What to do when government funds run out

The pandemic has undoubtedly had a significant impact on nearly every business in all sectors of the economy. While some companies, have seen their operations and bottom line grow, others have faced significant challenges. Some of the challenges brought on by the pandemic were eased with government stimulus funds provided by the CARES Act, but that cash injection is likely dwindling at this point and there’s no additional wave of funds projected to be released in the near future – which begs the question, what should business owners do as government funds draw down and eventually disappear?

One consideration we’ve been talking with clients about is how they may be thinking about re-examining and potentially pivoting their business model. Our “new normal” has caused customer demands for goods and services to shift. While this means that some companies aren’t seeing as much volume as they did pre-pandemic, new opportunities that they may not have previously considered have opened up. Government stimulus has provided a bit of a cushion for businesses to stay afloat while simultaneously taking a hard look at their business model. Together, we discuss how the economic environment has changed, what specifically that means for their business, and how the business may need to change focus to produce different products that are more in demand in today’s world. For example, many manufacturers have stopped production on their traditional products and pivoted to make PPE items instead.

Another topic we’ve been discussing frequently is the need for clients to look ahead to what their financial needs will be when government stimulus runs out, and be proactive about communicating with their financial partners about what their situation will be. Many companies are looking at alternative financing during these economic shifts in order to quickly take necessary action, pivot, acquire or sell their company. Financing these types of changes can take time, and while providing our clients with nimble and fast service is one of our key values, the sooner we can begin working on these types of shifts together, the better.

We also have been having more conversations about acquisition opportunities. As the pandemic wears on and government stimulus runs low or out, some companies find themselves in a position where selling may be their best option, and other companies find themselves flush with cash and in a position that they could consider a strategic acquisition. It’s important for businesses on both sides to take an in-depth look at how their finances matchup with their opportunities, and allow for enough time for the transaction to be carried out. We work closely with companies who have the potential opportunity to acquire to conduct due diligence, determine integration and execution points, and consider how customers will react. It’s important to think deeply beyond just buying out a competitor, and think more strategically from the outset of the acquisition consideration process.

Finally, we are proactive about bringing in third party consultants to help manage business considerations for clients who are finding themselves in a difficult circumstance. We were doing this prior to the pandemic, but have become even more conscientious about it in recent months. Naturally, business owners are very close to their companies, so sometimes, it’s challenging to make difficult decisions such as laying off employees, shutting down certain operations or selling the business altogether. A third-party consultant can help take the emotion out of these considerations and decisions, and can partner closely with us to understand and work out financial needs.

These are unprecedented times, and while the pandemic has impacted individuals and businesses differently, there is one common theme – that your trusted financial partner can help you manage any of the challenges or opportunities you’re faced with.

Dominic Karaba is the President of Specialty Lending at UMB Bank.