How to Handle Cash Management During Turbulent Times

By Jenna Zaikarite and Timothy Bessette

The introduction of COVID-19 to our country forced everyone to change the way they go about the management of their personal and professional lives. From a professional perspective, those who manage their companies' financial aspects have had to consider risks they have never faced before and completely unforeseen circumstances. While it is a possibility that we may soon be seeing an end to the most turbulent time in recent memory, it is also a possibility that we will be facing these conditions well into 2021. 

For the past year, owners and management of residential housing have faced challenges that have ranged from community health and safety to a moratorium on eviction proceedings. For some, this has caused significant volatility in cash flows and uncertainty about how to stabilize them. 

The following are some considerations that we believe can help maintain positive cash flow during these unpredictable times.

Cost Containment Measures

As mentioned above, residential property managers have dealt with community health and safety concerns. Those concerns have caused properties to incur additional costs related to providing safe and clean living conditions. These costs are essential as tenants across the country have cited this as a significant concern. Both existing and prospective tenants will continue to evaluate management's handling of these matters in determining whether to move to or from any residential property.

While absorbing these increased costs, management needs to evaluate how to accommodate them within their budgetary constraints. There are only so many costs a manager can cut, so additional energy may be needed to maintain or increase the inflow of cash to the property being managed.

Maintaining Your Current Cash Inflow and Managing Existing Resources

Tenant Relationships

The existing relationships you have with your tenants are an asset, and continuing to cultivate them could end up positively influencing your cash flow. We recommend keeping tenants informed of the details of the property's COVID response and ensuring they have access to key resources. Food banks, mental health support, and additional rental assistance programs could make a significant difference for those who could be struggling. Health and wellness is a vital issue for tenants. Your efforts toward keeping your buildings safe and your tenants healthy could be a determining factor in whether a reliable tenant chooses to stay at your property.

Existing Project Reserves

One of the more readily available sources of additional cash are cash reserves such as the reserve for replacement, residual receipts, or operating reserve. Upon approval from HUD, CHFA, or your lender, you may be able to use these reserves for operational cash flow needs. 

Increasing Cash Inflow through Available COVID Relief Programs

Payroll Protection Program

One of the most popular programs introduced last year was the Small Business Administration's (SBA) paycheck protection program (PPP). The second wave of PPP funding is now available. If your property has employees and can demonstrate a 25% reduction in revenue in any one quarter of 2020 compared to 2019, you may be eligible to apply. 

Economic Injury Disaster Loans

Another SBA program that could assist you is the Economic Injury Disaster Loan program (EIDL). Eligible organizations are those with 500 or fewer employees. EIDL loans are 30 year fixed interest loans (3.75% for businesses, 2.75% for tax-exempt entities). Payments are deferred for one year, and there are no prepayment penalties or fees. Funds may be used for working capital and normal operating expenses.

Other Opportunities

We recommend monitoring communications from regulatory agencies, lenders, and your trusted advisors. This will help to ensure that you are aware when other opportunities arise. There have been sporadic instances of additional relief offered by the federal government throughout 2020 beyond the standard programs mentioned above. We anticipate that the government will continue to offer additional relief through 2021. Guarantee that you will be alerted when opportunities for reimbursements or other relief arises.

We at Whittlesey are dedicated to helping you succeed. If you have any questions or would be interested in discussing how to implement any of these strategies, please contact your Whittlesey Advisor.