June 25, 2020
Having a strong relationship with a bank is crucial for businesses. As highlighted in an article by Jenn Goodman entitled
Lenders' top tips for weathering the COVID-19 crisis
, the uncertainty of the COVID-19 situation has reinforced the importance of working with an effective financial institution. Here are the recommendations given in the article on how to have a strong relationship with your banker:
Frequent communication
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The COVID-19 pandemic has necessitated a constant stream of communication between contractors and their banks. Even though PPP applications are winding down, contractors and their lenders need to be in touch regarding new guidance and legislation being announced nearly weekly.
Be picky about new jobs
. It is OK to say no. Make sure new projects have solid funding, which is harder to come by during economic uncertainty.
Be ready to explain how new safety and social distancing rules will affect a project’s bottom line.
With less workers allowed on site and more PPE and other protections, jobs will take longer and be more expensive.
Consider paying off credit.
Many contractors are flush with cash because their expenses have decreased during government-mandated job shutdowns. Take the opportunity to deleverage and save on interest expenses.
Be prepared for the upcoming LIBOR phase out in late 2021.
The discontinuation of the London InterBank Offered Rate, the interest rate banks use to lend to one another, will bring a host of issues for U.S. companies. Be prepared to switch to the new system (likely the Secured Overnight Financing Rate (SOFR)) and change the language in new contracts.
Continue using new ways to move money.
The pandemic has forced many contractors to switch to more efficient ways of paying and getting paid including automated bank-to-bank ACH electronic transfers.
Seize opportunities.
While it is important to be careful about new work, bankers like to partner with customers that are playing on their strengths during a crisis and can capitalize on work left behind by struggling firms.
Feel free to contact any member of our team at (610) 828-1900 (PA) or (732) 341-3893 (NJ) with questions. Rich Higgins, CPA, managing principal – New Jersey office can be contacted at
Richard.Higgins@MCC-CPAs.com
.
I can be reached at
Marty.McCarthy@MCC-CPAs.com
.
As always, we are happy to help.
Stay safe,
Marty McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).
