Samantha Novick is a senior editor at Funding Circle, specializing in small business loans.
With nonessential businesses closed and social distancing in full-force, small businesses across the country are struggling to survive COVID-19. This challenge rings especially true for salons, who tend to run on cash flow and low margins with little to no buffer. Luckily, there are several money-saving tips you can utilize to conserve cash and keep your business afloat.
Cut Nonessential Spending (And Reduce Everywhere Else)
Take a look at your profit and loss statement as well as your bank statements, and review your business (and personal) expenses line-by-line. It’s time to get control of your finances.
Cancel (or pause) any non-critical subscriptions or services that you’re paying for — like your business landline or paid marketing efforts.
Revisit your current plans and explore how you might be able to get a lower price. For example, switching to a lower-speed Internet package or to a bank account that reimburses ATM fees could keep more change in your pocket. And although these numbers may seem small, $20 here, and $30 there, can add up quicker than you think. You also may find that other providers offer a better price. If so, consider switching providers, or using the lower price as part of your negotiations with your current provider.
Exercise extra diligence when it comes to your usage of resources like utilities. Take a close look at your energy and heat bills, and see where you can conserve — maybe you don’t need to have the thermostat turned up every day. Create a lean budget, stick to it, review it, and adjust it as needed. It’s not one-and-done. Use the downtime during temporary closure to expand your financial acumen and get comfortable with forecasting. With new developments unfolding constantly and things frequently changing, it will be vital that you can get a read on your financial situation on your own.
Pro Tip: Using your updated budget, determine your “cash runway” (or the length of time you can operate with your current reserves). Perform projections, especially for worst-case scenarios. It can help you figure out — ahead of time — the best solutions for any potential future cash flow problems.
Communicate With Your Landlord
While some cities and states have enacted eviction moratoriums, this isn’t a solution to the recurring, fixed expense of rent. If you are unable to come up with the cash, don’t avoid the problem — be proactive and get in contact with your landlord. Come with a solid plan. Ask for rent abatement or adjustment, or negotiate an alternative lease arrangement that’s mutually beneficial. If business had been going well until COVID-19, consider asking for forbearance (temporary suspensions of payments) for a short period in exchange for an extended lease agreement. Although it’s always important to be a good tenant and on-time with your payments, your track record as a reliable tenant can truly pay off in your negotiations.
Need help? Minerva’s Jeff Grissler created a templated letter (and templated follow-up letter) to help guide the owners of salons, spas, and barbershops in asking for rent relief during COVID-19.
COVID-19—Landlord Rent Reduction Letter—Salons and Spas: https://www.salontoday.com/salon-management/623486/covid-19landlord-rent-reduction-lettersalons-and-spas
Landlord Rent Assistance Followup Letter: https://www.salontoday.com/salon-management/623597/landlord-rent-assistance-followup-letter
Talk Net Terms With Your Suppliers
In some cases, delaying payments can provide some much-needed wiggle room. First, visit your supplier’s websites and see if they’ve made an announcement. For example, SalonCentric enacted a program freezing all pending invoices (placed before March 23) until business activities resume as usual for their community of stylists. If there isn’t anything mentioned online, contact customer support. See if you can extend net terms from 30 days to 60 days, or come up with an alternative payment plan that works for both parties.
Call Your Creditors and Lenders
Believe it or not, your lender has no interest in you defaulting on your loan. Give them a call and inquire about what can be done to lessen the financial pressure — chances are, many of their customers are dealing with the same cash constraints, and your lender will have options to provide relief.
The same goes for your creditors. Many financial institutions, like banks and credit unions, have already announced various measures, including waived penalties, deferred payments, and refunded fees.
Explore COVID-19 Discounts and Offers
The beauty business is stepping up to the plate across the board to support stylists and salons during the crisis offering everything from free educational resources to launching professional affiliate programs.
Numerous technology providers are giving small businesses access and trials to their products and services, more often than not, at no-cost. From secure file sharing to virtual meetings to email marketing solutions, you’re bound to find at least one complementary tool that is beneficial to your salon.
Visit https://www.entrepreneur.com/article/347840.
Get a Low-Interest (or Zero-Interest Loan)
Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act — a $2 trillion stimulus package passed on March 27 — $376 billion has been allocated to support small businesses with the majority designated for two main programs: The Paycheck Protection Program and Economic Injury Disaster Loan Program. Sole proprietors, independent contractors, and self-employed persons are eligible for both of these relief options.
The Paycheck Protection Program (PPP)
The Paycheck Protection Program was established to help small businesses maintain their workforce. And there’s an incentive to do so. If you apply and are approved, your loan amount will be equivalent to 2.5 times your average monthly payroll costs (you can use a CARES ACT SBA Loan Calculator for an estimate of the amount you may qualify for). If you maintain your workforce, the loan proceeds used to cover qualified uses — like payroll, rent, utilities, and mortgage interest payments — will be forgiven. Any portion of the loan that is not forgiven will carry a fixed 1% interest rate. You will have two years to repay the loan, and payments will be deferred for the first six months.
Economic Injury Disaster Loan Program (EIDL)
If COVID-19 has impacted your business, you also may consider an Economic Injury Disaster Loan. You can apply for a loan of up to $2 million at a fixed interest rate of 3.75%, with repayment terms extending up to 30 years. It can take up to three weeks to receive a decision, so the SBA is offering EIDL Loan Advances of up to $10,000.
States, counties, and cities around the country are also offering geographic-specific low-interest loans. Check your local government’s website to find out what’s available in your area.
Rather than putting expenses on high-interest short-term financing products like business credit cards or business lines of credit, you should consider applying for one of these low-interest loans to conserve cash.
Apply for Grants
When you get a grant, you essentially get free money. You can find a laundry list of COVID-19 grants available to small businesses, with some even specific to the beauty industry. For a complete list of grants available to small businesses, visit https://docs.google.com/spreadsheets/d/1SRBZE2_6Nftwd02M6Oxj8MoeuZ7y93spXIgIPhkkp2w/edit#gid=0.
We’ve also gone ahead and highlighted a few grant options below.
The PBA COVID-19 Relief Fund
Licensed beauty professionals who are unable to work due to COVID-19 can apply for a $500 grant for immediate short-term needs such as food and bills.
Facebook Small Business Grants Program
Facebook has allocated $100 million in cash grants and ad credits to up to 30,000 small businesses that are located in or near a location where Facebook operates.
Small Business Relief Fund
The Small Business Relief Fund provides matching grants of $500 to qualifying small businesses that have created a fundraiser on GoFundMe (and raised at least $500).
LEARN MORE: https://www.gofundme.com/f/smallbusinessrelieffund
Save for Your Future
The money-saving tactics mentioned above are just a few of the many ways you can conserve cash for your salon. Even in a post-COVID-19 world, keep these cost-cutting measures in mind to help improve your bottom line.
About the Author: Samantha Novick is a senior editor at Funding Circle, specializing in small business loans. She has a bachelor's degree from the Gallatin School of Individualized Study at New York University. Prior to Funding Circle, Samantha was a community manager at Marcus by Goldman Sachs. Her work has been featured in a number of top small business resource sites and publications.
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