We’ve helped over 150 small businesses navigate the crisis | Here’s what we’ve learned

I wrote recently about the The Finance Assistance Network (FAN), that I helped set up (along with Lew Visscher and Phil Votteiro) three weeks ago to offer pro bono financial advice to small businesses affected by COVID-19. So far the network has helped almost 200 companies navigate questions around surviving in the post-Covid work and to access PPP and other federal assistance. Tomorrow (Friday, May 1) at 9:00MT the FAN is hosting a webinar – Extending Your Runway: Small Business Tools to Survive a Cash Flow Crisis. The webinar is hosted by Good Business Colorado and is sponsored by a number of organizations advocating for small businesses including MAPR Agency, The Bell Policy Center, Small Business Majority, and others. The webinar is free and you can register here. I’m encouraging everyone to share the information about the webinar and the FAN on their social media channels and especially with small business owners in their networks. Supporting small businesses during this crisis is crucial to the overall health of our economy so please spread the word about these free resources.

Additionally, Lew, Phil and I published an op-ed in The Colorado Sun this morning talking about what we’ve learned so far helping these small businesses navigate the crisis. I though it was worth sharing here as well. We will continue to aggregate learnings as we expand the network and try to use them to both influence policy as well as to accelerate and expand our ability to help businesses that continue to struggle through the Covid-19 induced economic crisis.

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Early Monday morning, the Small Business Administration’s application system for its second round of PPP funding crashed within an hour of coming online. The first round of $342 billion — nearly ten times what the SBA administers in a typical year — was depleted in just 13 days. And like the first round, this latest infusion of $310 billion will be delivered on a first-come, first-serve basis.

Getting money into the hands of small businesses is a good idea, and we applaud the government’s quick actions. However, in the haste to create and pass these two rounds of emergency financial support, there are some gaping holes that must be addressed quickly so companies can make the most of these lifelines and extend their financial runways. 

According to data released by the SBA, the average PPP amount was just over $200,000. That equates to a nearly $100,000 monthly payroll — hardly “main street” businesses. For companies reliant on PPP funding as a lifeline for operational survival, the stakes for accessing and using this funding wisely could not be more high. 

How high? A just-released survey from Goldman Sachs finds that nearly 70% of small businesses will likely change their business models for good as a result of COVID. In other words, if companies are relying on the same strategies that they had in place in January to keep their doors open, the ability to adapt and update practices now has an even greater urgency. Even in good times, most small businesses carried between one to three months of cash reserves. More than ever, understanding and then extending financial runways for small businesses is a critical component to helping businesses survive.

A little less than three weeks ago, we helped create the Finance Assistance Network, a pro bono alliance of senior financial professionals, supported by legal, HR and other resources that are available for free to any small business or nonprofit organization impacted by COVID, regardless of size or location. The network connects business owners with a small army of CFOs, controllers and senior financial professionals willing to help with business and cash flow planning, applying for PPP and EIDL money and urgently needed support. 

Since launching earlier this month, the network has helped more than 150 companies, giving us unique insights into the special challenges and limitations of the CARES Act. For example, the companies we’ve helped appear to be especially impacted by the eligibility criteria for PPP funding because the programs exclude many small businesses that can benefit the most from this support. 

Many small businesses rely on consultants and part-time 1099 workers who do not appear on payroll calculations (they can apply as individuals to the program, although anecdotal evidence is that few are), which can hurt their chances for larger loans. Likewise, businesses owned by women and people of color are at special risk of being excluded from PPP funding because they are more likely to make use of contractors and less likely to have established relationships with SBA approved banks.

The feedback that we hear most frequently is that the calculations of payroll are far too small to provide the stabilization needed for ongoing survival and continued operations. Many small businesses have expenses, such as rent and utilities, that are significant relative to their payroll costs. By stipulating that funds need to be spent on payroll to qualify for forgiveness and by covering only an 8-week period, the current program effectively acts as federal unemployment insurance, rather than a business stabilization program.

Our biggest takeaway is that companies need more flexibility in how they spend aid dollars to balance what’s in the best long-term interest of their business and in the best interests of their employees. Many employees will likely be out of work well past the 8-week period anticipated by Congress, and some are better off individually taking enhanced unemployment benefits. 

This Friday, we are partnering with Good Business Colorado to put on a free webinar, open to all, to share how companies of all sizes should be thinking about approaching business planning through the crisis. We’ll also discuss how they can access the pro bono resources provided by the Finance Assistance Network, apply for PPP and other loans and get expert guidance on using these funds to help your company extend your financial runway. Please join us by registering at https://bit.ly/3bM3OPg.