In line with the prime minister’s announcement on Sunday of the gradual easing of lockdown following the COVID-19 outbreak, many businesses and staff are returning to work this week or will be preparing to do so in the coming weeks and months.
While normality is still a way off, businesses should be putting plans in place as to how they can restart their operations, implement the appropriate social distancing measures, and begin the road to recovery. However, doing so may prove difficult if your business has faced a period of downtime or falling profits as a result of coronavirus interruption.
No matter what issue your business is facing during this time, financial planning can help you to improve cash flow, boost productivity, and get back to a state of success. We have put together this guide to explain how you can prepare your business for life after COVID-19, including what financial support you can utilise to help you overcome the barriers left by the UK lockdown.
- What to do if your business is facing financial struggles following COVID-19 interruption
- What do if your business faces high demand upon return
- How to take your staff off of furlough leave
- Get tailored advice for your business
What to do if your business is facing financial struggles following COVID-19 interruption
The outbreak of coronavirus has posed an unexpected period of reduced output for many businesses, which has resulted in them facing financial obstacles. While the easing of lockdown may be welcome news to these businesses, allowing them to work towards post-coronavirus output levels and begin to improve revenue, restarting operations may also require a financial investment that these companies do not currently have access to. Funds will be needed to bring back the necessary staff, purchase stock and fulfill any other costs involved with everyday operations – and if a business has faced a period of downtime, they may not have the cash flow to address these issues.
Fortunately, there are funding solutions available to these businesses that are struggling. These include government-backed schemes, set up specifically to help companies during COVID-19, such as the Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan Scheme. These schemes are open to any small businesses that have been affected by the coronavirus and can be a great way of financing your business if your cash flow has taken a hit. Both schemes are still open, so be sure to utilise them while you can.
Asides from the government support currently being offered, other types of finance are still available giving struggling businesses the necessary injection of funding. Trade finance is one: if you import, this can cover the funding gap between an order placed by a customer in the UK and payment required by your overseas suppliers by allowing to source the stock you need without having to pay upfront from your own funds. This means you can take and fulfil additional orders even if you don’t have all the funds in place right now. A variation on the same theme is supply chain finance, which funds your supply chain within the UK.
Another option is invoice discounting. As you send out your invoices, a pre-agreed proportion of each of those invoices could be drawn down by you direct into your bank account, once your lender receives a copy of the invoice. This means you get a relatively instant sum of cash from your invoices, rather than awaiting payment from your clients, which you can invest straight into your business.
Sale and leaseback is also a valuable option for businesses to obtain funds for their business. With this, you sell any plant or machinery that you currently own to a lender for a lump sum, who will then allow you to lease it back from them in return for monthly instalments. This only works where you have sufficient equity in your plant and machinery, but it does mean that you can continue to use said equipment whilst getting a cash injection.
Finally, one way that you can improve cash flow internally is by trimming expenses. Before restarting your operations, you should take a comprehensive look at your business and work out any costs that are not essential – including external services, supplies, or even renegotiating any current payments you owe. These should then be removed from your operations; they can always be re-introduced later down the line when your business is in a better state. By cutting these costs now, you can preserve your cash in the business and focus it on increasing your productivity and output.
What do if your business faces high demand upon return
For some businesses, reopening their doors may lead to a sudden burst of demand: particularly if they have a loyal customer base who have been unable to make their usual purchases, or if they provide solutions to problems people may be facing as a result of COVID-19 (such as IT services or medical suppliers). If you have experienced a period of downtime, the thought of meeting this demand may be daunting – but having the right funding in place will allow you to do so.
The current commercial loan market is mainly preoccupied with struggling businesses, so seeking funding for growth can be a challenge. This is where alternative and smaller lenders come into play: they tend to have access to a wider variety of funding options, making them more able to lend to businesses that are flourishing during this time. Research what alternative lenders are out there, or get in touch with a broker who can make recommendations, and find out what loans they can offer you.
We have already mentioned invoice finance as a solution for struggling businesses, but it can also help companies who are facing increased demand by allowing you to receive partial payment of your invoices rather than waiting for your customers to pay. This increases your cash flow, giving you funds to invest in your business growth, and fulfilling additional orders. Similarly, trade finance can help you to fulfill orders before you receive payment by funding any imported supplies you need so that you can start meeting the demand of additional orders without upfront payments in place. By using both together, you can use the invoice discounting funds to pay off the trade finance lender, this tends to be the preferred exit for many trade finance lenders.
Finally, if additional demand leaves you requiring new equipment and materials your business does not already own, leasing or hire purchase could be the right solution for you. Using these types of funding, allows you to spread the cost of plant, machinery or equipment purchases.
How to take your staff off of furlough leave
One of the government-backed schemes that many businesses have utilised during the UK lockdown is the Job Retention Scheme, in which the government pays 80% of your employees’ wages so long as they do not do any work during the period in which they are furloughed. While this has been helpful for businesses in retaining their staff during times of reduced productivity, companies wishing to return to normality will now need to start the process of taking their workforce off of furlough.
Doing so requires you to have the funds in place to pay your staff wages, so make sure you have the finance in place to do so. It is also worth doing some careful planning to work out precisely what staff you need and when; you don’t want to risk bringing back more staff than your business needs (or can afford) if it is going to place a financial strain in place. Instead, consider a gradual return of your staff as your revenue and productivity increases. The furlough scheme is currently due to end in October, so some tough decisions lay ahead for businesses and this needs to be planned in very carefully with the appropriate HR advice.
When removing any staff member from furlough, you need to ensure they have been on furlough for a period of three weeks or more, as this is the minimum period you can furlough staff to apply for HMRC funding. After this period, staff can be brought back into your business without any set notice, and this is a way that you can rotate your staff.
If you are bringing staff back into the workplace, make yourself aware of the government guidelines for doing so safely, which will mean implementing social distancing measures and other practices into your business.
Get tailored advice for your business
Businesses are dealing with unprecedented times currently as they deal with the ramifications of COVID-19 and begin the road to normality. However, having the right finance and preparations in place can make the process smoother, whether you are trying to overcome a downturn or meet new demand.
If you would like tailored advice for your business, we can provide guidance on available funding solutions. Our independent and experienced advisors can discuss your options with you and provide impartial advice. Please call the team today for a free consultation on 0203 327 0567 or email [email protected].