COVID 19

April 7, 2020

Dealing with the COVID-19 cash flow crisis

Dealing with the COVID-19 cash flow crisis

The outbreak of COVID-19) and its grip on businesses, industries and economies are unprecedented and the main issue with most companies is low or slow cash flow. Simply not having the cash to pay staff and overheads has become a harsh reality for many and though the UK and Irish Governments have taken steps to implement measures to support businesses during this time, the process and waiting for financial aid is taking its toll.

The Government financial support package includes:

  • a Coronavirus Job Retention Scheme
  • deferring VAT and Self-Assessment payments
  • a Self-employment Income Support Scheme
  • a Statutory Sick Pay relief package for small and medium-sized businesses (SMEs)
  • a 12-month business rates holiday for all 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 Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank
  • a new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans
  • the HMRC Time To Pay Scheme

Check the Government business support website for answers to frequently asked questions.

In addition to the measures now being implemented, the Government has also announced it will be making £330 billion available to business as a consequence of the COVID-19 outbreak – though there is still no news of when this will be available and how it will be apportioned.

The financial support package may be good news, but in reality, many companies can’t afford to wait for the implementation with the process looking like it could take over 6-8 weeks. The GGF understands that access to some of the schemes is in now place, but the sheer volume of applications is reportedly causing an administrative pileup.

To access cash in other ways is also available. There are many lenders willing to give some external funding in the form of loans and overdrafts to use for working capital, purchasing stock, asset buying and corporate finance. However, it is best to try and use your existing lender in the first instance, as you are more likely to get more favourable terms and also a quicker outcome.

Though it is easier said than done, it might be worth taking a step back from your business and perhaps, with an independent financial adviser or accountant, look over your accounts and identify where and when the holes in your cash flow may appear, so you can prepare for the different scenarios.  

Some companies are operating what is known as a “smoothing” exercise with their cash flow. This is where you look at larger monthly payments and see whether you can break them down into more manageable chunks for a short period so that your cash flow is more consistent.

The COVID-19 crisis has shaken the entire business world to its very roots. It has had devastating effects but it is a time to avoid knee-jerk decisions and try and make sensible business decisions that will allow your company to survive the crisis and minimise any long term damage.

Visit the Government Business Support web page (link below) to find out how you can gain financial help during these difficult times.

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

The GGF will continue to lobby the Government for more financial support for our industry and will update members on a regular basis.

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