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Essential Tips for Businesses During the Coronavirus Pandemic

Business To-Do List in This Time of Crisis

By: Laura Day DelCotto

I recently attended a national panel discussion on the outlooks for COVID-19 in the private equity and M&A space. The present uncertainties make it difficult to make any predictions. There is tremendous market volatility, with some industries being impacted more than others.

The panel addressed many concerns, including the availability of debt and equity capital, due diligence, distressed acquisitions, reps and warranties, potential insurance coverage availability, MAC clauses and Force Majeure clauses in pending and past transactions. While many of these issues may be outside the scope of what our small and medium-size business clients experience, some of the insights are helpful across the board:                  

1. Organize.

Every panelist said the words “the situation is fluid” multiple times. During the upcoming weeks, it is going to be next to impossible to make informed decisions.  While everyone wants more immediate certainty about what to do, the data is not yet available. Use this time wisely to get organized.  Have your key financial and business documents where you can locate them. Review past numbers and understand your cash flow. Understand what business debt may have personal guaranties. Gather up all of the paperwork, scan it, and have it ready to go once the timelines become clearer. 

2. Cash is King.

I have said this repeatedly over the years, and it never changes. Always has been, always will be. We are reading that most larger businesses have fully drawn down on all lines of credit. Businesses are cutting cap ex projects. Conserving your cash is a fundamental to-do for everyone, individuals and businesses. Cut out all non-essential expenditures.  

3. Insurance.

Locate and read all your insurance policies. You may be surprised that some have specific “virus” or “pandemic” exclusions, but the exact wording of your policies is the critical deciding factor. Contact your broker and discuss whether to put insurance carriers on notice now, even if you may question coverage. Pollution or environmental policies might provide some coverage, depending on the wording and your specific facts.  Business Interruption policies must be analyzed and often require some physical damage. All-Risk policies cover everything expect what is excluded. These issues will take time and shouldn’t be counted on for short-term recoveries.

4. Document Costs.

Many businesses may have extraordinary costs tied to the impacts of the COVID-19 closures. Setting up employees to work remotely; equipment or IT needed to continue or pivot operations; overtime pay to some of your critical employees; etc. Set up a new line item in your G/L to track these costs and gather your paperwork in a central location. You may or may not need them (certainly will for possible insurance claims) but starting to track them now will be much easier than later making an attempt to recreate them.

5. Review Supply Chain.

Think about your critical vendors and customers. What back-up vendors do you have in case one of your key vendors does not return or has its own disruptions and shortages?  Which customers of yours constitute a significant part of your revenue which if lost, would seriously affect your business? In short, understand your supply chain and be working to have back up plans, vendors, and customers in place now. Plan A, B and C can be brainstormed now. 

6. Keep up with Current Events.  

There are numerous outlets providing excellent daily information for businesses, including Commerce Lexington, the Kentucky Chamber, the Kentucky SBDC, Team Kentucky, and the SBA. Assistance options change daily.   Understand what might be available to your business and when.

7. Ponder Your Own Life Goals and Priorities.   

This time presents a massive shift for humanity, and we don’t know if the US will bounce back to “business as usual” or if we will see some major permanent changes. There is down-time now to think about where you are in your life and what you want next. Many business owners who are of a certain age should think about whether closing down permanently might be the thing to do, especially if you have cash to complete a clean closure and wind-down, and there is no one waiting in line to buy you out of your company. Be creative in your thinking.

How We Can Help

We at DelCotto Law Group are here to assist both businesses and individuals. Looking ahead you may be full of fear and concern, but we want to focus on what may be within each of our control right now. To begin to think through the best and wisest steps to take during a time of uncertainty that is out of our individual control. We believe in American ingenuity, and that working together, we will emerge from this tough time as our forebears have in past tough times. #TeamKentucky. Together, we can do this. 

For related information:

Coronavirus Emergency Loans – Small Business Guide and Checklist

About DelCotto Law Group

DelCotto Law Group is Kentucky’s asset protection law firm known for its commitment to the lifetime success of its clients. With offices located in Lexington, Louisville and Danville, DLG serves Kentuckians with complicated financial matters, especially in the areas of bankruptcy and complex litigation. For more information please call (859) 231-5800, email info@dlgfirm.com or reach us on our contact page.

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