Helping Small Businesses Survive and Thrive

Accountants, attorneys and financial institutions are helping small businesses navigate the coronavirus pandemic’s ever-changing waters.

By George N. Saliba, Managing Editor On Oct 8, 2020

While accountants, attorneys and financial institutions have been striving to help small businesses during the coronavirus pandemic, as with many disruptions, the pandemic has wrought both corporate winners and losers: Those businesses that have largely increased their prosperity include everything from online retailers and industrial cleaning companies to grocery stores and accounting firms themselves, while businesses often suffering incalculable losses obviously include restaurants and small store retailers, among hundreds of other categories. 

Robbin E. Caruso, CPA, CGMA, partner and co-manager of the National Tax Controversy Department at the accounting firm Prager Metis, explains she has clients such as hospital suppliers that have so greatly increased their business volumes that they are struggling to keep abreast of demand, while at the same time she has other clients who are struggling. She stresses, “This is not a one-size-fits-all [scenario]. People need to step back and evaluate their own, specific needs and [also] be communicating carefully with customers, vendors – and especially staff.” 

She also says that for many clients, “[Businesses] need to dig deep and then take advantage of every available tool or methodology to improve [their] cash flow and their outlay [to be] a viable, thriving business.” 

Some businesses are not only coping with disrupted supply lines, but with staffing and COVID-19 safety concerns, vendor payments and bills, paying rent to landlords, negotiations – and a range of new technologies. And while businesses typically have six-month, one-year and three-year plans, Caruso says, “When COVID-19 hit, we were saying: ‘You need a one week, a one month and a quarterly plan.’ Everything is so fast and fluid.” 

Supplier and Other Contracts 

Although New Jersey’s public health metrics may be improving and the state’s businesses are largely reopening (at least at press-time), much of the nation and world is now experiencing the pandemic to varying degrees, meaning that suppliers’ legal contracts are often examined when those suppliers fail to provide goods due to disruptions in their own (or other) locales. Such contracts often have force majeure clauses indicating that if a hurricane, massive flood, earthquake or pandemic occurs, then suppliers are no longer responsible for delivering goods. 

Edward B. Stevenson, member and co-chair of the corporate and securities group at the law firm of Chiesa, Shahinian & Giantomasi, P.C., asks: “If the supplier’s performance is excused, then what rights do you have to terminate because of the non-fulfillment by that supplier, or, potentially, the insolvency of that supplier?” He explains that the rights under the contract and governing law are factors.  

On the other hand, if the client is the supplier, then whether or not the supplier is covered by an “act of God” might still be a factor, but Stevenson says the supplier may want to instead proactively approach the other party and suggest revising the contract or terminating the contract and/or the relationship. 

Shareholder Agreements 

It’s not just supplier contracts that are coming to the fore during the pandemic: Businesses’ shareholder agreements are often explored as various owners assume different roles or want to leave their companies. Drafted at companies’ inceptions when the various shareholders typically have good relationships, these agreements may lack details regarding what occurs if a partner dies or, more simply, departs the business. 

Stevenson explains, “… some [shareholders] are finding that if the company is not doing well, they can’t afford to stay. They need to find [another job].” He then asks, “What happens to their interest [in the company]?” Business owners want to avoid being legally bound to be partners with someone who has left the business – and perhaps not on good terms, Stevenson says. New Jersey Business  has previously reported that documents that are properly drafted and/or revised with great concentration of thought given to various shareholder scenarios can help avoid these unfortunate situations. 

 Among other corporate law concerns are financing arrangements and agreements during the pandemic, since businesses have at times had difficulty repaying creditors, the latter of whom who have often been mending covenants and also providing latitude. Attorneys have likewise been focused on return-to-work-sites legal concerns.  

Financial Institutions 

As accountants and attorneys help guide their clients, financial institutions such as Fair Lawn-based Columbia Bank are assisting companies, having made in April alone some 2,300 Paycheck Protection Program loans totaling $470 million that supported approximately 40,000 employees across a wide swath of businesses. The bank additionally has been involved with the U.S. Small Business Administration’s Main Street Lending Program. Moreover, in the middle of the pandemic, Columbia Bank obtained a $1.5-million credit facility to help transform the New Jersey Convention and Exposition Center in Edison  into a 500-bed emergency field hospital. 

On lending to businesses, Thomas J. Kemly, president and CEO of Columbia Bank, says, “We have tightened some lending standards to be a bit more prudent in an economic recession. [It’s] not unreasonable. But, honestly, we are following our guidelines and our policy pretty much to the letter of the law. We are not being terribly liberal in granting exceptions.” 

The bank is additionally increasingly becoming involved with digital services such as remote deposit capture, online treasury management and online banking, overall. Kemly says, “We are seeing a demand for our small businesses to be more digital. One of the outcomes of the pandemic is that there has been a transfer to a more digital environment, not only from what the banks deliver, but also for what the businesses are requiring.” 

He adds, “We have accelerated our expenditures in that area. Fortunately, we had a pretty strong program in the first place, but now what’s happened is that the client is more interested than ever in digital services. We are putting our [banking] teams out there to push [the services] to clients and help them transition.” 

Kemly says overall, “The New Jersey banking community has supported this state, its residents, its communities, its businesses – and as a career banker of almost 40 years – I am so proud to be part of this industry that is really just [giving] essential services to keep this economy in New Jersey moving forward.” 

 K-Shaped Recovery 

Economists initially believed the coronavirus pandemic might yield a V-shaped recovery, where the business community would rapidly bounce back. However, the recovery appears more “K” shaped, with companies in both upward and downward trajectories as visually depicted in the letter “K.” 

The Federal Reserve said in June that the coronavirus posed “acute risks” to small businesses, many of which had less than a 15-day supply of cash on hand. Businesses have been struggling throughout New Jersey, and more than 1.5 million residents have applied for unemployment since the pandemic’s inception. 

Attorneys and bankers are assisting businesses. Prager Metis’ Caruso concludes, “CPAs are in this unique position to quarterback and maneuver through all of this, and figure out how they can best move forward.”

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