remote workers and have concerns on effectively managing them; even while they feel that the work-life balance for employees is the greatest benefit of remote working.

With all the challenges, most small business owners have worked from home for years. A vast majority of them work from home and that number is even higher amongst the younger business owners.  It seems that age plays a big role in how remote work is perceived. A recent study found that the younger the owner, the more positive they are about their employees working remotely. Younger business owners tend to feel that remote workers are more productive, more positive, and overall harder workers than those working in a traditional office setting.

Should You Have Your Employees Work Remotely? This is a hard question to answer. In order to figure out if a remote workforce would be best for your business, you need to consider the employees’ specific job duties, their ability to work effectively from home and their ability to work securely from home.

Below are a few ideas to consider:

  • Is the employee safer at home than in your office?
  • Would your business benefit from lower overhead?
  • Does the employee have the equipment and technology at home to work efficiently and effectively? If not, are you willing to provide it?

FYI – VAMBOA is partnering with Dell Technologies to provide significant discounts on computers and you can check them out here:  https://vamboa.org/dell-technologies/

  • Does the employee work with highly sensitive business data? If so, do you have security practices and solutions in place to safeguard that data when accessed remotely?
  • Does the employee have the tools to provide customer service or customer support?

If you choose to allow your workforce to continue to work remotely, you will need to put in place policies on how they will work, how you will manage them and how you will deal with the various challenges that will come up.

Below are some of the things you will need to work on:

  • Make sure you put in writing your new remote work policies and distribute them to your team so that everyone is on the same page.
  • Schedule and conduct regular check-in calls, video chats, or meetings to ensure everyone stays on the same page and works together.
  • Provide opportunities for remote social interaction. Even though you are not all working in the same location, team building and bonding is still very important. Schedule and conduct virtual happy hours, trivia contests, team luncheons, etc.
  • Make sure to deploy the correct technology to keep your employees connected and collaborative. Things such as video conferencing tools, instant messaging, office productivity software, and more. This is also an excellent time to update your computers and other equipment.  You may want to transition from desktops to laptops
  • Additionally, take the time to assess how working remotely is going for your staff. Schedule one-on-one talks and ask your employees how things are going for them and if they need more support from you.

People were already adopting remote work; the pandemic simply accelerated the popularity of the trend and it seems to be growing significantly. More and more companies are looking to expand the remote team model and shift a large portion of their workforce to remote work for good. Since more employees now have the technology and equipment they need to work remotely, it is easier for companies to offer that ability going forward.  Small business owners should seriously consider moving to this model too.

As employers and employees alike experience the benefits of working remotely, more companies will inevitably decide to make the leap. In the future, once the pandemic has finally passed, there will be a dramatic rise in fully remote companies with no physical workplace and providing savings.

Speaking of savings, VAMBOA is pleased to announce that we have partnered with Dell Technologies to provide VAMBOA members and friends significant discounts.   Please check them out here:  https://vamboa.org/dell-technologies/

COVID Pandemic Business Lessons

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By Debbie Gregory.

LinkedIN Debbie Gregory VAMBOA VAMBOA Facebook VAMBOA Twitter

 

It does not matter whatever area your small business is in; it looks very different today than it did last year. Unfortunately, it might never look quite the same again. The COVID-19 pandemic has forced every industry to drastically change the ways in which they conduct business to keep both their employees and customers safe.

Below are a few powerful lessons that you can take away from this pandemic and ones that will assist you in changing your business for the better:

1.) Be Flexible:

COVID-19 tossed a massive wrench into all our plans this year. Regardless of when you re-opened, when you plan to re-open, or if you never closed your doors, you must be flexible and creative when solving current problems. If you can embrace these challenges, your business will not only survive, but should grow once the pandemic has passed.

2.) Consider Alternatives to The Standard Office:

Many businesses have been forced to close entirely or work with a very limited amount of staff in the office while the rest worked remotely from home. Many businesses are now choosing to allow their employees to stay remote indefinitely as they close physical offices to save on overhead. If you can do it, now is the perfect time to embrace working with reduced overhead while providing your employees more flexibility in their work schedules.

3.) Utilize Technology:

Utilizing tools such as Slack, Zoom, and Skype businesses are keeping employees connected, focused, and on-task. These tools also continue to facilitate camaraderie by allowing virtual team lunches, meetings, happy hours, and more.

Technology is also helping companies keep on top of customer service with chatbots, messengers, newsletters, and other online tools; as well as helping companies expand their offerings with things like online stores. Technology has made the transition from traditional office to home-office incredibly simple as well as boosted how companies can find and communicate with their customers. Helping to keep business marching forward, keep up morale and keep everyone feeling connected to one another.

VAMBOA recognizes that many small businesses may need to update their computers and technology.   For this reason, VAMBOA has made the decision to partner with Dell Technologies to VAMBOA members and friends significant discounts on their outstanding technology products.  Here is a link to check out what they offer:  https://vamboa.org/dell-technologies/

4.) Involve Your Customers:

When looking for new and creative ways to boost your business during these challenging times, it is an excellent idea good to involve your current customers.  You need to find out from them how you can better serve them.  They may have a few ideas that you would never have thought of without their input. Some businesses have pivoted to online sales, at-home kits that are delivered, virtual meetings or gatherings and much more. Your customers know what they want and adding their desires to your offerings may open up a whole new revenue streams for your business.

5.) Pivot:

If your business is not open, you need to find a new way to get your offerings into the hands of your customers. If you have not yet added other services or ways for people to purchase your offerings, now is the time to do so!  If you are a restaurant then offer curbside pickup, online ordering, delivery services, or at-home meal and dessert kits. If you are a retailer then open an online store. Find ways to bring people together and connect your products and services to them.

The COVID-19 pandemic is far from over and will continue to dramatically change the way small businesses operate as we head into the future. To survive and thrive, you need to find new and unique ways to continue to serve your customers.

Please check out the discounts for VAMBOA members and friends offered by Dell Technologies to upgrade your computers and technology here:

https://vamboa.org/dell-technologies/

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