Getting through COVID-19: a financial game plan for small businesses
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For the past couple of months, several small and medium-sized companies have been affected by the negative effect of the coronavirus, with most businesses laying off workers, encouraging workers to work from home or both.
Despite the fact that the UK government has made available some lending to the small and medium enterprises, there is still a long way to go when it comes to navigating through this COVID-19 era.
Additionally, not every business has the luxury of encouraging workers to work from home, or even laying off some workers. One glimmer of hope for small businesses lies in adopting some measures to help sustain their operations until the light at the end of the tunnel is in view.
First of all, every small business should check their business insurance coverage. Whether as part of an overall policy or a stand-alone policy, a number of small businesses have been covered by some business interruption insurance. Therefore, businesses that have insurance coverage should check immediately what kind of business coverage they have and what the length of their coverage is.
Business coverage policies are not necessarily the same for every business – the exclusions, the wording, limitations, etc. may vary from company to company. Therefore, take time to review your coverage policy.
And for companies without any coverage, it may be a bit too late now as most insurance companies do not offer relief from ‘disasters’ that are already underway.
Another glimmer of hope may lie in a company’s emergency budget. This uncertain period is proof of the importance of having an emergency budget. When implementing this budget, a company should be sure to cut down or eliminate unnecessary expenses such as non-essential travel costs and subscriptions.
Large projects that can wait should be put on hold in the meantime. Also, if a company is in the process of paying off debt aggressively, then now is the time to opt for a measured monthly payment system.
As mentioned earlier, the UK government has made some lending packages available for small and medium-sized companies. However, depending on what a company’s financial needs are, they may need more financial help.
There may be other companies that have to benefit from any form of a financial relief package. In such cases, one alternative for a company is to get a loan with low interest and consider refinancing a high-interest loan.
Refinancing a loan to a lower interest rate can help to reduce a company’s monthly payments considerably. And this will help make some money available during this time of uncertainty. Refinancing can also help businesses pay off some (if not all) of their debts faster.
Finally, this is the time to be more proactive with the way businesses communicate with their lenders. For example, a company that faces the possibility of not being able to pay suppliers and vendors, it is important to inform them as soon as possible. Although this may not be a pleasant conversation to have, it is important as it helps maintain trust.
