Adapted from an email, April 9, 2020.

As a family business advisor working primarily with small to medium-sized privately held companies across a wide array of industries, the past couple of weeks have been extraordinarily busy. 

For years people have asked me why family businesses have such conservative balance sheets, with high levels of cash and low amounts of leverage. Today the answer is obvious as we undergo the financial and economic challenges as a result of COVID-19. 

In order to withstand events such as these, companies need to be on strong footing. It is a key reason as to why multi-generational businesses have been able to survive for decades. Despite the strong financial position of the various companies I work with, there is still a need to access additional capital over the next few months. 

“What will be made clearer as we navigate through this crisis is just how interconnected the U.S. economy is and that no industry will find itself immune to the impact of COVID-19.”

While the CARES Act and the related $349 billion in the Paycheck Protection Program (PPP) is helpful, the government will need to do more. I would not be surprised if there are multiple versions of the PPP over the coming weeks. 

During the first week or so of the crisis, specific industries were identified as sources of economic strain (e.g. airlines, restaurants, etc.). But what will be made clearer as we navigate through this crisis is just how interconnected the U.S. economy is and that no industry will find itself immune to the impact of COVID-19. 

If there is a takeaway from this crisis from an economic perspective, it should be the importance of small and medium-sized businesses. They are the backbone of the U.S. economy and critical to the financial stability of the country.