Today I cover the best action steps small businesses and event organizers can take in order to ensure long time survival of your business or event during this COVID-19 crisis. Including how to suspend your loan and credit card payments, apply for SBA Disaster Relief funding, the CARES Act Paycheck program, an alternative to being forced to layoff your employees, and more.
UPDATES: This article was updated 4/3/20 to reflect the new changes in the SBA Disaster Relief application process and to include the new CARES Act SBA Paycheck Program.
COVID-19 has been devastating for most small businesses. But for event organizers, promoters, music venues, and entities in the live events industry – COVID-19 has been a complete “show stopper.” Tens of thousands of live events have been shut down by the government and nobody knows how long the live events ban will last.
So RIGHT NOW is the time to do everything you can to help ensure your live events or your small business can sustain with low revenues (or no revenues) until this is over. I spent the past week talking to bankers, accountants, governmental agencies, other business owners, and other event organizers to develop a roadmap that you can follow.
It’s Better to Be Safe than Sorry!
Even if your business has a decent amount of cash reserves like our companies do (Afton Tickets and Afton Shows), I still reccomend that you consider implementing these strategies as a proactive “safety back up” plan in case the current live events ban lasts 6 months or longer. Or, even worse, if future waves of COVID-19 occur and future live event bans are enforced later on!
We are in dark times… Many events and businesses that I’ve talked to fear they won’t exist when this is all over. But you can do this. There is a light at the end of the tunnel. We are all in this together.
If you have any additional ideas or tips that I can add to this list, or if you have any questions I may be able to help with, email me at: Ryan.k@AftonTickets.com
DISCLAIMER: This article does not constitute legal advice or tax advice. Each state agency has different requirements and terms. Please check with your attorney, accountant, and your state specific agencies. These are suggestions only. Afton Tickets is no in way guaranteeing any specific outcome with these suggestions and tips.
TABLE OF CONTENTS
- APPLY FOR SBA DISASTER RELIEF IMMEDIATELY (UPDATED).
- (NEW) CARES ACT: SBA Paycheck Protection Program.
- ALTERNATIVE TO COMPLETELY LAYING OFF YOUR EMPLOYEES.
- BANKS ARE SUSPENDING PAYMENTS DUE ON CREDIT CARDS, CREDIT LINES, LOANS, & MORE.
- SCRUTINIZE YOUR PROFIT & LOSS STATEMENTS & MONTHLY CREDIT CARD STATEMENTS.
- CHECK ON YOUR REFUND POLICY TERMS.
- DO ALL OF ABOVE FOR YOUR PERSONAL FINANCES!
*Note: Potential to suspend your home mortgage payments.
#1. APPLY FOR THE SBA DISASTER RELIEF IMMEDIATELY!
As of 4/3/20, the SBA Disaster Relief website has revamped its online application process after being completely down for 4 days. Now it takes 10-15 minutes to apply with a short application. The type of loan you want to apply for is the Economic Injury Disaster Loans (EIDL for short).
If you have questions, DO NOT email the SBA and wait for a reply before you start your application. They are just now replying to emails that colleagues of mine sent them 14 days ago. Hold times if you call in vary from 1-2 hours. I suggest getting started on the application as soon as you can.
$10,000 QUICK ADVANCE NOW AVAILABLE!
They are offering a $10,000 advance within 3 business days, and if you are rejected for the loan you don’t have to pay the advance back. However, it’s been reported it is taking longer than 3 days. But they are trying to expedite that portion of your loan as an advance as soon as possible.
IF YOU ALREADY APPLIED THROUGH THE SBA’S “OLD” APPLICATION?
The SBA has sent emails to my colleagues specifically stating that if you already applied for the EIDL SBA Disaster Relief Loan weeks back when they had their previous application – that “YOU SHOULD APPLY AGAIN WITH THIS NEW UPDATED APPLICATION.”
So if you remember the old application they had originally that was super long, required you to upload a bunch of documents and forms, etc. you should go back to the link above and RESUBMIT through their new shorter application. If you own more than 1 company, you can apply for any and all companies you own for separate SBA Disaster Relief Loans.
The SBA Disaster Relief Loan program now is accepting applications from businesses affected directly by COVID-19. The U.S. Congress is pushing to get $500 Billion in funding to this program, and it’s possible they increase the funding even further. To put this into perspective, $500 Billion is enough to give 1,000,000 businesses a $500,000 loan. But as of right now, there is only $50 Billion of current funding. It’s on a first come, first served basis and it’s possible that the money could run out.
The benefits of an SBA Disaster Relief Loan include:
- Loan terms of up to 20-30 years. This means monthly SBA loan payments will be much less than you’re used to versus a short-term 3-year or 5-year loan.
- Approximate Estimation: $100,000 loan at 30 year term, 3.75% interest rate could have monthly payment as low as $1,000. That is unheard of for a business loan.
- Interest rates could be as low as 2.75% for non-profits, and 3.75% for small businesses. So yes, it appears that non-profits can still apply!
- Small businesses can qualify for loans up to $2,000,000. After you apply, the SBA will calculate out the loan amount you qualify for.
SBA Disaster Relief Loans can be used during this crisis to pay business expenses, office rent, employee payroll, etc. The SBA has said you can also consolidate other debt you have with other banks or credit cards. By doing that you can significantly lower your total monthly debt payments and save money with the lower SBA interest rate.
TO APPLY FOR A SBA DISASTER RELIEF LOAN GO TO: https://covid19relief.sba.gov/#/
They updated the application process around 3/30/20. You no longer need to create an account. They simplified the process and now the site is stable, thankfully!
WHAT YOU NEED IN ORDER TO APPLY.
- Your EIN number or business tax ID number.
- Gross Revenue for the past 12 months.
- Cost of Goods Sold for the past 12 months.
Note: Cost of Goods Sold does not include all of your expenses as a company. Talk to your accountant so you are not including expenses that do not qualify as Cost of Goods Sold.
- Number of employees.
- Date business established.
- Other info about yourself and the business, but above is the info that may take longer for you to come up with.
Note: Originally in this article, I talked about several forms such as the 4506-T. It does not appear the new application is requiring these forms. But the new application will prompt you with any documents or information it is now requiring.
THE SBA DISASTER RELIEF WEBSITE IS SLOW & BUGGY!
As of March 21, 2020, states with declarations include Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Guam, Hawaii, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia and Wyoming. If your business is in one of these states you may apply online at https://disasterloan.sba.gov/ela. If you are unable to apply online, you may download an application at https://disasterloan.sba.gov/ela, under the Loan Information tab.
For an up to date list of states eligible:
If your state is not on this list, I reccomend you check the SBA website everyday (or more often) because it’s 1st come 1st serve. So if you’re one of the first businesses once your state is eligible to apply you will be ahead of the line for your state.
The sooner you complete your application the further ahead of other businesses you will be. So if you need SBA Disaster Relief do this immediately.
CONTACT INFO FOR THE SBA
Hold times are 45 minutes up to 2 hours. I’ve heard reports of people being on hold for an hour and then the SBA phone system hangs up. Their phone systems are overloaded.
Response times via email are taking up to 7-14 days or longer. Their staff is completely overloaded.
#2. CARES ACT: SBA Paycheck Protection Program
Breaking Update as of 4/3/20. Part of the CARES ACT includes the SBA Paycheck Protection Program.
This is an ADDITIONAL PROGRAM on top of, and separate from the SBA Disaster Relief Loan program I talk about in item #1 above.
So can apply to both the SBA Paycheck Protection program as well as the SBA Disaster Relief Loan.
The Paycheck Protection Program essentially can give you 2.5x your monthly average Payroll. You can include your health insurance to workers and retirement plan contributions as a company in this figure.
Example: If your company’s total Payroll expense average over the past 12-months was $12,000 per month. This program could provide funding of up to $30,000 ($12,000 x 2.5).
PAYCHECK PROTECTION LOAN FORGIVENESS!
Here’s the best part. This program is intended to prevent more mass layoffs and to keep your employees on your payroll. So if you use this Paycheck Protection Loan during the loan period to pay eligible expenses it will be forgiven completely. So this is potentially free money that helps you and your employees. Eligible expenses for loan forgiveness include employee compensation, utilities, rent/mortgage interest, and more.
Read these articles for more information on the fine details and requirements:
HOW CAN YOU APPLY?
The SBA is requiring businesses to apply through their bank. Check with your banker to see if your bank is ready to accept these applications yet. Chase Bank just started accepting them on 4/3/20 but some banks are experiencing delays. Key Bank is offering to take on businesses that are not current clients, but many banks are requiring that you already bank with them to apply through their bank.
Once you apply through your banks online portal, the SBA is requiring that bank to process your application. So far, it appears that after you submit the application through your bank’s online portal, on a first come first serve basis, your bank will contact you for the next step to process your application.
The sooner you apply for this, the sooner you can “get in line.” It may be a long line. Many businesses are desperate to receive this funding ASAP.
To illustrate that point, I just read that a Portland, Oregon organization (Prosper Portland) offered $1.3 Million dollars in grant money to Portland small businesses… Within 48 hours they had over 1,300 businesses apply from the city of Portland.
#3. ALTERNATIVE TO COMPLETELY LAYING OFF YOUR EMPLOYEES.
**BEFORE YOU LAYOFF YOUR EMPLOYEES READ THIS SECTION!**
The state of Oregon has a program called “Oregon Work Share.” Here’s how this works. Oregon Work Share is our state’s program to help employer’s AVOID full layoffs. With Oregon Work Share, the employer chooses which employees to cut down 40% of their hours.
In this case, the employer only pays 60% of the employees’ normal wages, and the Oregon Employment Department, through Work Share, pays those employees 40% of their full unemployment benefits. The thinking here is, if they can help you AVOID laying off 40% of your work force, and keep most employees through Work Share, than that is a big win for your employees and for the state in general.
TIP: You may want to implement a Work Share program in your state immediately to help cut down on payroll expenses. Even if you are applying for the SBA Paycheck Protection Program, it could be weeks or longer before you get funding. So a Work Share program may help stretch out your cash in the meantime and avoid layoffs!
TIP: Call your state’s employment office or google to find what the equivalent is in your state to Oregon Work Share. It may be called something different, but you should have something like it in your state.
ADVANTAGES OF WORK SHARE FOR EMPLOYEES.
- Rather than being laid off completely they still work for your company with reduced hours.
- The Oregon Employment Department will not force your employees to look for another job if they are on Work Share with reduced hours.
- Typically, a laid off employee only gets about 50% of their normal wages through unemployment. With Work Share, the employee will earn “approximately” 75% to 79% of their normal wages. So about a 21% to 25% cut in their normal wages. But that’s much better than a 50% income cut that a complete layoff would incur.
- The employee has more free time off, working 24 hours per week instead of 40 hours per week.
ADVANTAGES OF WORK SHARE FOR THE EMPLOYER.
- The employer saves 40% of the normal wages for each employee.
- The employer still employs employees on Work Share, so they are not forced by the Oregon Employment Department to look for another job.
- The employer decides each week on who is on or off Work Share. So there is no long-term commitment. Even if you are forced to do full layoffs later down the road, this is a great interim program to help lessen payroll expenses.
- This is helpful if workload has decreased during COVID-19 and employees don’t really have 40 hours of work to fill their time with.
- You can potentially avoid full layoffs for key employees you need to keep/retain.
You must have at least 3 or more employees on Work Share. Full-time employees must have been full time for at least 1 year. Part-time employees must have been part-time for at least 6 months.
ROUGH NUMBERS ON HOW THIS COULD WORK:
Employee A annual salary is $30,000 = Monthly Payroll Cost $2,500
Employee B annual salary is $60,000 = Monthly Payroll Cost $5,000
Employee C annual salary is $90,000 = Monthly Payroll Cost $7,500
Employer puts Employee A, B, and C on Oregon Work Share and reduces full time hours by 40%, so each employee now works 24 hours per week.
Employer now pays with Work Share:
Employee A Monthly Payroll Cost: $1,500
Employee B Monthly Payroll Cost: $3,000
Employee C Monthly Payroll Cost: $4,500
Employer in this example now has a $9,000 monthly payroll with Oregon Work Share versus their normal $15,000 monthly payroll. So that’s $6,000 saved per month for this employer. Work Share potentially saved this employer from having to completely layoff Employee A and Employee B.
Employee approximate earnings on Work Share:
Exact numbers can vary, but from various calculations through the Work Share calculator and from reports from several business owners I spoke with, employees are seeing a 21% to 25% decrease in total wages when put on Work Share. Because Oregon Work Share sends a check to each employee to makeup for some of their reduced hours.
EMPLOYERS CAN APPLY FOR OREGON WORK SHARE HERE:
FOR EMPLOYERS OUTSIDE OF OREGON:
Call your state’s Employment Office or do a Google search to see what your state provides for programs similar to or equivalent to the Oregon Work Share program.
#4. BANKS ARE SUSPENDING PAYMENTS DUE ON CREDIT CARDS, CREDIT LINES, LOANS, & MORE.
If your business owes any money on credit cards, credit lines, cashflow lines, or long term loans – you need to know about this!
Right now, every major bank is giving “forebearance” on monthly loan payments. This means they are basically suspending your loan payment (you don’t have to pay it) IF YOU CALL YOUR BANK AND REQUEST THIS.
DO NOT just stop paying your minimum payments. You have to call into your bank (it may take 30 minutes to 1.5 hours of being on hold) and request this in order to not get penalized.
Make a list of every single minimum payment you owe on any business debt along with which bank that debt is held at. Then call down the list and keep track of which payments you successfully got suspended and put into forebearance.
IMPORTANT: Banks are requiring in most cases, that you call back EACH MONTH to get the next month’s payment suspended. If this is the case, make sure you know which date you need to do this again by for each loan payment. If you forget to do this each month, they will charge you the minimum payment.
One business I talked to didn’t have a large amount of debt for a business their size. But they were paying the following minimum payments each month:
- Credit Card #1: $153 minimum payment
- Credit Card #2: $249 minimum payment
- Cash Flow Line #1: $1,486 minimum payment
- 5-Year Loan: $2,266 minimum payment
- Credit Card #3: $49 minimum payment
TOTAL MONTHLY MINIMUM PAYMENTS: $4,203.00
By calling in and doing this, this business saved $4,203.00 per month during this crisis which could cover their office lease/rent or potentially allow them to keep 1-2 more employees on payroll with Oregon Work Share.
BANKS SAY THAT PAYMENTS WILL STACK UP – BUT…
Right now banks are saying when a minimum payment goes into forebearance, at the end of this crisis you’ll need to pay those payments. So they will “stack up” and be owed later, in theory. So be prepared for that.
HOWEVER, there is a possibility that the government provides funding programs to wipe away these stacked up suspended payments, or that the government will end up forcing banks to forgive these stacked up payments. Nobody knows for sure. At the end of this crisis, if we all find out any suspended loan payments in forebearance somehow get forgiven – the businesses that did not bother calling in to suspend their loan payments are going to have a lot of regrets.
#5. SCRUTINIZE YOUR PROFIT & LOSS STATEMENTS & MONTHLY CREDIT CARD STATEMENTS. CUT ALL THAT YOU CAN.
Now is the time to pull up your Profit & Loss Statements from the past 3-6 months. Look at every single business expense line by line. You can’t properly plan without this information. This will show which areas you can cut spending on, decrease spending on, or what large expenses need to be looked into.
Also go into your online banking portal and look at every single transaction on every business credit card for the past 60-90 days. This will show you which vendors or services are on auto-payments and will show you what else you’re spending your money on.
If you’re paying $750 for your server hosting each month, will that vendor allow you to suspend payments like the banks are doing? Or, with lower web traffic during COVID-19 can you back down your server costs at 40%?
If you typically send a lot of emails with Mail Chimp, but during COVID-19 your email sending is going to be 50% lower, look into downgrading your email sending provider plan so you’re not overpaying.
What can you cut for now? Office janitorial services? Downgrade your internet speed or cut TV products? Which software as a service subscriptions can you live without temporarily? Try to negotiate with any vendors or long-term contracts you have – it’s worth a shot and in most cases will probably work!
A $49.99 per month subscription service may seem like a drop in the bucket, not huge savings. But if you identify 15 or 20 expenses like that you’re going to be saving almost $1,000 per month.
It’s all about budgeting! You’re probably not eating out at restaurants as a company expense like you use to. You already know that. But have you calculated out exactly how much your company credit cards will save by not eating out at restaurants? If you know that will save the company $1,200 per month – that’s 1/3 of one of your employees salaries.
Lastly, after you do all of this. WATCH your banking statements and credit card statements each week. This will help you see exactly how much money is being spent with limited business operations. If your normal operating expenses for the business are $89,000 per month, it’s valuable for you to learn over this next 1-2 weeks that during “COVID-19 CRISIS MODE” your business is only going to be spending $24,000 per month after all of your cost cutting and strategy is in place. Then you can calculate out how long your business can sustain itself based on your remaining lines of credit and the SBA Disaster Relief Loan you are applying for.
#6. CHECK ON YOUR REFUND POLICY TERMS.
Now is the time to review, word by word, your official company refund policy. Are the exact same refund policy terms matching in all areas your customers can view them? Do you know all of the areas that customers can view your refund policy? (Website terms, checkout terms, email receipts, FAQ’s, etc).
If you are a live event or event organizer, do you know what the refund policy is with your ticketing provider? Now is the time to find that out!
Is an Act of God specifically guaranteeing refunds to everyone? Or does an Act of God such as COVID-19 in your refund policy or your ticket provider’s refund policy specifically indicate that refunds are not given, but a reschedule date will be given which the tickets will be honored to?
You need to know this so you can effectively handle any customer complaints or issues or refund requests.
This is also the time to ask yourself, “Does my Refund Policy protect me enough?” It’s too late for a revamped Refund Policy to take effect to any past purchasers. However, if you find that your Refund Policy says that an Act of God grants a full refund – and you don’t want that to be the case anymore? Change it right now. So that all future orders will have the terms applied that you want to have in your Refund Policy.
Click Here to read an article I wrote with more advice on refunds, rescheduling events, canceling events, and how to use correct messaging so your customers do not badmouth you online.
#7. DO ALL OF ABOVE FOR YOUR PERSONAL FINANCES!
All of the above should also be done for your personal finances. Obviously, all of them except for the SBA Loan and the Refund Policy.
Checklist for personal finances:
HOUSE MORTGAGE: SUSPEND PAYMENTS!
If you own a house, call into your bank immediately. There are talks in Congress about giving a 3 month 12 month suspension on house mortgage payments, and if that passes you need to be ahead of the line. When you call your bank mortgage lender, specifically explain how COVID-19 has affected your ability to pay your mortgage via your business losses. I am told right now banks are “coding” your account when you request this so that as soon as the banks and the U.S. government decide what they are doing you will be contacted first. How much easier will it be to sustain your business throughout the COVID-19 crisis if you get your house mortgage payments suspended? That’s a huge savings in your monthly expenses.
Note: Nobody knows for sure. But there are talks that banks will suspend house mortgage payments for 3-12 months, with a possibility that you won’t owe those payments and they won’t stack up. The best case scenario is banks decide to just add those payments to the end of your mortgage, and not make you pay back the suspended payments when COVID-19 ends. The worst case scenario is the suspended payments stack up and when COVID-19 crisis is over and business is back to usual you can make those payments. Either way, it seems like not having to pull cash out of your business to pay your personal house mortgage is a pretty big win.
PERSONAL CREDIT CARDS
Like I discuss up above, call each credit card company and ask to suspend payments. The same goes for any personal loans or personal lines of credit.
PERSONAL EXPENSE BREAKDOWN
Look through all of your credit cards and your checking account, transaction by transaction for the past 60-90 days. Find out what you can cut. Do you really need your HBO or Spotify subscription right now?
LOOK INTO A REFINANCE OF YOUR HOUSE MORTGAGE!
Right now, the Fed has cut interest rates to almost 0.00% for lending to banks. Take advantage of this immediately. Call your mortgage lender and ask what REFINANCE options are.
Doing this ASAP is important for a key reason: The refinance underwriters are going to look at your most recent pay stubs and your W2 income from the past 2 years. So starting your refinance immediately ensures that you have W2 income to show them before you potentially get laid off from your job, or get your hours cut down.
If you wait and try to refinance later on and you have lost your job it will be hard to get a refinance approved. It’s also important to do this ASAP before your credit scores decrease if you expect to lose your income soon or are not able to service your existing debt payments.
IMPORTANT THINGS TO KNOW:
- Ask if the refinance can be done with $0 up front cost. Friends of mine have been able to wrap the closing costs into the new mortgage and pay $0 up front costs.
- Ask how much lower your monthly total mortgage payment will be. I’ve seen several cases where my friends are saving 10% to 20% of their total mortgage payment which is a huge monthly cash savings.
- You can ask for a CASH OUT OPTION. This allows you to take out cash from your mortgage equity (so you are borrowing from yourself so to speak, on equity you have int he house) however this cash out option amount will be put into your new mortgage refinance with a super low interest rate and on a 30 year term. You can use this cash as a “safety cushion” to pay expenses, or you can use this cash out to PAYOFF another high interest or high monthly payment loan. For example, if you use the cash out option to pay off your car loan and that eliminates a $400 per month car payment, you just saved yourself a lot of money on your monthly expenses. You know your finances best, but this is a valuable tool to lower not only your house mortgage payment but also your other monthly expenses in general.
- Make sure you get a FIXED LOAN. Do not do a variable APR or an ARM loan that is interest only because your monthly payment could skyrocket. You want a FIXED LOAN so your APR interest rate is locked in for the life of the loan.
Also consider, with so many employees being laid off and with our entire economy being shut down due to COVID-19, I see a very unlikely chance of being able to sell your house if you get in financial trouble. Everyone will be trying to sell their house, and there won’t be many buyers in this market. So you want to think about cutting your monthly expenses as much as possible so you can sustain your monthly mortgage. This could affect home prices as well, so the longer you wait to refinance risks that when you go to refinance later the appraisal value of your home is way less than it would be right now.
Action Step Checklist for Event Organizers!
How are Sponsors Responding to the COVID-19 Crisis?
Three Remove Event Team Communication Guidelines.
ANY OTHER IDEAS TO SHARE?
I hope this helps get the gears turning. There is no sure fire method to sustaining your event or business throughout this unprecedented crisis. But hopefully the tips we’ve put together can help you survive this. Our economy needs you, we all need you. Leave a comment if you found any of our tips helpful and we’d love to hear what else you’re doing with your business or live event if it’s a new idea we haven’t covered yet!