These are unprecedented times with many businesses being forced to suspend trading and shut their doors as we wait out the viral pandemic.
The Government has introduced a number of measures to assist businesses through these times, but the inevitable flood of applications has led to many experiencing significant delays before funds arrive.
Faced with this there are several practical steps that you should be taking to protect your business and assist with cash flow.
Robust credit control
Chase debts as soon as they become due; if a customer is experiencing cash flow issues themselves, in view of the current pandemic, it may be sensible to allow a payment plan but if you do it needs be monitored carefully to ensure the terms are adhere to. You may also consider offering a small discount for early settlement.
Invoice discounting could also be considered to free up much needed cash.
Continue dialogue with existing customers; consider discussing extending credit terms or a payment plan, if required. If you have existing asset finance or loans, consider extending the terms, to reduce monthly payments, or ask for a repayment holiday. Most lenders will consider a repayment holiday in the current climate.
Taking on additional debt
If you need to borrow further monies it is always best to avoid PGs where possible. Although there are a number of lenders who can provide funds quickly, which may be tempting in such testing times, they will almost always insist on PGs and most will pursue you aggressively in the event of default on repayment of the debt.
In most cases, the Government support outlined above will be preferable if you are eligible and can get it. If you haven’t already, your next step is to talk to your professional advisors and access the suite of measures already put in place. These include:
Coronavirus Business Interruption Loan Scheme
The Coronavirus Business Interruption Loan Scheme, offering loans to small and medium sized businesses (“SMEs”), has recently been amended:
- Banks will no longer be able to ask for personal guarantees (“PGs”) for loans of £250,000 or less
- Small businesses could originally only apply if a loan on commercial terms had been refused. This is no longer the case
- Loans to businesses with turnover of between £45m-£500m can be up to £25m.
Other Government initiatives to support businesses
- Furloughing staff and having their wages paid by the Government’s Coronavirus Jobs Retention Scheme.
- Deferring VAT for 3 months and Income Tax payments due in July (under self-assessment) deferred until January 2021.
- Statutory Sick Pay relief for small and medium sized businesses (“SMEs”) – 2 weeks SSP refund per employee effected by Covid-19
- A 12-month business rates holiday for retail, hospitality, leisure and nursery businesses in England.
- Small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief.
- Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
- The HMRC Time To Pay Scheme – agreed on a case by case basis with HMRC.
Remember there is currently a three-month suspension, from 1 March 2020, of the wrongful trading provisions effectively removing the threat of personal liability during the Covid-19 outbreak should your company ultimately fail.
If your company is experiencing financial problems, as a result of the Covid-19, please get in touch to discuss your current situation and the options available. Our skilled and experienced team of Insolvency Practitioners will help you find a solution.
Please call us now on 0330 159 8080 for a FREE initial consultation.