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Michael Bosma: How to survive, and perhaps thrive, post apocalypse (Voices)

Michael Bosma

Covering Your Assets

Michael Bosma
Courtesy photo

RENO, Nev. — Admittedly, I feel like I am living in a dual universe, akin to a Rod Serling narrative that goes something like: “Imagine, you have been ordered to not venture out of your house. All essential government functions have ceased. In fact, society, as you know it has ceased.

“Even if you are part of the brave ones who venture out to the grocery store, there is no eye contact or casual greetings in the aisle as you race to secure the last roll of toilet paper. Pillowcases have been converted to makeshift facial masks, and tickets are issued if you venture out in public without one.

“Everyone knows that there is no medically proven reason to adorn one, but you will be publicly and privately shamed if you fail to comply. This … is the “Twilight Zone!”

From a business perspective, many business owners reading this article have already applied for the Paycheck Protection Plan (PPP) or Economic Injury Disaster Loan (EIDL).

Many have been “declined” from the loan simply because they didn’t have a loan with a bank. In fact, those with SBA loans can rest secure, knowing that their lender contacted them, informing them they have a 6-month payment holiday.

Many business owners, in a moment of weakness, might be tempted to think that having more government-secured debt, etc., would make their lives a bit easier in this “Twilight Zone” moment.

As such, I thought I would share a few time-tested truths…

  1. Just like there is no better meal to eat than one that someone else made, there is no better debt than one that does not have to be re-paid if you default. To put my banking buddies at ease, I am not advocating for borrowers to not repay their loans, but rather for lenders to have sufficient equity to lend before they loan. It gives business owners the best future prospects when making decisions in times of trouble.
  2. Having many sources of income is better. Personally, I am shooting for 10. The minimum is two: one, your job, and two, your retirement/savings/other income account. If the cash flow from your retirement/other account is all the income you have, what would your lifestyle be? Current events make this calculation more important than ever.
  3. Don’t live on the edge. Some business owners were barely making it prior to the current crisis. I have marveled at the resiliency at many businesses to reinvent themselves. I also mourn that had they done more prior to the crisis, they would have had more cash, which in the end, means more options.
  4. Have multiple banking relationships. It has been hard to watch those with a certain bank that the government has issues with run out of lending capacity, and not have the ability to do PPP loans. Those with multiple banking relationships have fared better in the current crisis.
  5. Resources matter. Whether you have a CFO, multiple controllers, or a plethora of accountants on staff, the need for real time insight into your financial picture is more important now than it has ever been.
  6. It’s fluid. In my prior article, I mentioned that 2020 estimated tax payments begin 10/15/2020. This language, although in one version of the bill, did not make it into the final bill. As of this writing, the second payment is due 6/15/20, which is before the first payment, which is due 7/15/20. You can’t make this stuff up!

In the end, it’s a good time for CPAs. Hold them close. Tell them how much you appreciate them, etc.. The SBA form for the PPP changed 4 times in 48 hours. Being plugged in will help you navigate.

Tax returns that were due 4/15/20 are now due 7/15/20. Business owners want to maximize their return on investment for this 3 months.

Please note that this discussion is general in nature, and not intended to be tax advice. Please consult with a CPA to get answers to your specific fact pattern. Follow me on Facebook to receive updates on current developments.

Michael Bosma, CPA, is Principal-in-Charge of the Reno office of CliftonLarsonAllen LLP. His NNBW column, “Covering Your Assets,” focuses on effective planning strategies for every business owner. Reach him for comment at mike.bosma@claconnect.com.