Businesses facing the coronavirus shutdown have rediscovered the adage “cash is king” as they struggle to survive the crisis that has no end in sight. Whether companies have temporarily closed their doors or remain open, the problem is the same: The lack of paying customers has wiped out reserves.
To get cash, businesses can apply for the $349 billion relief package that is part of the recently enacted $2.2 trillion CARES Act. But signing up for the program has been a mixed bag.
Dr. Olga Bachilo, a plastic surgeon in Houston, Texas, had a frustrating experience as she attempted to apply for the aid shortly after the bill became law.
“During the day, the website kept crashing. They also keep changing the process. The first time I logged in, they had me download a file, fill it out, and send it to them. Then, they changed it to an electric submission. They seem to keep changing it daily,” she said.
At the time of reporting, she had yet to successfully apply for the relief. Without the aid, she has 10 weeks of savings to cover her payroll, that includes six employees. If she cannot get a rescue, she could continue operations with two workers, meaning that four would lose their jobs. However, she fears that her medical practice might not survive the shutdown, in which case every job would be cut.
“I do have fears like that. I am hopeful that there’s going to be some kind of financial assistance,” she said.
One in four small businesses say they are less than eight weeks away from closing permanently, and another 24% of small businesses have already closed temporarily amid the coronavirus pandemic economic shutdown, according to polling released Friday by the U.S. Chamber of Commerce.
A total of 54% of all small businesses report that they have closed or expect to close temporarily in the next 14 days.
Bachilo also worries if she can ramp up after the crisis has passed. She said that Washington needs to provide additional funding to assist companies returning back to business, as she expects it will take a while after the crisis has passed for clients to return to her offices.
“I’m afraid that patients will still have a fear of going out unnecessarily even if the quarantine has been lifted,” she said. “Patients are still going to be more hesitant going places. And, of course, the financial crisis that’s going to hit everybody; so many people unemployed. Even people who have savings are going to feel less ‘rich,’ so they’re not going to be pursuing services that my clinic has to offer, which are more of an elective procedure.”
Bachilo’s office is closed because it was not deemed an essential business. But essential businesses that are open are also feeling the cash crunch.
Manufacturing plants that are deemed essential are in need of cash, according to Chris Netram, vice president of tax and domestic economic policy at the National Association of Manufacturers.
“There’s a cash flow problem,” he told the Washington Examiner. “Even if you’re essential and you’re producing things for the manufacturing supply chain, there’s no guarantee that everything you produced before [the crisis] is in high demand [now].”
Manufacturers must still cover the costs for products created before the crisis began, even if the demand for them has dried up. Cash is needed to cover these expenses since customers are no longer expected to buy them.
Danny Reynolds is also struggling with unsold products due to a drop in demand because of the coronavirus.
He owns Stephenson’s of Elkhart, a bridal/prom dress shop in Elkhart, Indiana, and shut down his business to help slow the spread of the coronavirus just as he was entering his busiest season.
“It was really not a good time for us from a business standpoint because we were right in the heart of our busiest season,” he told the Washington Examiner.
Reynolds is fortunate in that he owns the property where he sells garments, but he still worries about cash flow since he can’t move his inventory.
“Any business can only last so long, but with us, I guess we’re in a kind of fortunate situation in that … we own our property … Our largest overhead is our inventory and then staffing after that. … The most expensive component is obviously our inventory,” he said.
Reynolds recently beefed up his inventory of wedding and prom dresses to prepare for the spring when there is usually a surge in demand for such items. He now has a store full of inventory and no customers to buy them.
“Essentially, we have a store full of beautiful spring gowns that no one is getting to see,” he said.
Reynolds successfully signed up for relief provided by the coronavirus bill, but the money has yet to hit his account.
He also wonders if more customers might be attracted to his store after the virus crisis has passed since his store is rarely crowded.
“I’m wondering if a store like ours might even end up in a more favorable light, as some of these mass merchants have large areas that are known for having crowds of people,” he said. “Maybe people will come to respect or appreciate a small family-owned, locally operated store that is less crowded than other stores.”
