Small Business Owner’s Guide to the CARES Act

From the U.S. Senate Committee on Small Business & Entrepreneurship

The programs and initiatives in the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was passed by Congress are intended to assist business owners with whatever needs they have right now. When implemented, there will be many new resources available for small businesses, as well as certain non- profits and other employers. This guide provides information about the major programs and initiatives that will soon be available from the Small Business Administration (SBA) to address these needs, as well as some additional tax provisions that are outside the scope of SBA.

To keep up to date on when these programs become available, please stay in contact with your local Small Business Administration (SBA) District Office, which you can locate here.

For more information and to download the Guide, click here.

Table of Contents

  • Paycheck Protection Program Loans
  • Small Business Debt Relief Program
  • Economic Injury Disaster Loans and Emergency Economic Injury Grants
  • Small Business Counseling
  • Small Business Contracting
  • Small Business Tax Provisions

Struggling to get started? The following questions might help point you in the right direction. Do you need:

  • Capital to cover the cost of retaining employees? Then the Paycheck Protection Program might be right for you.
  • A quick infusion of a smaller amount of cash to cover you right now? You might want to look into an Emergency Economic Injury Grant.
  • To ease your fears about keeping up with payments on your current or potential SBA loan? The Small Business Debt Relief Program could help.
  • Just some quality, free counseling to help you navigate this uncertain economic time? The resource partners might be your best bet.

Essential Businesses & Operations Frequently Asked Questions

Illinois Department of Commerce & Economic Opportunity

Executive Order 20-10 requires all non-essential businesses and operations to cease all activities except for minimum basic operations. Non-essential businesses may also continue operations consisting exclusively of employees or contractors working from home.

What businesses and operations are considered essential?

  • For information and updates to essential businesses click here

My business falls within one of the categories. Can I require my employees come to work?

  • The intent of the EO is to ensure that the maximum number of people self-isolate in their places of Even essential businesses and operations should promote telecommuting whenever possible.
  • Consider alternating work schedules to minimize the number of employees in the office at the same time.
  • To the greatest extent feasible, essential businesses and operations shall comply with social distancing requirements, including maintaining six-foot foot social distancing for both employees and members of the public at all times. They must also take the following practice measures wherever possible:
    • Designating with signage, tape, or by other means six-foot spacing for employees and customers in line to maintain appropriate distance;
    • Having hand sanitizer and sanitizing products readily available for employees and customers;
    • Implementing separate operating hours for elderly and vulnerable customers;
    • Posting online whether a facility is open and how best to reach the facility and continue services by phone or remotely.

I’m not sure if my business falls within one of those categories

Please read the Executive Order as it provides much more information of what businesses and operations are essential. If after this review you still are not sure, you can reach out to DCEO at [contact info] and please be prepared to answer the following questions:

  • What general industry are you in?
  • What products do you make/what services do you perform?
    • Where/when do those products/services go into the stream of commerce?
    • Which specific medical or other essential business do you supply products to?
    • Is there a pending order or a routine schedule for shipments?
  • Can any of your business functions be performed remotely?
  • How many employees do you have?
    • Can your employees work remotely?
    • If some or all of the employees must be at the place of business, can operations be modified so that employees work in shifts (one week at home; one week at the place of business)?
  • What is the physical layout of the facility where people work?
    • How will you be able to ensure proper distancing?
    • Do you have hand sanitizer available?
    • Are restrooms cleaned frequently and stocked with soap?
    • Where do employees eat? Is that cleaned frequently and is there room to social distance?
  • Explain why you believe your business falls within one of the essential business categories.

My business is not considered an “Essential Business,” does this order require the business to shut down my facility?

  • You and your employees are allowed to perform “Minimum Basic Operations” at your work place, so long as employees maintain a distance of six feet from one another to the greatest extent feasible. Minimum Basic Operations include maintaining the value of inventory, payroll, ensuring security, and ensuring that employees can work remotely. Other than to maintain “Minimum Basic Operations,” employees can only work remotely from their residences.

My technology company provides products and services that the public needs to access critical services. Is my company being completely shut down?

  • No, However, most employees of such companies will need to work from home. Anyone who must work onsite to maintain “Essential Infrastructure” for the community or to maintain “Minimum Basic Operations” as described in the Order may continue to work in the workplace so long as they are maintaining social distancing.

Are companies that sell only CDB products and/or nutritional supplements, but not medicine or other medications not requiring a prescription, considered essential businesses?

  • No. Companies that only sell these products do not fall within Section 12(a) of the Executive Order and must temporarily cease operations apart from “Minimum Basic Operations.”

Can people who reside in Illinois but perform manufacturing or supply chain work outside the state (where there is no such order in place) be able to travel to their jobs?

  • Yes. This order covers businesses in Illinois and their operations; it does not cover businesses that are located outside of Illinois.

My business is non-essential. Can I have one person come in on a daily basis to pack up online orders and take them to the post office?

  • Yes. Maintaining inventory is considered a minimum basic operation  that  non-essential businesses can continue to perform. However, non-essential businesses are not permitted to have in-store pickup. The inventory must be taken to the post office.

My business is non-essential. Can I have an employee come to the building each day to pick up the mail?

  • Yes. Retrieving mail is considered a minimum basic operation that non-essential businesses can continue to

Can a personal trainer have exercise training sessions with 5 or fewer people?

  • No. Professional services such as a personal trainer is not considered essential business under the restrictions contained in the executive order.

Would manufacturers that produce products for the transportation and construction sectors qualify under Sec. 12(t) of Essential Businesses? (e.g. supply products or parts for street/highway signs and construction sites)

  • This depends on how directly and closely linked the manufactured products are to critical infrastructure, public health, and/or essential You will need to answer additional questions such as: what products are you producing? Do you currently have orders to supply an essential business such as a restaurant, grocery store, or health care facility? Do you currently have orders to supply firms or governments that are building or maintaining critical infrastructure such as roads, railroads, airports, or electrical power plants?  If after conducting  an analysis guided by the questions above you are still not sure, you can reach out to DCEO at 1-800-252- 2923 or

Can golf courses stay open?

  • No; recreational sports businesses including golf courses are not considered essential businesses under the executive order.

Are car dealerships considered essential businesses? 

  • Car dealerships can remain open for repair services. They can also remain open for car sales on an appointment-only basis. Showrooms must remain closed. 

Can residential and commercial lawn service remain open?

  • Many landscape projects will fit under an exemption such as construction, agriculture, or public works. Outdoor landscape projects generally will provide for good social distancing that poses little risk of transmission, but it still is important to ensure the ability to wash or sanitize hands and take other precautions.

Is residential remodeling an essential business?

  • Generally yes, residential remodeling falls within Section 9 of the Executive Order. However, residential remodeling companies must ensure social distancing compliance during their work.

Are car washes considered an essential business?

  • Exterior automated car washes, both free-standing and those connected with a gas station, are Full-service car washes are not permissible. Interior cleaning is prohibited. Self- service vacuums are also prohibited.

Are moving companies considered essential?

  • They fall under Section 12(i) as shipping, delivery and pick-up services.

Are sprinkler contractors considered “essential business”?

  • Yes. Sprinkler contractors fall within Section 9 of the Executive Order as essential infrastructure (construction and building maintenance).

Are fire alarm system contractors and fire protection/suppression system contractors considered “essential businesses”?

  • Yes. Fire alarm and fire protection/suppression systems are deemed critical trades under Section 12(h) of the Executive Order as they ensure the safety of residences, Essential Activities and Essential Businesses and Operations

Are building security systems contractors considered “essential businesses”?

  • Yes. Building security systems contractors are deemed critical trades under Section 12(h) of the Executive Order as they ensure the safety of residences, Essential Activities and Essential Businesses and Operations.

Are businesses licensed under the Private Detective, Private Alarm, Private Security, Fingerprint Vendor, and Locksmith Act deemed essential?

  • Yes. Section 12(h) provides that “security staff” is a critical trade and an essential business and operation that may continue in operation and is not subject to the stay-at-home directive. The Department deems private detectives, private detective PERCs, private alarm contractors, private alarm contractor PERCs, private security contractors, private security contractor PERCs, fingerprint vendors, canine handlers, locksmiths, locksmith PERCs, and security officers of a registered armed proprietary security force holding active licenses under the Private Detective, Private Alarm, Private Security, Fingerprint Vendor and Locksmith Act to be “security staff” as referenced in Section 12h of the Executive Order and not subject to the stay-at-home directive.

Are greenhouses/garden centers that sell vegetable plants in addition to flowers considered essential?

  • Generally, no. Garden and flower stores are not essential. However, stores that sell supplies that assist with either (a) agriculture; or (b) products for landscaping continue to sell those products to the public , provided adequate social distancing is complied with.


Energy Sector FAQs

Will public utilities and other service providers be subject to movement and business operations restrictions?

  • The energy sector maintains multiple types of facilities that must remain operational for the remainder of the duration of the Gubernatorial Disaster Proclamation.
  • Individuals may leave their residence to provide any services or perform any work necessary to offer, provision, operate, maintain and repair “Essential Infrastructure,” including the operations and maintenance of electrical generation, provided that they carry out those services or that work in compliance with Social Distancing Requirements.
  • The definition of Essential Businesses and Operations in Governor Pritzker’s Executive Order is meant to encompass the workers identified in the Memorandum issued by the S. Department of Homeland Security, Cybersecurity & Infrastructure Security Agency, on March 19, 2020, which can be found here: workforce
  • Utilities should prioritize essential services and use best judgement when deciding to proceed with infrastructure upgrades and movement and business operations. 

How should essential employees identify themselves? Will they be able to present their company badges to law enforcement and allowed to proceed home or to work? How will this be communicated to local law enforcement?

  • Law enforcement officials should not stop residents who are on their way to or from work.
  • To preserve public health and safety throughout the state and ensure that our healthcare delivery system is capable of serving those who are sick, we recommend that utilities identify absolutely essential staff – those who ensure basic power plant operations and cannot do their work remotely.
  • Individua ls that are not subject to movement and business operations restrictions should wear appropriate badging (where available) and carry company identification (if available).
  • Individua ls may also display other documentation or orders that clearly indicate their role or purpose matches the exceptions to any movement and business operations restrictions.

Is the state prioritizing power plants with supply chain needs, for items such as cleaning supplies and surgical masks?

  • The state’s reserve of personal protective equipment (PPE) is currently prioritized for health care workers and first responders.

What is the protocol for commercial transportation if mechanical equipment is needed for power plant operations?

  • “Essential Travel” includes any travel related to the provision of or access to Essential Activities,.
  • Individuals engaged in any Essential Travel must comply with all Social Distancing Requirements as defined in the Executive Order.
  • Transportation of mechanical equipment necessary for plant operations will still be allowed.

Will rain carriers be subject to the movement and business restrictions?

  • Individuals employed by, contracted with, or operating on behalf of railroads are not subject to the movement and business operations restrictions when providing products and services necessary to maintain safe and efficient train operations in the furtherance of community relief and sustained supply chains.

Will the vendors or contractors relied upon by public utilities and other utility service providers be subject to movement and business operations restrictions?

  • Individuals employed by or working on behalf of establishments that provide parts, repair and service, fuel, security, or other products or services necessary for the operation of “Essential Infrastructure” or electrical generation are not subject to these restrictions.
  • This includes, but is not limited to, individua ls employed by entities that sell any of the following to essential businesses or infrastructure: IT and telecommunication equipment; electrical, plumbing and heating material; automotive fuel; domestic fuel.

What other guidance do you have for utility companies and their workers?

  • If you must do work at a customer’s home, practice social distancing.
  • If you are sick and have respiratory symptoms, such as fever, cough, and shortness of breath, stay home unless you need medical Remain in your home until you feel better and have no symptoms.
  • Keep in mind there is no treatment for COVID-19 and people who are mildly ill can isolate at While at home, as much as possible, stay in a specific room and away from other people.
  • Those who need medical attention should contact their health care provider who will evaluate whether they can be cared for at home or need to be hospitalized.
  • Additional guidance can be found on IDPH’s site: services/diseases-and-conditions/diseases-a-z-list/coronavirus

For questions regarding essential businesses call (800) 252-2923 or email

DuPage Business Resources Related to COVID-19

Haga clic aquí para ver en Español.

Choose DuPage is committed to assisting and connecting businesses in DuPage County with the resources they need during this time. Below is a list of business and industry resources related to COVID-19.

For more information, questions, or if your business is in need of assistance and you are not sure where to turn, please contact Greg Bedalov at or Lisa Miceli at

You can also join us on social media, where we are sharing information about what businesses and residents in DuPage County are doing to help, and demonstrate the #DuPageDifference.

Choose DuPage 

Choose DuPage Board Members have volunteered their expertise to assisting businesses in DuPage County in the coming weeks. If you would like to be connected to an expert in banking, education, insurance, legal, or marketing, please contact Lisa Miceli,

View our message to the community from Choose DuPage President & CEO, Greg Bedalov.

DuPage County Health Department

The DuPage County Health Department has put together information for businesses on COVID-19, including guidance, food facility guidelines, water sampling, CDC guidance, education, outreach and more. Click here for details.

  • If there is a confirmed or suspected COVID-19 case identified at your agency or business, please contact the DuPage County Health Department Communicable Disease and Epidemiology program at (630) 221-7553 (8:00AM – 4:30PM) or (630) 682-7400 after hours for consultation and next steps.
  • If potential exposure to confirmed case of COVID-19: Click here
  • If diagnosed with COVID-19: Click here
  • For any questions or concerns about COVID-19 call (630) 221-7030

Businesses that can provide respirators, ventilators, and personal protective equipment or other medical devices should contact DuPage County at or click here for more information.

State of Illinois

  • State of Illinois COVID-19 Information and Resources: Click here
  • Illinois COVID-19 Hotline (800) 889-3931
  • List of essential businesses: Click here
  • Illinois Department of Revenue Taxpayer Resources (Employers): Click here
  • Illinois Department of Employment Security (IDES) Information for Employers: Click here
  • Illinois Emergency Child Care for Essential Workers Information: Click here
  • State Treasurer’s announcement to make low-interest bridge loans available for businesses as soon as this week (3/23/20), click here. For future updates, click here.
  • Hospitality Emergency Grant Program: Click here
  • Illinois Small Business Emergency Loan Fund: DCEO and the Illinois Department of Financial and Professional Regulation (IDFPR) are establishing the Illinois Small Business Emergency Loan Fund to offer small businesses located outside the City of Chicago with fewer than 50 workers and less than $3 million in revenue in 2019, low-interest loans of up to $50,000. Click here for details.

U.S. Small Business Administration (SBA)

For small business guidance and loan resources, click here.

Illinois Economic Injury Disaster Loan

The U.S. Small Business Administration is offering Illinois businesses low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19). For more information, visit their website or review the resources below.

  • Start you disaster loan application now: Click here
  • Disaster loan assistance: Click here or click here
  • Stay up-to-date: Click here
  • For frequently asked questions: Click here
  • Register for webinars on the Economic Injury Disaster Loans by clicking here. The trainings will cover program eligibility, use of proceeds, terms, filing requirements, and additional small business resources. 

Paycheck Protection Program

  • Eligible recipients may qualify for a loan up to $10 million determined by eight weeks of prior average payroll plus an additional 25% of that amount.
  • Loan payments will be deferred for six months.
  • SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
  • Business owners can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. 
  • Lenders may begin processing loan applications as soon as April 3. The program will be available through June 30.
  • Click here for information sheet for borrowers. 
  • Click here for more information. 

7(a) Borrower Relief

SBA will pay the principal and interest of current 7(a) loans for a period of six months, beginning with the first payment due on or after March 27, 2020. The SBA will also pay the principal and interest of new 7(a) loans issued prior to Sept. 27, 2020. Your lenders will be receiving more guidance on this program soon.

SBA Express Bridge Loans

Small businesses that currently have a business relationship with an SBA Express Lender can access up to $25,000 to bridge the gap while applying for a direct SBA Economic Injury Disaster loan. Contact your existing lender to see if they can participate in this program.

Contact Information for the U.S. Small Business Administration

Local staff is on-hand and ready to assist. 

Coronavirus Aid, Relief, and Economic Security (CARES) Act

The programs and initiatives in the CARES Act that was passed by Congress are intended to assist business owners with whatever needs they have right now. When implemented, there will be many new resources available for small businesses, as well as certain non- profits and other employers. This guide provides information about the major programs and initiatives that will soon be available from the Small Business Administration (SBA) to address these needs, as well as some additional tax provisions that are outside the scope of SBA.

To keep up to date on when these programs become available, please stay in contact with your local Small Business Administration (SBA) District Office, which you can locate here.

Struggling to get started? The following questions might help point you in the right direction. Do you need….

  • Capital to cover the cost of retaining employees? Then the Paycheck Protection Program might be right for you (see page 2 in the guide).
  • A quick infusion of a smaller amount of cash to cover you right now? You might want to look into the Emergency Economic Injury Grant (see page 7 in the guide).
  • To ease your fears about keeping up with payments on your current or potential SBA loan? The Small Business Debt Relief Program could help (see page 6 in the guide).
  • Just some quality, free counseling to help you navigate this uncertain economic time? The resource partners might be your best bet, click here.

Download the Small Business Owner’s Guide to the CARES Act.

Internal Revenue Service (IRS)

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus. This page will be updated as new information is available, click here to view.

Tax Deadline Changed
The deadlines to file and pay federal income taxes are extended to July 15, 2020.

workNet DuPage Career Center

The workNet DuPage Career Center has funds available to cover the cost of retraining your staff so that their jobs can be repurposed and layoffs can be averted. For information on these grants, please contact Ron Schlager (630) 955-2037,

If you have to layoff staff, there are resources available free of charge for those individuals (including up to $10,000/person of funding assistance for necessary job training.) Affected workers should visit to access services.


Pace is offering free rides on all Pace fixed route bus and On Demand services to all medical personnel–including doctors, nurses, EMTs, and paramedics–for the duration of the State’s “stay at home” order. To ride free, medical personnel must present a work ID showing that they are employed at a hospital, doctor’s office, medical facility or local fire department. 

For the latest information on Pace’s response to the COVID-19 pandemic: Click here


Industry Resources





  • Hospitality Emergency Grant Program: To help hospitality businesses make ends meet in the midst of the COVID-19 pandemic, the Illinois Department of Commerce & Economic Opportunity is launching the Hospitality Emergency Grant Program with $14 million drawn from funds originally budgeted for job training, tourism promotion, and other purposes. Grant funds are available to support working capital like payroll and rent, as well as job training, retraining, and technology to support shifts in operations, like increased pick-up and delivery. Bars and restaurants that generated between $500K and $1M in revenue in 2019 are eligible for up to $25,000, and bars and restaurants that generated less than $500K in revenue in 2019 are eligible for up to $10,000. Hotels that generated less than $8M in revenue in 2019 are eligible for up to $50,000.
  • DuPage County Health Department Food Facility Guidelines: Click Here

Additional Small Business Resources

Other Important Resources

This page is will be updated throughout the next few weeks. Check back for more information about DuPage business resources related to COVID-19.

COVID-19: 5 Steps Every Impacted Business Should Take to Maximize Insurance Coverage

Written By: Charles L. Philbrick & David P. Hollander, Rathje Woodward LLC

In the wake of COVID-19, businesses everywhere are reckoning with how to keep dollars coming in the door. While many will find that coronavirus itself will not trigger insurance coverage, every impacted business should be taking a hard look at their existing policies. Business should consider the following five steps to better their position with regard to their existing insurance policies. For those who are unfamiliar with insurance coverage issues, a glossary of key terms can be found by clicking here. For those looking to dig deeper, read on for a more substantive discussion of the key provisions and issues that may arise, as businesses attempt to secure coverage for losses caused by COVID-19.


  1. Review all existing insurance policies, front to back. One-page endorsements tucked in the back may dramatically change what sort of claims are and are not covered by the policy.
  2. Do not rely too heavily on the advice of your broker or agent. Your broker or agent may attempt to negotiate claims between you and your carrier. Communicate with your broker or agent, ask for their advice, but know that they may have conflicting incentives.
  3. If in doubt, give notice to your carrier about the loss. Failure to give notice can result in waiver of coverage that you otherwise might have.
  4. Meticulously document both the cause and amount of any losses. For example, if a key supplier says they need to back out of an agreement due to coronavirus, ask follow-up questions and take detailed notes.
  5. Consult an attorney who has experience negotiating with and litigating against carriers.


Some businesses may find relief in their existing business interruption insurance (or business income coverage). This coverage arises most commonly with a fire or natural disaster that destroys a building. Ideally, the business would turn to first-party property insurance for construction costs, while seeking business interruption coverage for the business income that was lost while the building was unusable. As stated by one Wisconsin court, “business interruption insurance covers profits lost and continuing normal operating expenses incurred while the business is not fully operational.”

If your business has a general property or commercial policy, it likely has some form of business interruption coverage. But just because the coverage is part of the policy, it does not follow that you will be entitled to reimbursement any time you suffer a loss of business income. There must be a covered loss to trigger the business interruption coverage. An insurance policy is a contract and the existence of insurance coverage turns, first and foremost, on the policy language and the nature of the insured’s losses.


The most common trigger for business interruption coverage is physical damage to the insured’s property. Property damage often involves damage that structurally alters the property (like a fire or floods) so courts may be skeptical of claims that coronavirus constitutes property damage. Nonetheless, some courts have held that, even in the absence of visible damage, physical damage can be established by showing that the insured property was rendered unusable or uninhabitable. For example, a federal court in Oregon has stated that “physical damage can occur at the molecular level and can be undetectable in a cursory inspection.” Once again, whether coronavirus constitutes physical property damage will hinge on the policy language used, and the ways in which the virus impacts the insured’s business.

Moreover, even if coronavirus does not itself cause physical loss, it could lead to property damage. For example, with millions of employees shifting to remote work, there may be no one around the insured’s property to notice a plumbing leak before it causes significant water damage. Similarly, with no employees present, the insured’s property may become a target for a burglary. If the insured loses key equipment or hardware, it may cause an interruption in business.


A somewhat common trigger to business interruption coverage involves closure by order of a “civil authority” such as a city or state agency. Civil authority coverage may still require property damage—for example damage to a nearby building, which leads a government authority to bar access to the entire block. However, the policy language varies, and the opportunity to secure coverage via civil authority orders will continue to grow, as agencies become more proactive in attempting to control coronavirus.


A policy might provide for exclusions, such as a Virus or Bacterial Exclusion, which squarely preclude coverage caused by coronavirus. Conversely, a policy can explicitly include such coverage through an endorsement. Insureds may have virus or bacterial coverage without realizing it. For example, a business that is highly sensitive to cyber risks may have obtained virus and bacterial coverage as part of a package of endorsements that the insured purchased primarily with the intention of securing cyber coverages.


There are other permeations of business interruption insurance that, while less common, provide significant benefits. For example, “contingent business interruption” insurance may provide coverage if a key supplier of the insured suffers property damage, resulting in losses to the insured. A “leader property” endorsement may provide coverage for physical loss or damage to nearby property, where the insured’s business relies upon the neighboring property. As an example, this could come into play for restaurants adjacent to schools or sports stadiums that have been shut down. Finally, an insured may have service interruption coverage for loss to electrical, steam, gas, water, sewer, telephone, or other utilities, should those situations arise.


Assuming coverage exists, there will be several additional factors to consider and negotiate with the carrier. Coverage may be limited by time period (i.e. two weeks after a civil authority imposes an order) or dollar value (i.e. only the first $50,000 of lost business income). The insured will also be expected to prove its losses and should therefore meticulously document both the cause and extent of any losses. The insured should also be mitigating damages. The insured will be expected to take reasonable steps to minimize its business interruption (by, for example, emphasizing online sales, if possible).


Policy language varies greatly and COVID-19 is largely unprecedented. No business should assume that they are without coverage. Follow the Five-Step Insurance Coverage Checklist and contact one of the authors if you need assistance in evaluating your policies.

Rathje Woodward LLC

Rathje Woodward routinely advises insured companies on how to maximize their insurance coverage. Rathje Woodward negotiates claims with carriers and, where necessary, litigates coverage disputes through to trial and appeal. Rathje Woodward’s attorneys also have extensive experience in commercial litigation, employment, business and government law, among many other areas.

Focus on cash flow and liquidity for COVID-19 resilience

Article provided by: Grant Thornton | View original article

With recession looming, 4 ways to act now

The COVID-19 pandemic is roiling financial markets, threatening businesses and challenging management teams. In these uncertain times and with a possible recession looming, the cash and liquidity needs of a business are paramount. Focus on these four areas now to position your business for what’s coming next.

1. Cash is king

Understand your cash and working capital needs. Cash is the lifeblood of any business. In a volatile and slowing economy, getting an immediate handle on your daily cash needs is essential. Take a critical view of operations, review existing cash flow forecasting processes and understand how potential disruptions to operations may affect liquidity.

  • Run scenario analyses on your financial and cash forecast and understand how that interacts with short-term liquidity needs. This exercise may also highlight any borrowing base or covenant beaches that you could be facing and can help shape any short-term management decisions.
  • Look for opportunities to build a war chest of cash and investigate whether drawing down on credit facilities could be prudent for safeguarding your business.
  • Strategically manage working capital, potentially selling inventory or minimizing new inventory purchases to generate cash. Take a critical look at working capital KPIs such as days payable outstanding and days sales outstanding and understand impact of stretching these days in either direction. Assess capital expenditure requirements and defer non-essential spending if possible.

2. Cost optimization

Be relentless on cost control. Maintaining your current or historical levels of profitability in an environment where supply and demand fundamentals are decreasing simultaneously can be difficult without closely analyzing spending.

  • Develop a strategy: do not execute cost-cutting initiatives at the risk of compromising revenue generating capabilities or diminishing value.
  • Review fixed and variable costs carefully and determine what costs you actually need to run the business.
  • Develop and monitor cost reduction initiatives, such as rationalizing SG&A, taking a close look at headcount and instituting policies that encourage and reward cost savings and conservation.

3. Evaluate customers and suppliers

In times of economic uncertainty, businesses could see increased pressure on the purchasing power and credit-worthiness of customers while also facing tighter credit terms and product availability from suppliers.

  • Do not assume your customers are financially healthy. Re-evaluate credit terms with current customers, negotiate the shortest reasonable terms, and carefully review the credit-worthiness of each new customer before extending credit.
  • Continuously monitor accounts. Failing to collect receivables timely (or even on an accelerated basis) may result in a cash flow shortfall that could have an immediate impact on all areas of your business.
  • Negotiate for the most favorable credit terms with suppliers and critically evaluate your supplier base to determine if your current agreement is still the most favorable for your business.

4. Communicate early and often with your lenders

Your existing lenders will likely know you and your business best. Communicate with them early and often, explaining any situations that may arise and the actions you propose to address them. Transparency and open communication will serve you both well. Your existing lender could be your fastest source of additional liquidity.

  • Evaluate potential covenant breaches based on the outcome of various scenario analyses impacting your financial forecast.
  • Conduct detailed modeling of your working capital facilities, particularly with asset-based loans, which can change their availability formulas due to updated net orderly liquidation values via new appraisals.
  • Stay current on your debt if possible and assess capital structure concerns, including whether you should consider refinancing or recapitalization alternatives.
  • Engaging in key stakeholder and lender discussions early can provide you the time and liquidity to address your immediate potential financial challenges.

The COVID-19 pandemic presents novel challenges and a chaotic business environment. By focusing now on cash flow and liquidity, you can provide your business with the financial cushion and flexibility to weather the storm.

For more – economic analysis, business implications, and new thinking on how to respond, restore, and plan – please visit Grant Thornton’s COVID-19 resource center.

Ryan Maupin
Strategic Solutions
T +1 212 542 9988

Bill Fasel
Managing Director
Strategic Solutions
T +1 312 602 8834

Paul Melville
Strategic Solutions
T +1 312 602 8360