At this point, it would be highly unlikely that any business, irrespective of size or industry, remains unaffected by the COVID-19 pandemic. Those impacts could be positive, negative, large or small, but it would be reasonable to assume that no business has operated ‘normally’ since March 2020. Given this lack of normalcy, and the common practice of using historical performance to guide future forecasting, a common question and theme that we are hearing from both lenders and borrowers is “How do we account for COVID impacts in 2022 and beyond?”

While there are some similarities in certain industries and lines of business, the specifics of how and when COVID impacted businesses is truly on a case-by-case basis. The first step in gaining an understanding of the “when” component is to develop a timeline that encompasses all impactful events throughout the pandemic. Some examples of macro events would be both the institution of and the subsequent remanding of governmental restrictions (national, state, local), stimulus infusions, and industry specific regulations/guidelines. On a more micro level, some items to be considered would be the type of business and or industry it is operating in, changes in business hours/days of operation, receipt of PPP funds and/ or employee retention credits, layoffs, furloughs, and remote work. The second step is to line up this timeline with the financial results of 2020/2021 and determine whether or not these events did, in fact, have an impact (positive or negative) on the business’s performance, and then measure that change in performance.

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