Coronavirus means that challenging times are ahead for every business. It will come to an end though, at some point, and the most important thing that you can do is ensure your business is still here to thrive again at that point.
To ensure that’s the case, you need to take some key steps now.
In this video, we’re taking you through the most important one, that of preserving your cash.
We’re also talking about the Government’s Coronavirus Business Interruption Loans and the £3,000 grant announced in the recent Budget.
The time to act is now, so please get in touch if you have any questions having watched the video – we’re here to help!
Hi and welcome to another episode of BaranovTV, designed to demystify the world of accounts and tax and to help your business grow.
Now I have put off doing a video on this subject, but it can’t be avoided any longer, and that is Coronavirus. There’s so much in the media and everywhere else about it, you cannot possibly avoid it, it’s unprecedented, the actions, and just the upheaval that it’s causing throughout the world.
I want to talk about the most important implication it’s having on our clients and that is around cash.
With the fear and everything else, people aren’t going out, they aren’t creating footfall in a lot of businesses, they’re canceling, they’re sitting tight, they’re hunkering down, and businesses are already feeling the implications.
We’re already speaking to clients and trying to help them and trying to support them through what is an unknown process.
First off, we need to be very careful about cash, obviously we don’t know what’s going to happen, we don’t know whether the UK is going to go into lockdown, so we need to make that we’re protecting ourselves for the future, whatever that may bring.
Costs and Staff
We need to make sure that we go through our businesses and work out what we absolutely HAVE to be paying out for. We need to work out what our staff requirements are, and we need to think about whether we need to be laying staff off or whether we need to be cutting their working hours.
To do that, we need to make sure that we’re speaking to our HR advisors and making sure that we’re checking what’s in our contracts.
Beyond that, we need to make sure obviously, we’re looking carefully at what other payments we absolutely have to be making.
- That includes things like that rent, but also what else?
- What else in your business do you absolutely need to pay out?
- What can’t you postpone?
Once you’ve worked that out, you’ll get to a figure of how much you actually have to pay out every month and when you do that, you need to cut anything as far as possible.
Speak to your team, get them involved, ask them what we can cut, what have I missed?
Then you need to think about what your worst case scenario looks like.
Do you have some customers that are automatically taking your product, your service, that will continue to do so, or is your worst case scenario, absolutely no sales for a period of time?
Whatever that looks like, you need to be realistic about it, you need to plan for the worst case scenario.
Because what you’re trying to do is find what your potential gap might be.
Ideally, obviously, you’d do a cashflow forecast for the next 12 months, but at the moment, how can you? We will appreciate that that is just not going to be worth the paper it’s written on.
In the last three days of last week, Barcelona went from normal business to total lockdown, so it’s not worth doing a 12 month cashflow, you just need to do scenario planning really.
Once you’ve got your gap, you need to think about how you’re going to fill it.
You need to work out how you’re going to find finance to fill that gap, to make sure that your business will survive, whatever is thrown at it.
The thing is if you are looking to fill that now, you will be filling that gap ahead of the majority of the other businesses that are out there, who will still need to do the same process. You want to put yourself ahead of everybody else, because your business needs to come first.
So you need to make sure that your application is in in advance of the flood that will hit in the next two, three, four weeks, when other people actually realise, “Oh, this isn’t working,” and come out of the panic and paranoia that is all over social media.
Time to Pay Arrangements
The best thing to do is to respond now, but, one of the big things that came out of the Budget last week was that the government have and the Revenue have put 2,000 more people on Time to Pay phone lines. Now our advice would be that Time to Pay is a brilliant move if you want to protect your cashflow.
However, if you are still not going to have enough cash, having done that, just to get through any unforeseen circumstances, and you need to look for finance, if you have taken out a Time to Pay arrangement, it is unlikely you will be able to get finance from an alternative source.
Banks will not look at a Time to Pay agreement favourably, other lenders will not look at favourably.
So whilst that is available, make sure that you only use that when you’ve already got the extra funding that you might need. Also, if you are looking to look at the government loan, which I’ll come back to in a minute, that equally, may not be available, if you have not paid, for example, your VAT. So do think about using the Time to Pay route but make sure that you only do that if you don’t need any other funding.
Timing is everything!
Make sure that you apply for your funding as soon as you know you need it and before the impact of this is showing in your bank statements, if you can.
Because you need to portray your business as strongly as possible, when you’re putting that application in. What you don’t want to do is wait until you can’t pay all of your bills to apply for the funding, because any lenders first question is going to be, “How are you going to repay me?”
And if you can’t show that you have any hope of doing so, then you will really struggle to get any kind of finance at all.
Who do you go to to look for finance?
Well, the banks are out there, they are making the right noises, but they are still likely to be very slow to provide any financing. They also have a lot of criteria, which we all know from previously, so banks will be a route, but they may not be the best route.
Alternative funding, that whole entire market, has lots of different options out there, they can be very flexible, they can also be a lot faster than the traditional banks.
They have options such as, you can do individual invoice financing. So if you are doing, I don’t know, a £50,000 invoice to Tesco’s, you can fund just that one invoice, you can fund all of your invoices to Tesco’s, for example, if someone like that, who pays quite slowly, you might think that it’s worth doing an invoice financing route, to get those funds into your business faster. You don’t have to use that, you can set it up but then not use it, you can use it, as I said, for one invoice.
The other option is to have a revolving credit facility, which again, you only pay for if you use it. That might be the right way to go, to give yourself a buffer of cash in your account, that if you don’t use, you can then pay back, but you’ve got it there to call on, should you need it. You may end up paying interest for a couple of months or one or two months interest, but you can then get your application in for the government loan, which is going to be at more favourable rates, we hope, and then you repay whatever you’ve borrowed elsewhere.
It gives you that buffer zone, it gives you that peace of mind in the meantime.
That’s the idea of this, is to give yourself peace of mind and to protect the business.
It’s not going to negate the impact of Coronavirus on any of us, but hopefully it will get you through the worst while everyone’s in max panic mode, before everyone’s started to calm down and started to be more logical about it all.
It also buys you time to get creative and to start to think, “Well, how can I change my offer to work around the circumstances that we have? Can I move online? Can I work out how to do this with contact electronically rather than face to face? Can you be more agile?”
You can also use the time to educate your customers about how your service and your environment potentially, is safer, so the hygiene routes that you’ve taken, the different approaches that you might be able to take if you can’t move everything online.
Obviously, as ever, if you need any help with any of this, then do get in touch.
Coronavirus Business Interruption Loans (CBILS)
The two biggest options that are coming in are the government loans that were talked about in the Budget last week, which is technically called the Coronavirus Business Interruption Loan Scheme.
The first real information about that and the first tangible information which we’re all waiting desperately for, is likely to come out next week, so it’s still going to be sometime into the future, the way things are moving.
There are going to be 40 plus lenders that have access to the funds. The government is guaranteeing up to 80% of any loan, up to £1.2 million per business, and up to £1.2 billion has been made available.
These are primarily aimed at businesses will little availability of security. So businesses who can’t offer assets as security.
But, it’s likely to take time to get off the ground, if the first information about them isn’t likely to come out until next week, beyond that we’re going to have to have the lenders are going to need to get their schemes set up, get their criteria in place, get their approval mechanisms in place, all the paperwork etc.
So those are going to take time to come out, so you need to fill the gap between now and then.
Business Rates Grant
The other option obviously, is the £3,000 grant that was also announced as part of the Budget.
That is coming out and going be to be accessible via local councils. That is also likely to be very slow.
You are going to need to apply for that funding, so again, that’s another hurdle, it’s another delay. We will obviously pass out more details as we get them, but that is all that we know right now on that score.
You need to get through to the point where the options above become available, but you also need to make sure that you’re protecting your personal finances as a business owner.
It may be that if you can reduce your personal outgoings, then you can reduce the pressure on the business in terms of dividends for example.
We’ve had an email over the weekend from Halifax that talked about mortgage holidays and overdraft fees and all of those sorts of things. I have also seen that some of the other banks are doing similar offers and opportunities.
So if you have loans or borrowings or mortgages from other banks, do speak to them, find out what the situation is, and see whether there’s anything that you can do on that.
Ask your suppliers whether there’s anything you can do in terms of extending your terms, because we’re all looking to make sure that we’re protecting our businesses, and your suppliers won’t be any different. They may be actually receptive to making some sort of arrangement with you to protect your cashflow.
Check your business interruption cover. Make sure that you know what insurance you have so that you know what you’re planning for. Will your insurance cover you for anything that’s coming up at the moment?
Not all policies will.
Make sure that you’re chasing any debtors that you’ve got.
We know that everybody is scared, everyone is worried about the future, but make sure that you are chasing what you are owned.
It’s up to you, whether you make a decision based on a customer’s current situation, as to give them more credit or whether to go, ‘no, do you know what, I want it’.
You need to make sure that you’re working with relationships right now, so it possibly a case by case decision to be made.
You might want to suggest that your customers might want to stockpile your product. Depending on what you supply, it may be something that actually, they might want to stockpile that now, because your supply chain might be affected, and it may have a massive implication on them.
I’m not talking toilet rolls here, but you may need to have that conversation with people, do they need to actually over order right now? It might give you a little bit more cash coming in sooner rather than later to see you through this gap.
And finally, not the cheeriest of suggestions, but given the mortality rates, make sure that your Will is up to date.
If you are running a limited company, it is a separate legal entity. And if the company is left without any directors, you need to make sure that there is a plan in place for what will happen and that your family is protected should the worst happen, so they know what you want doing, and they know what to do.
That’s a very lengthy BaranovTV, I’m really sorry. But hopefully, it’s helpful!
As ever, as I’ve mentioned before, if you want to speak to us, if we can help in any way, shape, or form, please do get in touch. It is what we are here for, we are aware that it is uncharted territory right now, and we will do everything that we can to help you as a client.
The biggest message I want you to take from this video though, is that if you need to have finance, you need to know sooner rather than later. You need to be applying whilst your business is looking as strong as possible to maximise your opportunities in order to get that finance.
So that’s my message, keep smiling, don’t panic, and just try and look forward! We’ll be in touch very soon with more, and I’ll leave you with that.