Shawn put together an article for our friends at the Professional Bicycle Mechanic Association about what resources are available for small business forward during this very challenging time!
There are hard days ahead for our industry. At the time of year when we should be hiring and growing inventory to get ready for a great year, bike businesses find themselves facing unanswered questions and difficult decisions. Will we be deemed “essential” by our local governments, or will we be forced to close our doors? If we have to close, when can we re-open? And what do we do until then?
If there can be certainty about anything at all, it is this: Our communities need us to succeed. The vast majority of bike-related businesses, from local bike shops to accessory manufacturers to event promoters, are classified as small businesses. We are the uniqueness, character, and culture of our regions. But small businesses are also critically important to our national economy:
Over 98 percent of America’s 31 million firms are small businesses with fewer than 20 employees. (Most bike shops fall within this bracket)
48 percent of all US employees work for small businesses.
Firms with fewer than 20 employees created 1.2 million net jobs in 2016 (the most recent year for which data is available). Small businesses (as a whole) accounted for two-thirds of new net jobs per year.
Small businesses accounted for 43.5 percent of GDP in 2014.
(Source: United States Small Business Economic Profile 2019. US SBA Office of Advocacy, 2019.)
We are the job creators. And so although every business is unique, I wanted to share some information and resources that might help your bike shop take care of your employees and get through these tough times.
Unemployment: Taking care of your employees
If you have to let staff go or drastically cut their hours, you can support them in filing for unemployment benefits. Like most business owners, I take a lot of personal pride in being independent and self-sufficient instead of leaning on the Government. Using public benefits feels like somehow I’m failing as a business owner. But as businesses we have been paying into the Unemployment Insurance program for years now through payroll taxes. Now is the time to use these benefits you’ve paid for and feel OK about it.
The good news is that unlike in 2008, the nation is coming off an extended economic hot streak with record low unemployment. Thus most states’ Unemployment Insurance programs are in good financial shape.
Each state will differ slightly with their Unemployment Classifications, but the primary titles are.
Furlough – temporary reduction in work hours.
Temporary Unemployment – layoff intending to rehire. Requires a formal letter from the business but allows the employee to not perform a job search for a 4 week span.
Permanent Unemployment – no intention to rehire.
In Oregon we have a program called “Work Share Oregon” it is a partial unemployment program that supports the Furloughed employee up to 40% of reduced hours. This is a great program as it allows you to reduce an employee’s hours while not reducing their salary.
Cash Flow
The average small business has a cash buffer of only 27 days or fewer, and labor-intensive businesses tend to have even less. Loans and lines of credit can help fill the gap until you can start bringing in money again. And unlike in 2008 when there was limited to no access to Loans or Credit, the Federal Treasury is backing bank lending at near 0%. Policy makers learned from the Recession that lenders need to act fast and get money out into the community. What does this mean for your bike shop? It means that you can likely borrow money at a very low interest rate. As a personal example, I have talked with US Bank about a 2% rate for a “Secured Line of Credit”. They are committed to working on ways to simplify and expedite the Lending process.
Insurance
Our business insurance manager said that this COVID-19 situation would have required a specific insurance rider. “While we can turn in any claim you may have, it is hard to say if there will be any coverage for this type of Business Income loss,” she said. “Only the carriers can determine if there is coverage at the time of a loss.” Not a lot of help.
Payroll Tax Credits
Though there are still details being worked out, this is how the federal bailout plan works with the expansion of the Family and Medical Leave Act: The bill takes effect on April 2nd and continues to Dec 31, 2020. It is a payroll tax credit to help cover expenses due to the expanded Paid Sick Leave. It’s only a tax credit on Federal payroll, not State, and it is not a grant or a loan. Another important thing to note about this tax credit is that if you have to lay off employees, you’ll have less payroll and will therefore get less of a credit. The payroll tax credit applies to the
following situations:
- If an employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
- If an employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
- The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
It is still unclear if your bike business and employees qualify for this if your business is deemed a “non-essential” service and required to close by your Governor or Mayor.
Rent and Eviction Freezes
While some locations have enacted rent and eviction freezes for residential tenants, similar policies have not been forthcoming for business tenants. Talk to your business landlord in advance. Tell them your situation before it gets dire or reassure them you are in ok shape. They have an interest in working with you to negotiate a solution if you need help. If your business fails, then they don’t get paid, and it is likely they have a mortgage on the building to pay. They might let you postpone a rent payment for later in the summer when we are all busy fixing and selling bikes.
As small businesses, we all have had hard days that made us want to quit, but bike shops are smart, creative and know how to be lean. We have the benefit of being cyclists, too. We are wired for hard efforts, continuous improvement, and pushing ourselves outside our boundaries. It will be hard and we will experience some tough losses along the way, but the more we can share information and support each other, the more wheels will still be turning when we make it to the other side.
Resources
This spreadsheet has financial resources for each State and includes some unique Private Resources here.
Senator Chris Murphy (D-Conn.), Jeff Merkley (D-Ore.) and Chris Van Hollen (DMd.) introduced the Main Street Emergency Grant Program (MSEGP) to rescue small and mid-size businesses and nonprofits as they weather the coronavirus storm.
All of the US has now been declared a Disaster. This is an important distinction as it makes your area eligible for SBA Disaster Loans. To apply use the link here.
Here is a good breakdown on the FMLA expansion.
And here is a presentation I sat through with my payroll company (not Oregon specific)Gusto payroll presentation
When in doubt, contact your Representative. Their job is to listen to us. We need to tell them our needs as an industry. Are bike shops “Essential” in your region? Tell your officials now.
Find your elected representatives here.
From the mind of Shawn Small and edited by Rebecca Hamilton