As our government continues to address the implications of the novel coronavirus, we at LifeManaged, share the same uneasy feeling as other business owners about the coming months. Confusion, uncertainty, stress, and fear of the unknown is making it difficult to make the right financial decisions.
The practice of social distancing and self-quarantine is throwing our country into recession or potentially a depression depending on how long this lasts. With the landscaping changing in varying degrees depending on region, managing cash flow is essential to get your business through these unprecedented times. Here are some ideas for small business owners to consider.
- Reevaluate business growth initiatives and purchase orders. Depending on the type of business you run, try and prioritize essential versus growth opportunities.
- Talk to your bank. Ask if there are any relief options to switch to interest-only payments. Additionally, if you happen to be aggressively paying down principal, stop making extra payments and save your cash flow. Now is not the time to pay down debt.
- Discontinue your payroll for yourself, spouse or any children. Work with your CPA to determine what cash you need to live on and turn these into shareholder distributions. This can minimize your payroll taxes and federal taxes through these uncertain times.
- Call your credit card companies. If you have a strong history with these companies, you might be able to skip payments with no penalties or interest.
- Access available lines of credit. The federal government continues to inject liquidity to the system and if you have a relationship banker you might be able to even open an emergency line of credit.
- Work with your professional team to gain perspective. Stay in touch with your Financial Planner, your CPA, and your business attorney. It is these exact times that they truly add their value and earn their keep. By making good decisions based on facts and numbers, rather than emotions, you could save yourself from making a life-altering financial mishap. These professionals should also be able to help filter news and keep you apprised of new relief programs and stimulus that our government is trying to pass.
- If you have the proper liquidity and access to lines of credit, do not sell your stocks. The illustration below shows that the average investor has lagged the S&P 500 by 4.7% over the past 20 years. This remarkable difference is due to emotional reactions. Most human brains are not wired to handle the overload of information and buy and sell their stocks at the wrong times. Before liquidating your investments, be sure to speak with your financial professional.
We are prepared to try and do our part and help the community. If you just need someone to talk to or you had one quick question, please do not hesitate to speak with us. You can schedule a FREE 30-minute phone call, no strings attached, on our calendar here to discuss your immediate needs or concerns and we hope to give you the guidance on how to best alleviate these.
*Athanassios Panagiotakopoulos is an Investment Advisor Representative with Dynamic Wealth Advisors dba Life Managed. All investment advisory services are offered through Dynamic Wealth Advisors.