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6 Lessons About Working Capital We Learned from COVID-19

5 min read • May 04, 2020 • Grant Olsen

We’ve reached a critical time in the ongoing saga of the coronavirus pandemic. The number of cases is leveling off in many states, easing the risk of ventilator and hospital bed shortages. But experts caution us not to get overly excited about the data.

“So it’s really about the encouraging signs that we see, but as encouraging as they are, we have not reached the peak, and so every day we need to continue to do what we did yesterday, and the week before, and the week before that,” explained White House coronavirus response coordinator Dr. Deborah Birx at a recent news conference.

The Painful Effects on Business

Statements from government officials suggest that social distancing will likely stay in effect for the foreseeable future. As small business owners know all too well, these quarantine-related protocols are having severe impacts on revenue.

Research from Lendio’s experts reveals that 43% of small business owners are experiencing negative impacts from the pandemic. Small businesses in urban areas, where a substantial proportion of businesses are located, are twice as likely to report problems such as declining revenue.

The reasons for these business struggles vary widely, but the most common reasons cited in Lendio’s survey are all closely tied to social distancing and the financial toll of our stalled economy. First, there aren’t as many customers visiting business locations. And even when online purchasing options are available, customers are less likely to buy because they don’t have as much disposable income on hand.

The Importance of Working Capital

With small business owners facing a host of financial pressures, working capital has become a rarer commodity than ever. Painful decisions become the norm when you can’t manage your daily expenses. From salary cuts and layoffs to the finality of closing your business, options become narrower with each passing day of lower sales.

These drastic actions have sadly been unavoidable for many businesses, as even the most prepared of entrepreneurs can easily find themselves in danger when a crisis of this magnitude hits.

But there are also constructive lessons to be learned. With the specter of future quarantines on the horizon, it’s important to find ways to improve from this unexpected disaster. Here are 6 lessons you can take from the coronavirus pandemic to help prepare your business for better resiliency in the future.

1. Get your financing in order: Loans can be harder to come by during times of trouble, so you should always plan ahead. The most important thing to remember is that your current financing situation might not be sustainable during a catastrophe such as the pandemic.

In order to bolster your odds of having access to working capital during a crisis, you’ll need to consider various disaster scenarios that could arise in the future. How much money would you need to weather the various storms? And where would you access this money? By strengthening your current sources of financing and identifying alternative sources for future scenarios, you’ll be better able to take quick action when trouble arises.

2. Don’t sleep on receivables: If your business is on an upward trajectory, financing is accessible, and rates are favorable, there might be less pressure to focus on your invoicing. But you should always make your receivables a priority, ensuring you have ample working capital during the good times and enough of it when things become leaner.

Evaluate your receivables management process to find areas of refinement. Are you consistent in your invoicing? Do you avoid common billing errors? Every protocol you put into place now will help you get paid more promptly in the future.

3. Reevaluate your own payables: This suggestion is the most delicate on this list. When you owe money to suppliers and other partners, you never want to damage that relationship with delinquent payments.

At the same time, you can strategically manage the situation and get extensions on certain payables. Talk to those you owe money to and try to work out arrangements that work for both parties. The chief objective is to protect your working capital while also safeguarding your reputation in the industry.

4. Manage your supply chain: It’s hard to be dependent on others in a time of crisis, but that’s the nature of a supply chain. Assess your supply chain from top to bottom. Find the potential risks and plan for alternatives that could allow you to sustain your operations even if links were to break.

As long as your supply chain is effectively moving, your business is more likely to retain working capital and ride out the storm.

5. Explore new revenue streams: The coronavirus pandemic has altered all industries, shutting some down completely. The businesses that have fared best are those pivoting to alternative revenue-generating models. In many cases, these new revenue streams would have seemed unimaginable before the lockdown.

To prepare your small business for the future, identify models that would allow you to continue making money in various crisis scenarios. While you can never predict exactly when and how disaster will strike, you can lay out pathways to help you keep moving forward once they arrive.

6. Prepare for the long haul: Crises typically come in stages. When the coronavirus first began its march across America, many assumed the social distancing would be regional and episodic. Now, most of the Western world is in some form of lockdown.

We’ve learned from this disaster that you have to look at the long game and not get caught up in optimistic, yet uninformed, timelines. If the crisis extends into the worst-case scenario, at least you’ll be ready for it. If better times arrive before anticipated, you’ll be able to resume operations with extra momentum.

Whether you knew it or not, your small business was enrolled in the school of hard knocks the moment social distancing was instituted in our country. We’re all suffering in unique ways, but hopefully the lessons of 2020 will guide us to a stronger and brighter future.


Grant Olsen

Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on and Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.