To slow the spread of COVID-19, restaurants and bars across America are taking drastic measures. Many establishments have shifted their business models to offer only carryout and “contactless delivery,” while others have temporarily closed their doors with hopes of reopening once the pandemic passes.
Clearly, the coronavirus crisis is placing immense financial pressure on small food and beverage businesses, with business owners seeing drastic drops in sales and working to find even more ways to keep their operations afloat. Unfortunately, there is no single solution to overcoming the economic hardships created by this pandemic.
However, food and beverage business owners can take a few steps to lessen the negative impacts.
1. Request federal support.
The U.S. Small Business Administration (SBA) is offering guidance and loan resources for companies affected by the coronavirus pandemic. You can apply for an Economic Injury Disaster Loan (EIDL). The size and terms of these loans vary depending on your location. The dollar figure could be as large as $2 million, the duration could span for as long as 30 years, and the interest rate is 3.75% for small businesses and 2.75% for nonprofits.
The funds can be used toward fixed debts, payroll, accounts payable, and more. But be aware: Amid the pandemic, the SBA website is naturally getting tons of traffic and loading slowly. It took me around five hours to complete my application, so be sure to allot plenty of time.
You can also apply to the CARES Act programs, which offer several initiatives for small businesses, such as the Paycheck Protection Program (PPP), Emergency Economic Injury Grants (EEIG), and SBA Debt Relief. Learn more about the CARES Act here. Due to limited appropriations funding, the application portal for the EIDL–COVID-19 assistance program (EIDL loans and EIDL Advances) is temporarily closed, as of April 16, 2020. We will post updates once funding is available again.
2. Consult local resources.
Contact your city’s chamber of commerce and your district’s Small Business Development Center. They might offer area-specific assistance programs, and they could address your questions about insurance, unemployment, and other virus-related concerns.
Many states have also created virtual classrooms where small businesses can gain information about local and federal resources. For example, in Indiana (my home state), startup accelerator Gener8tor is partnering with our Economic Development Corporation to host a virtual assistance program. SCORE also provides access to free business mentoring via a nationwide network of mentors, and its coronavirus resource hub also has information on business grants and financial resources.
3. Explore loan deferral and bridge loans.
The federal government is recommending that financial institutions offer assistance in the form of loan deferrals, so ask your bank about its deferral programs. Many banks will allow customers to delay paying mortgage notes and will waive penalties and fees.
Bridge loans are also a quick funding option. Microloan and bridge loan programs are dedicated to businesses that are still open but have little cash flow due to reduced sales and revenue. They’re typically set up for quick reviews and approval, and loan terms can extend up to five years. In Indiana, for example, nonprofit lender Bankable is offering a bridge loan program to small businesses with a three-year repayment term, 8% fixed rate, and no closing fees.
4. Consider your credit.
Contact your credit card company to see what it’s doing to help cardholders during this time. Citi, for example, waived fees for small businesses throughout the entire month of March. Also, ask your credit card company about cash advances available to you. The thought of doing this might make you cringe, but cash advances typically come with very low-interest rates for six to 12 months — and cash can help carry you through this crisis.
5. Seek insurance coverage.
The federal government and multiple states are currently exploring whether insurance carriers need to cover the business-interruption losses incurred due to COVID-19. As the debate rages on, it’s important for restaurant, brewery, and bar owners to contact their insurance agents and ask about any existing coverage their policies might provide and discuss coverage options.
Reduced payroll and sales will result in reduced costs for general liability insurance and workers’ compensation insurance. Talk to your agent about the reduced exposure, a policy adjustment, and the potential for reduced premiums. Unfortunately, most business owners will likely be denied coverage — but this is a fluid situation, so be sure to keep tabs on it.
6. Evaluate your staff.
In mid-March, it was estimated that 4 million restaurant workers could lose their jobs because of the coronavirus pandemic. Since then, we’ve seen a record-breaking number of unemployment claims filed. Many businesses have had to make the gut-wrenching decision to evaluate their teams and ultimately lay off nonessential workers. This is the sad and harsh reality of our times.
However, before you do so, keep in mind that, under the CARES Act, the PPP provides small businesses, including sole proprietors and independent contractors, with up to $10 million. The funds can be used to cover payroll costs, interest payments, mortgages, rent, and utilities. The maximum amount a small business can receive is the average monthly payroll for 2019 multiplied by 2.5.
Additionally, payments are deferred for six months on this loan, the fixed rate is 0.5%, and the loan term is two years. Most importantly, the SBA will forgive up to eight weeks of payroll and other costs if the organization retains its employees and maintains salary levels. There are no loan fees for borrowers. You can apply for the PPP through your local bank. It’s a good option for funds that will be disbursed much quicker than EIDL loans.
If you do have to lay off employees, do it the right way: Have these conversations face to face to show your employees you care. Point them in the right direction for unemployment benefits, and tell them they’re welcome back once things return to normal.
7. Keep customers engaged.
Your customers are stuck at home practicing social distancing. As a result, their social media use is skyrocketing. This is a perfect time to connect with your audience, build buzz, and drive sales on platforms such as Facebook, Twitter, and Instagram.
Don’t just let your customers and community know you’re still open — get creative. Take photos of your menu items, post videos of your team members, and run online specials. Also, if you were planning to release a new dish or drink later this year, do it now. Pull out all the stops.
8. Adapt your business.
Another way to keep customers engaged is to adapt your service. For example, many breweries and distilleries have temporarily pivoted away from creating beer and spirits so they can mass-produce hand sanitizer to combat the national shortage. During these uncertain times, you won’t make any friends by only looking out for yourself.
No industry is immune to the insidious effects of COVID-19. We’re all taking it day by day as we look for ways to generate revenue. Food and beverage business owners must remain flexible, vigilant, and creative during these trying times. Stay connected with your consumers, keep tabs on ongoing legislation, and do everything in your power to prevent your reserves from draining.