crisis managementFinancial PlanningFinancingHEROS ActSmall Business

Round Two of Small Business Recovery

Two months ago the U.S. House of Representatives passed a bill called the “HEROS Act” that included financial resources to small businesses struggling to restart after the disruptive effects of pandemic shutdown. While the entire bill is not likely to become law because of objections by U.S. Republican Senators, the small business portions of that bill are widely supported by the majority of those same Senators. This week Senator Rubio and others introduced bills called the “Continuing Small Business Recovery and Paycheck Protection Program Act” and “Keeping American Workers Paid and Employed Act” that address small businesses in a similar form as the earlier HEROS Act legislation. No form of proposed small business legislation is likely to become law in the current form, however, some form of a modification of all of these proposals is likely to eventually become law by this fall. This post is meant as a ‘head’s up’ to small businesses who may need recovery funding when that legislative approval actually happens.

The one overriding lesson learned during the first phase of recovery funding earlier this year, called the CARES Act, is that most small businesses are not ready to apply for and qualify for recovery funding. Congress misaligned past efforts in ways that made access to programs impossible or ineffective. For this reason, parts of the CARES Act, like the Main Street Lending Program,  were a failure. It takes a massive effort to reopen a small business after a period of shutdown and loss; few businesses owners fully considered all of the lingering consequences. Now both Congress and business owners are beginning to understand the scope of the obstacles. Of course, not all businesses should apply for recovery aid, nor should all be approved. Many business owners should file bankruptcy, reorganize and move on to another enterprise. But for those small businesses that do have a solid plan for recovery already, it is necessary to be prepared to prove that to investors, lenders and the government. Unlike the prior law, the new small business recovery law will be able to deal with business reorganizations, bankruptcies and new business formations. The new law will likely include a widened range of grant and loan options for small businesses. The new law will likely be open to a wider range of business types and nonprofit organizations. The key to successful access is to get ready NOW with the appropriate planning and documentation.

This is a list of items that must be ready to maximize the chance of a successful recovery:

  • A business plan
  • Letter of intent from shareholders or private investors
  • Resolution from Board of Directors
  • Up-to-date financial statements electronically linked to accounting records and bank transactions for easy verification
  • Up-to-date tax returns
  • Up-to-date state business filings
  • Formation documents
  • ID and credit report of business principles

A warning again: do not underestimate the time and work that it takes to plan a small business recovery. Now is the time to begin gathering teams and documents to make it happen. Federal, state and local governments have resources available to help. Small business financial specialists in private practice combine multiple resources and strategies to achieve an efficient way to fund recovery for those firms who can afford to pay for this financial expertise.

My CPA firm focuses on small business financial management, including nonprofits, and I continue to offer no-fee pandemic recovery consultation services as I have since this past March. Just use the contact information on this page to plan a discussion. I would be happy to hear about your small business recovery plans and offer feedback on the financial aspects of the plan.

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