The Coronavirus Cash Flow Crunch | Coronavirus Series

coronavirus ecommerce cash flow

Editor’s Note: This article is part of a series that explores the impact the coronavirus crisis is having on the world of ecommerce. Explore daily insights surrounding the coronavirus crisis or check out these additional resources to help you navigate your marketing strategy during this time.

Is my business going to run out of money? How am I going to pay my employees? How am I going to pay my suppliers? These are the kind of questions Allen Walton, founder and CEO of, a six-person surveillance gear business based in Texas, has been asking himself over the last couple of weeks as company sales began to sink under the weight of the COVID-19 crisis. 

Allen saw the crisis unfolding earlier than many others, tracking its impact on the Asian manufacturing facilities he works with as early as January. Still, the eventual impact on sales was harsher and more sudden than expected.

Allen is not alone. Small business operators are worried. This worry comes through clearly in the responses to Klaviyo’s ecommerce COVID-19 Daily Pulse Survey. A consistent top answer to the question, “What worries you most?” is cash flow.  

The Wall Street Journal is calling this week “America’s make-or-break week.” It’s easy to understand why, especially for small businesses. The turn of the month triggers many obligations: payroll, supplier payments, rent, loan payments. Even during a routine economy, this time of the month strains cash flow.

In fact, half of all American small businesses have fewer than 15 days of cash on hand as a buffer to cover costs in the event their sales falter, according to research from the JPMorganChase Institute. And it’s just over 15 days since the Federal government declared a national state of emergency and states like New York and California began issuing work-from-home orders.

If many of these businesses are operating on a razor’s edge even in good times, how are they supposed to navigate a global pandemic? For companies like Allen’s where cash is a concern, especially with no definitive end in sight, what resources are there to keep operating?

The federal government steps in

The most significant government funding is part of the CARE Act, the $2 trillion stimulus package passed by Congress and signed into law last Friday. It is the largest relief package in U.S. history. Key components of the legislation provide support for small businesses like 

The Paycheck Protection Program (PPP) is the largest source of small business funding in the stimulus package, providing $350 billion to help small businesses avoid laying off employees. The loans, which are capped at $10 million, are available to companies with fewer than 500 employees and are intended to cover expenses from February 15th through June 30th. 

Perhaps most importantly, the government will forgive up to 100 percent of the loan amount for funds the company uses for payroll, interest payments on mortgages, rent, and/or utilities over eight-weeks during the loan period. For any amount not forgiven, the interest rate is capped at four percent. These loans will be processed and administered by private banks, reportedly starting as early as this Friday. 

The U.S. Senate Committee on Small Business and Entrepreneurship has produced an authoritative resource with relevant details, including exceptions to who qualifies for these funds.

The CARE Act also added $10 billion in funding to the Small Business Association’s Emergency Economic Injury Grant and Economic Injury Disaster Loan (EIDL). Under this program, a qualifying business is eligible for an emergency grant of up to $10,000 within three days of applying for an EIDL. 

Technically, this $10,000 is an advance on the loan but doesn’t need to be repaid under any circumstances. This advance and loan can be used for any business operating expenses (payroll, supply chain disruptions, rent, etc). Currently, companies can apply for and receive both a PPP loan and an EIDL loan. The funds must be used for different expenses (eg. the PPP can cover payroll expenses for eight weeks and the EIDL can help with other operating expenses). 

Unlike the PPP loans, which will be administered by private lenders (eg. banks), companies must apply for this program directly with the SBA.

These funds will make a difference, but only if processed and released quickly. This is not a pace government entities are typically known for. 

Paul Ebisch, president of Classy Llama, an ecommerce digital marketing agency, said he is “very encouraged with the stimulus package through the Cares Act and the many provisions to help small businesses through this disruptive time.” 

“It has the potential to provide the cash flow needed to survive and hopefully keep teams intact so that merchants can even thrive on the other side of this global challenge,” said Paul. 

“The combination of SBA loans, grants, tax credits and delay in FICA payments will make a big difference. I pray the speed of payments and funding will get to merchants with great speed to enable them to make their necessary business decisions.” 

Consider working capital solutions beyond government

Although most would agree that grants and forgivable loans are the most attractive funding options, they’re not the only ones. 

It’s always sensible to ask your own bank about their own standard loan programs for small businesses. For many small ecommerce businesses and others that may have challenges with the collateral requirements of standard loan programs or personal guarantees, especially in a downturn, there are alternatives.

A variety of working capital solutions exists for ecommerce businesses today, including companies offering credit lines with interest-free and extended payment terms. Matt Estes, senior director of partnerships at Brex, a corporate credit solution, advises small business owners to “cobble together as many funding sources as you can, even if the terms are less attractive today than in a good market. Then, be extremely disciplined about non-headcount expenses.”  

There are also new capital funding models created specifically for ecommerce businesses. One of these companies, Clearbanc, provides no-interest working (or “growth” capital) to fund business expenses, specifically. In return, they charge a flat fee on the capital and take a percentage of a company’s daily sales. This is quite different from the equity stake an ecommerce business would be expected to give up to a more traditional venture capital (VC) firm in return for funding.  

Now is likely not the most opportune time to pursue more traditional VC solutions. Most investors will focus first on their existing portfolio of companies—they’re going to prioritize offering those founders and operators guidance on how to navigate a crisis, extend their cash runway, and keep the business on track. 

Investors that can look beyond their own portfolio have more leverage in investment negotiations on key issues like valuation when the market is in a downturn. They can also be more selective in their investments, lengthening a deal cycle. These factors complicate any effort to start a traditional VC fundraising conversation at a time like this.

Final Thoughts

For companies interested in federal support, move quickly. Reports suggest that PPP loans will be available to apply for by the end of this week. Given the likelihood of immense demand for these funds, contacting local lenders and preparing payroll records now would be wise. Applications for EIDL loans are open now and although $10 billion in funding for this program sounds like a lot, it will get allocated quickly. Apply for both programs if you need the cash.

The effort to navigate the fine print and the government loan application process is worth it, but don’t stop there. Look beyond government sources and assess whether the variety of working capital alternatives are a good fit for your business. 

Finally, stay hopeful. Allen, who applied for the new federal funding and now awaits word, chooses to be optimistic amid the coronavirus outbreak with his business—and navigating a new normal in his life: “I’ve had a little more time to walk around my neighborhood with my family—and people are a lot nicer.” 


Looking for more information to help you adjust your marketing strategies as you navigate the coronavirus crisis? These resources may be helpful. 

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