The Financial Impact of a Pandemic

BUSINESSES IN NEW HAMPSHIRE CAN SUCCESSFULLY NAVIGATE THIS CHALLENGING TIME

In New Hampshire, Gov. Chris Sununu had declared a state of emergency that shut down all nonessential businesses and required people to stay at home. As the state went dark, businesspeople began to grapple with a new — and unsettling — reality.

“It created a constant state of change where businesses had to pivot very quickly from what they knew as business as usual, understand what was occurring in their new world, and figure out how to adapt,” says David Weed, Assistant Vice President of Business Services for Service Credit Union. He adds that all aspects of business — operational, logistical, governmental, human resources — presented “impacting, unfolding” challenges.

No business was untouched by the rising cases of COVID, but some were affected more dramatically. The state’s hospitality industry was particularly hard hit. “If you were running a hotel or a restaurant, you went from 100 mph to zero overnight,” says Earle Rosse, Senior Manager for Commercial Lending Business Services at Service CU. The same was true for inns, B&Bs, convention centers, conference centers and retail stores. Seasonal businesses fared the worst.

With no customers, the cash flow stopped in a hurry. What didn’t stop — the bills for overhead. “If you were heavily leveraged, without much cash in reserve, you had a big mountain to climb,” Rosse says. That reality wasn’t confined to the hospitality industry; it quickly spread across all sectors of the state’s economy.

FINANCIAL RELIEF

Service CU, the largest credit union in New Hampshire, stepped in to help provide relief. It facilitated the federal Paycheck Protection Program (PPP), which gave customers access to capital they needed to survive. David Weed led the process to develop procedures that enabled the Service CU team to quickly process hundreds of PPP loans throughout the region. He was recognized for his efforts with a NH Business Review 2020 Business Excellence Award. (See sidebar on page 4.)

There were other programs that also cushioned the blow, including the state’s Main Street Relief Fund and Small Business Administration loans. Though those programs are now winding down, Weed says, “Those sources enabled a number of businesses to operate through a very stressful situation.”

Another way Service CU helped businesses was through payment deferrals. If businesses could demonstrate an impact from COVID, such as having to shut down

because of government restrictions, Service CU could defer payments on loans for up to six months. Requests for deferrals are now back to normal levels, but Weed says, “Even this year, there are some. We try to support the businesses whenever we can.”

On an ongoing basis, there is a complete range of depository services, like cash management, which has continued throughout the pandemic. Even though many banks stopped commercial lending early in the pandemic, Service CU did not. Rosse says, “Those were our members who needed to stay open and needed financing to do it. We tried to make sure they were able to.”

YET MORE CHALLENGES

Lack of cash wasn’t — and isn’t — the only challenge that COVID has created for businesses. Hiring and keeping employees is another. “Businesses have always worried about finding good people who will come and stay for a while, but that worry has just grown tremendously,” Rosse says.

Even with all-time-high wages, incentives and bonuses, “there’s nobody around to take the job,” he says. And, if businesses are able to hire someone, they often don’t show up, or leave after a few days. Why? Rosse says no one seems to know why, but one thing is for sure: “No company I know feels totally confident about their ability to attract and keep good, talented people.” An aging population in New Hampshire further dilutes the pool of possible hires.

In light of diminishing options for staffing, David Weed says each business has to do a risk analysis. “They have to ask, ‘With this new reality, can I physically operate in the same manner I did before?’” For many businesses, the answer is “no.” And that means limiting services, limiting hours, keeping employees safe, and working with them if they have constraints.

To pay the higher wages required in a reduced labor market, businesses have had to raise prices. “If you have a restaurant that had an average cost of employees at, say, $14 an hour, and all of a sudden that number goes to $18 an hour, the only alternative they have is to raise the price of the bacon and eggs they’re selling,” Rosse says.

That upward pressure on prices helps to fuel inflation, which has hit highs not seen since the 1980s. That means higher prices for goods and services of all kinds. And, adding to the challenges, there are serious supply chain issues, making it difficult to purchase needed products. “In general, two to three months isn't atypical for delays, sometimes it’s up to a year,” Weed says. “It’s continuing to impact businesses across the board with no real end in sight.”

THE ‘NEW NORMAL’

Ask Weed what business life will look like once the pandemic recedes, what people are calling the “new normal,” and he says it’s anyone’s guess: “We don’t know what we don’t know.” But taking the right steps now can make a big difference in how well businesses weather any uncertainty. In general, he says businesses are going to need to keep their financial house in order, so that they can pivot to adjust to the changing environment. That includes having six months of capital reserves.

Working remotely is likely to continue to some degree, he says, and that will mean the rebalancing of office space in some communities. Rosse, who handles commercial real estate lending, agrees. “Do we need a huge office building where 500

people show up to work every day?” he asks. “I think it’s going to be a long time before the working environment looks like it did prior to the pandemic, where everyone got up in the morning and went someplace to work.”

Remote work has intensified a challenge for businesses that existed pre-pandemic: cybersecurity. Migration to a digital platform creates many more issues about keeping proprietary information safe, keeping customer information safe, and reducing the threat of fraud. Rosse says those challenges do have a plus side: It’s “accelerated the pace of the required technology by eight or nine years.”

Take Service Credit Union’s switch to a remote workplace for many back office employees, for instance. Weed says the transition took just three days. He says it’s “thanks to the company’s IT infrastructure and a very robust online banking platform that allowed us to move to remote quickly, all the while maintaining security and compliance.” Rosse adds, “Our IT team worked relentlessly through the pandemic. That we’ve been able to do this — while safely maintaining an extraordinary level of in-branch office work to serve our members — was miraculous.”

SUCCESS DESPITE THE UPHEAVAL

As daunting as it seemed for businesses in the early days of the pandemic, many ended 2021 in the black — and then some. Weed says Service CU, despite everything, had record volume and growth this past year. Many others — such as Bob Coco, owner of Newfound RV Park and Campground (see story on page 8), and John and Mary Kendzierski, owners of the Inn at Ellis River (see story on page 6) — have also successfully navigated the pandemic.

That’s not to say there aren’t still dangers ahead. As the explosion of the Omicron variant has demonstrated, this isn’t likely to go away anytime soon. “Unfortunately,” Weed says, “we’re going to have to become accustomed to living with the virus.”

Businesses have been through tough periods before — oil embargoes, recessions, a neardepression and soaring interest rates, among them. But, Rosse says, “The unsettling part of this is you have no idea how bad it will get and how long it will last. It’s never knowing what you’re going to find tomorrow when you open the front door. … The pandemic and the effect on businesses is a watershed event, a turning point, and it’s going to cause some shakeout in the general business community.”

But the threat can be mitigated, Weed says, with the help of trusted partners who understand and can help. “Bring in those trusted partners and have that conversation to adapt, succeed and continue to grow.” n