William Safire, in his “On Language” column in the February 22, 2009 issue of the New York Times Magazine, noted the resurgence of the phrase “Hard Times” to describe the current economy. No one can doubt that these are hard times. Yet, hard times can also offer possibilities for future success. Starting a new business or attempting to expand one that you have already begun, even in the best of times, is fraught with risk. But taking risks, educated, well thought out, and planned for risks, is not only at the very heart of entrepreneurship it is the essence of the definition of entrepreneur. So, rather than see only gloom and doom, let’s look at the possibilities.
Talent: Not wishing to be accused of schadenfreude, please know that I take no joy in pointing out that thousands of intelligent, highly competent people have lost their jobs, through no fault of their own, and that the survival of many smaller businesses suffering from financial losses is an ever increasing problem. The upside of these catastrophes is that there is an enormous pool of talent waiting to be tapped by businesses looking to hire or for potential business partners for businesses that may wish to cooperate or consolidate. With a little creativity, expansions, alliances, or consolidations can be accomplished at an acceptable cost. Independent contractor and/or commissioned sales representative arrangements, licenses, franchises, joint ventures, strategic alliances, mergers or acquisitions, or “sweat equity” investors are among the many possibilities. Also worth considering are overseas companies that would rather partner with an existing United States business rather than establishing totally new businesses here.
Credit: Clearly, reestablishing the credit markets is an extremely high priority for all levels of government. And, while credit is certainly tight, not all credit sources have totally shut down. The old standby lenders, family and friends, may still be a possibility, but there are other choices as well. Business loans are based upon different criteria than residential loans, and there are banks that continue to make loans to credit worthy businesses. Small Business Administration loan programs are also a possibility, as are loans collateralized by inventories or credit card receipts. And, believe it or not, there are online loan companies that will arrange loans from investors seeking a good return on investment. It’s worth a look.
Leases: Depending on your choice of location, landlords may be far more responsive to requests to negotiate or renegotiate rent and additional rent provisions. There has been a substantial increase in commercial space in New York in recent months. As an example, office space vacancy rates in the City have risen to more than 10% and, with falling sales prices, many landlords are finding them selves with mortgages that are under water. (New York Times, January 5, 2009)
Tax Breaks: The American Recovery and Reinvestment Act of 2009, better known as the Stimulus Bill, has many provisions that are directed at small businesses. Among these are the extensions of the accelerated depreciation provisions enacted in 2008, a provision that permits a small business (average gross receipts of $15 million or less) to carry back 2008 net operating losses for five years, a provision that permits tax payers that must make estimated tax payments to base their 2009 payments on 90% rather than 100% of their 2008 tax liability, and a host of others that should be discussed with your accountants. Any business that contemplates a need to purchase machinery or equipment, furniture or fixtures, or computer software, should be aware of these provisions.
These are only some of the possibilities that should be discussed with your professional advisors. What is most important is to realize that this is not the time to sit still or, even worse, to retreat. Instead, you must carpe diem.
© 2009 Ronald I. Paltrowitz, Esq. This column is for your general information only and does not substitute for legal or accounting advice regarding your specific situation.