Businesses should consider all options to preserve cashflow
PUBLISHED: 17:32 09 April 2020 | UPDATED: 17:32 09 April 2020
With cashflow an increasing issue, Sam Grimmer of Lovewell Blake has some tips for businesses seeking to survive until government assistance starts flowing.
‘Turnover is vanity, profit is sanity, cash is reality’: this has never been more relevant. For businesses which have seen income depleted, cashflow management has become a necessity. This has been exacerbated by the fact that little of the promised government assistance for businesses has yet started to flow through.
Grants for small leisure, hospitality and retail businesses, and those for firms which pay little or no business rates are being paid, but employers are unlikely to see payment for furloughed workers until the end of this month, and the self-employed must wait until June before payments reach their accounts.
For many, simply surviving and paying wages has become a major challenge – and finding sources of finance is a priority. Before seeking new loans, businesses assess what expenditure they can delay to cover the most urgent bills.
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HMRC has announced that VAT payments which are falling due can be deferred; and Time To Pay arrangements are available for a range of other taxes, including corporation tax, self-assessment income tax and PAYE costs.
Then talk to your existing bank to see if there is flexibility around existing borrowing. Lenders are increasingly open to repayment holidays for loans, mortgages and HP arrangements, giving you breathing space before government help starts coming through. It is often easier to arrange a temporary increase to your existing overdraft than applying for additional financing.
Your existing bank is the starting point for the Coronavirus Business Interruption Loan scheme too. Because you already have a relationship, the application process should be simpler and faster. However, consider making parallel applications to one of the many challenger banks. Many see this as a long-term opportunity to build new relationships, so they may be more receptive.
Whatever route you take, you’ll give yourself the best chance of success if you’re well-prepared. So prepare cashflow forecasts for various scenarios (eg different lengths of lockdown), have historical accounts to hand, and at least a basic business plan about how you plan to emerge from the crisis. There may be increased flexibility from lenders, but they are still operating lending criteria.
Sam Grimmer is a manager in the Corporate Services and Corporate Finance teams at Lovewell Blake.
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