‘And if you can keep your head when everybody around you is losing his / hers, then it is very probable that you don’t understand the situation.’ - quote taken from an anonymous newspaper article published in Rhinebeck, New York in September 1935.
This quote always pops into my mind when facing into a challenging situation. It is not true of course, but its important to retain your sense of humour when in a crisis. Covid-19 is causing very serious financial challenges for the vast majority of businesses in Ireland – some notable exception being supermarkets, food suppliers and medical equipment / PPE suppliers.
The key to surviving this crisis lies in remaining calm and working through things rationally and logically. There are two key areas on which businesses should focus their attention – micro-managing cashflow and accessing financial (and non-financial) supports that have been put in place by the government.
Micro-manage your cashflow – with regards to cashflow, I recommend that all businesses do the following;
Review accounts receivables. Contact all customers to get an update on payment status – ie is the customer able to pay on time, if not, when can you expect payment
Review accounts payables. For each, try to defer / delay payment as much as possible.
Review all of your business overheads – reduce or delay any expenses that you can. Delay all discretionary spending.
Bank loans – contact the bank to request a holiday on the monthly repayments or perhaps switch to interest only payments until after the crisis is over.
Contact Revenue through ‘MyEnquiries’ on ROS to get permission to delay payments, including the suspension of monthly direct debits that may be in place.
Check if your insurance policy covers you for an interruption in your business, or a temporary business closure, caused by Covid-19.
If, having taken all possible actions referenced above, you are still going to run out of cash during the crisis, consider applying for one of the government working capital loan schemes. The options are as follows;
Microenterprises can access Covid-19 loans of up to €50,000 from MicroFinance Ireland. The terms include a six months interest free and repayment free moratorium, with the loan to then be repaid over the remaining 30 months of the 36-month loan period. Businesses can apply through their Local Enterprise Office or directly at microfinanceireland.ie.
The €200m SBCI Covid-19 Working Capital Scheme for eligible businesses supports loans from €25,000 up to €1.5 million (first €500,000 unsecured) with a maximum interest rate of 4%. Applications can be made through the SBCI website at sbci.gov.ie.
The Credit Guarantee Scheme supports loans up to €1 million for periods of up to seven years. Applications can be made to AIB, Bank of Ireland and Ulster Bank. The purpose of the SME Credit Guarantee Scheme is to encourage additional lending to SMEs by offering a partial Government guarantee (currently 80%) to banks against losses on qualifying loans to eligible SMEs.
It is important not to take unilateral action, especially in the case of loan repayment and utility bills, as this could impact your credit rating.
Ideally businesses should prepare detailed weekly cashflow projections covering the next 12 weeks. These projections should be reviewed and updated at least weekly to make sure issues are identified and managed as early as possible. If you need assistance with doing, this contact your accountant or your Local Enterprise Office for help. Alternatively, if you contact me through my website, I will email a cashflow template to you.
Avail of supports that have been put in place by the government and state agencies – these supports include the following;
Covid-19 Temporary Wage Subsidy Scheme – subject to meeting some basic criteria the government will refund employers 70% of the net income of their employees for a period of 12 weeks. According to the briefing documents, the payments will generally be made by Revenue within two working days of receiving the required information from the company. Further details are available on the Revenue website.
Covid-19 Pandemic Unemployment Payment – This is a payment of €350 per week. It is available to employees and the self-employed who have lost their job on (or after) March 13 due to the Covid-19 (Coronavirus) pandemic. The Covid-19 Pandemic Unemployment Payment will be in place for the duration of the crisis. Further details are available on the Revenue website.
Business Continuity Voucher is now available through Local Enterprise Offices. This is open to sole traders and companies across every business sector that employ up to 50 people. The voucher is worth up to €2,500 in third party consultancy costs and can be used by companies and sole traders to develop short-term and long-term strategies to respond to the Covid-19 pandemic. The goal is to help business owners make informed decisions about what immediate measures and actions should be taken to protect staff and sales.
The economy will bounce back, so it is critically important to do everything in your power now to ensure that your business does not run out of cash during the crisis.
Business owners that keep a cool head, micro-manage their cashflows and avail of the government supports will considerably improve their chances of surviving.