QuickHit: How Coronavirus (COVID-19) affects SMEs and what they can do about it
This week’s QuickHit episode talks about Coronavirus or COVID-19 as it spreads to more areas in the world. How does this global pandemic affect small to medium-sized enterprises, especially in the US? Our guest for this episode, Megan Allen, has 20+ years of experience working with SMEs in the US. We get her thoughts on what she thinks might happen and what small businesses can do to deal with the Coronavirus setbacks.
The views and opinions expressed in this QuickHit episode are those of the guests and do not necessarily reflect the official policy or position of Complete Intelligence. Any content provided by our guests are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.
Hi. I’m Tony Nash, CEO and Founder of Complete Intelligence. QuickHit is an occasional video program where we speak with experts in markets and industries to get their thoughts on current events. Complete Intelligence uses publicly available enterprise data, to help companies with market intelligence to forecast costs, revenues, and economies.
For today, we have Megan Allen. She is a long-term expert in the franchise sector. With all of the isolation, shut down, etc., a lot of my worries are for franchisees, like restaurants. It’s helpful for people to understand the perspective of SMEs.
Can you give us a quick overview of what you’ve done and what the concerns for franchisees are right now?
MA: After 20+ years, you build these relationships, I get a lot of questions from very successful large multi-unit owners, but more importantly, the one or two unit owners. And they’re just starting out. Their cash flow is so incredibly tight. They may have taken out a $100,000 in working capital based on what the economy was doing before. And now, of course, they would need more.
I think what I would like you to help me and my friends and clients understand is how does this play out? Because it’s a novel situation. And when you have a novel situation, you can’t always look at past indicators, and I think they just want someone to help them wrap their heads around what’s going on here.
TN: From our perspective, and what we see is cash flow and liquidity, is very important for small companies. And we’ve seen these massive disruptions right now with shut downs.
We just did a mid-month reforecast of equity markets, commodities, etc. And what we’re seeing is that we don’t expect the market to have a V-shaped recovery over the next 8 weeks. We do expect things to move incrementally, gradually.
But with this disease, we expect it to be on the backside around April. This is what I hear from other people.
We’ve seen the Chinese, Singaporean, and Korean economy, how quickly economies can spring back to life. If we’re on the backside of this in a few weeks, then we can see the US economy coming back. You don’t necessarily recover the demand from this within say 4 to 6 weeks. That’s the problem that SMEs are facing.
When it comes to things like crude oil, where we had a double-whammy (Coronavirus and Saudi regime pushing the crude prices down), if we get some move from Saudi Arabia to relent on their threats then it’s very feasible for us to see, say west Texas intermediate crude back up to 40s. That represents the demand issues with Coronavirus, but it would be a little bit forgiving of what Saudis are seeing.
The fuel costs are scarily low. Maybe more affordable, but not as ridiculous as they are in crude oil in the mid or high 20s.
The real impact that I am afraid of is large companies dispersing their workers to work at home, and large companies locking up budgets. What is the trickle down effect to SMEs? What do you see, and what do you recommend to your franchise clients? Can they find external funding sources? What does it look like? And is it possible on short notice?
MA: The SBA right now, because it’s very fluid, is targeting areas that are worst hit first. Its a nice priority system for places like Seattle. They’ll be looking at those applications first, and providing very low interest rates, and it’s one of the best ways to finance your business and get working capital.
After 9/11, everything shut down with SBA, because they had to re-evaluate the process. That process has now been fixed with SBA. So I’m very bullish for everybody to eventually get that loan money.
In the meantime, you need to be creative and know your rights, call your CPA and your attorney. Look at force majeure language in your lease. Call your landlord – yes, they are struggling, too, but we have to work together. Small business owners have more rights than what they realize. They just need to be curious.