3 conversations to have with your banker during COVID-19
Navigating quick-changing legislation and other factors that will impact your business
There are few events in our lifetime that will have the wide-reaching financial and societal impact as what we are facing right now with COVID-19. In unprecedented and unsettled times like this, it’s helpful to find solace in the fact that we have weathered storms like this before and we will do the same this time. And we will do it together.
As financial professionals, we have a responsibility and strong desire to help businesses through these challenging times the best we can. One of the ways to do this is to communicate and then over-communicate again with each other, especially as we navigate quick-changing legislation and other factors that impact businesses of all sizes. Here are several questions and conversations that you should be having with your banker about your business, the impacts of COVID-19 and what the future holds.
First, start the conversation
Now is the time to be in touch and communicate with your banker if you haven’t already. You should be talking with them about how you are dealing with this uncertainty and what your contingency plans are. Ideally, your banker will have already reached out to you, is listening to your needs and is offering advice and business solutions.
Part of this conversation with your banker should center around what your business plan is during this time. What are your cash flow projections? How are you dealing with staff and benefits? What will you do if revenue starts to decline? These conversations will help you get prepared for the future and have a plan in place if/when the time comes to make business critical decisions.
Second, understand the CARES Act
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law by President Trump on March 27. Its goal is to provide relief for individuals and businesses negatively impacted by COVID-19. For businesses, this assistance comes in several different forms, including:
Enhancements to the SBA Program
The CARES Act offers expanded SBA benefits to enable more companies to qualify for larger loan amounts at more favorable terms. There are several programs available, including the Paycheck Protection Program, the Economic Injury Disaster Loans and Loan Advance program, the Express Bridge Loan program and the Standard 7(a) Loan Program. Your banker can help you understand and navigate which programs are right for your business, and you should also consult your tax and legal advisors when making those decisions.
There are multiple provisions in the CARES Act to provide tax relief to businesses, including refundable tax credits and deferred payment of employer payroll taxes. Your banker and tax advisor can help you understand the relief measures.
Modification of charitable contribution limits for 2020
The act increases the limitation on charitable contribution deductions. For corporations, the “10% of taxable income limitation” is increased to 25% of taxable income for the 2020 year.
Third, ask how your bank can help
Bankers are risk managers by design and should be prepared for all environments, including this one. Most larger banks have the capital and liquidity built up to meet the needs of businesses and individuals during this time. Some relief measures that are currently available include:
- Increased mobile deposit limits
- Individualized, flexible credit card repayment and payment deferral options, as well as a balance transfer opportunity
- Access to additional credit lines extended on a case-by-case basis
- Six-month term loan payment deferral option for current small business customers
- Counsel on the SBA Disaster Assistance Program and other state and local programs
- A 90-day moratorium on initiating foreclosure activity on all mortgages and home equity lines and loans
I have no doubt there will be much more coming down the pike in terms of new legislation and economic relief measures in the months to come. In the meantime, I encourage you to stay proactive and in touch with your banker. I also firmly believe that brighter times lie ahead. Together, we can work our way through the current environment and enjoy what’s on the other side when we come out of this.
Zach Fee is president of Regional Banking for UMB Bank and can be reached at Zach.Fee@umb.com.