We are beginning to see hopeful signs about the ongoing COVID-19 crisis, and the conversation about when and how to reopen the U.S. economy is beginning in earnest. In the meantime, however, the restrictions remain in effect. What can businesses do to try to increase their odds of surviving the crisis?
- Assess all costs and expenses to determine if any costs can be eliminated or delayed. Cut back or cut out expenses that are entirely within your control to adjust. Where you don’t have the right to cut back, speak with vendors to see if they will agree to temporarily modify terms, perhaps in return for longer terms or other compromises. Evaluate force majeure provisions to see if the coronavirus pandemic might provide grounds to terminate or renegotiate unfavorable agreements. Determine if any counterparties are failing to perform under your agreements, and if such nonperformance might allow you to terminate or renegotiate those agreements. Weigh the potential long term costs and potential short term benefits of breaching agreements. Note renewal and expiration dates of all agreements. Discuss all of these potential actions with an attorney to make sure that you fully understand the potential risk of taking any of these measures.
- Review existing lines of credit and other sources of cash, and consider drawing down on those lines in full to increase cash reserves. Speak with existing creditors about potentially delaying payments or other forbearance.