Coronavirus – and your clients’ cash flow

Coronavirus is a threat not just to human life, but also to your clients' prosperity

The global shutdown is presenting challenges to every business. But it is particularly challenging for SMEs, who may not have the resources of a large firm to weather out the storm. Whether customers are not coming in, clients are suddenly not calling, or the production floor is silent because of a lack of staff or supplies, the effect can be the same. The business grinds to a virtual halt, and the first sign that these matters are becoming serious can be your SME clients’ short-term cashflow.

Many accountants are now seeing a similar picture - one that has appeared so suddenly that most clients are completely unprepared. Just a month ago, it was business as usual in most sectors, with the coronavirus hardly hitting the headlines. By the middle of March, shops were closing and factories falling silent.  

Many thriving businesses have found that their income streams have dried up virtually overnight.

Now, the focus for most businesses - and their accountants - is getting a grip on short-term cashflow at a time when revenues seem to have fallen off a cliff. Then, when the client realises the depth of the problem when their income has effectively been turned off, the next step is to looking at the options that can help effectively preserve cash and keep business afloat in these uncharted waters.

Clients need to know exactly how much cash they have to call on and then how long they can make it last.

You need to look very carefully at your client’s operations, see where economies can be made – and at what sources of income are still open to them.

What savings can be made?

Most businesses will have stock that can be liquidated in normal times. These times are far from normal, and it is unlikely that cash can be raised by a fire-sale approach.

Letting staff go may be unwise - especially at a time when the government is keen to preserve jobs by paying 80% of workers' wages.

The only saving that might be possible in the current market may be to refinance existing financial commitments - where Rangewell can help find solutions.

But you may need a more radical approach.

The government can help

The government first introduced its surprisingly generous support measures for businesses during the budget speech on March 11. However, as stricter social distancing measures rapidly became needed, the government has taken further steps to support the economy.

The government has deferred VAT payment from March 20 until June 30. Deferred VAT is then to be paid by the end of the 2020-2021 tax year

The VAT deferment concessions may have the biggest immediate impact on helping your clients cashflow - and their prospects for survival. The VAT bill is one of the big regular costs for all SMEs. Being able to preserve that cash - earmarked for the taxman -  within the business can provide an immediate cash injection.

HMRC will not charge interest or penalties on any amount deferred as a result of the Chancellor’s announcement, but VAT returns will still need to be submitted in the usual way.

A 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England

Business rates are another constant drain on your client’s resources. The rates holiday will free up additional cash, particularly as it can be accompanied by small business grant funding of £10,000 for all small businesses in receipt of small business rate relief or rural rate relief.

The HMRC Time To Pay Scheme will allow your clients to avoid late payment penalties if they need to pay late because of coronavirus

If you believe your clients will have trouble paying a tax bill that they are already liable for, you may need to contact HMRC without delay. 

The new Coronavirus Business Interruption Loan Scheme - CBILS

This is aimed at helping small and medium-sized companies keep in business by allowing them to borrow up to £5m at preferential rates through the British Business Bank on repayment terms of up to six years.

The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, and there is no guarantee fee for SMEs to access the scheme. Interest and fees will be paid by Government for 12 months - the Government will make a Business Interruption Payment to cover the first 12 months of interest payments. 

Under CBILS, clients that were trading profitably before the crisis in any sector can apply for a loan, with the intention that the government’s involvement will allow lenders to make a positive decision. 

You may need to remind clients that, while several of the government’s initiatives are given in the form of grants or deferments, CBILS loans are also a major part of the response, and could be a key aspect of a rescue package designed to keep their cashflow positive. 

You should ensure that your client is aware of the potential they have for providing the cashflow support they need. You need to be certain that your clients have potential for a viable business after the crisis before recommending a loan. 

CBILS supports a wide range of business finance products, including Term Loans, overdrafts, Invoice Finance and Asset Finance. You need to be certain that the right facility is used - and that the most competitive loan is secured. 

However, this can be a challenge. The lending market is in a state of flux because of the crisis - and securing the most cost-effective and the most appropriate finance can be a challenge that lies outside your usual expertise. 

The solution is to call us at Rangewell

At Rangewell, we are specialists in business finance. We help all types of business access all types of funding - and we are rapidly establishing ourselves as the experts in funding for businesses affected by the coronavirus crisis. 

If your clients come to you with a cashflow problem caused by the coronavirus, or other urgent funding need, call us 020 3637 4150 - or email contact@rangewell.com, and our experts will work with you to find the solutions you need. We can discuss CBILS and CCFF, and the various other funding options available - and help you to give your clients the support they need at this challenging time.

Our service is free - both for you and for your clients.