Keeping your business afloat during times of crisis can be overwhelming. But there are a lot of measures we can take to do just that. Here’s how to keep your business running during a crisis.
We’re in unsettling times. The COVID-19 pandemic is shuttering some businesses outright while others are struggling with cancellations and project postponements. And with school closures expected to continue through next term, parents may struggle to work efficiently, if at all.
Yet, despite it all, we are carrying on. Yes, these are challenging times, but there are things we can do as small business owners to mitigate the financial implications of COVID-19 and see our way through to the other side.
Even if you feel that your business is doing fine for now, it’s a good time to consider your cashflow position. Many, many businesses, whether an SME or a global giant, will struggle with cashflow during crises. If you already have funding in place prior to the crisis, or near the start of a crisis, you will be in a much stronger position going forward.
In fact, it is vital that the funding is in place before the actual need for it arises. Cashflow financiers review your previous six months of financial statements in order to determine your current turnover. This then determines the maximum funding that’s available to you. Delaying your request for funding until things have already reached a tipping point will negatively impact the level of unsecured finance available to you. And that will negatively affect your ability to keep your business running, and running well.
The Government has put in place certain economic measures to help stimulate the economy, boost consumption and stave off recession. Some of these are designed with the small business particularly in mind.
Boosting Cash Flow for Employers is one measure. It will provide from $20,000 to $100,000 to eligible businesses in the form of credits on activity statements.
Another is the apprentice and trainee subsidy. If you have apprentices or trainees in your business you may be eligible for up to a 50% wage subsidy (or up to $21,000) for the wages of those apprentices and trainees.
Eligible businesses will receive $1,500 per fortnight per employee. This applies to full-time workers, part-time employees, sole traders and casuals if they were employed with the business as of 1 March.
Eligible sole traders aren’t being left out either. They will be able to access support via a Coronavirus Supplement, which is a $550 maximum payment per fortnight.
The Government is also offering a 50% guarantee to lenders who are providing short-term, unsecured loans to small and medium businesses. This will provide businesses with the ability to access funding for immediate cash flow needs by enhancing lenders’ willingness and ability to provide credit.
Finally, you can also take advantage of tax breaks in the form of increased access to instant asset write offs and increased depreciation benefits. These are things you can talk to your accountant about as well or reach out directly to the ATO at 13 28 66 or via the Coronavirus Business Liaison Unit.
Banks are also offering a pause on loan repayments for both business and home loans for up to six months. For business loans, this is limited to businesses that are adversely affected by the virus, but under the current circumstances, it’s likely that will be most businesses. They are also deferring loan payments for small businesses, including car, plant and equipment loans that are financed through the business.
These deferrals could offer you a welcome respite during these challenging times, and it’s worth speaking with your bank directly, or with your finance broker, to understand your eligibility.
It’s important to remember that interest will keep accruing on both business and home loans while your repayments are paused. So, when it comes time to begin making payments again, you’ll need to increase your repayments to cover the accrued interest and repayments over the remaining loan term. In some cases, you may have the option to extend the loan term instead. These might not be ideal choices for you. If not, you might want to consider making part payments despite the pause, though we know this may be easier said than done.
The Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority have released measures responding to the COVID-19 pandemic. These include providing banks with access to $90 billion in funding at a rate of 0.25% for three years. The banks have responded by cutting interest rates on small business loans by as much as 100 basis points. The RBA is taking these steps to ensure that small businesses, just like ours, keep their doors open.
Banks are also reducing interest rates on one, two and three year fixed rate mortgage loans by as much as 70 basis points to as low as 2.29%. You should consider whether any funding that you currently have, or currently need, can and should be accessed at these reduced rates.
Focus on managing your business in line with your business continuity plan. You should make sure you have enabled working from home, remote login options and online services if possible. You should also get across online technologies such as Zoom, Trello, Dropbox, SugarSync and Facebook Messenger for Business, among others. This is the time to think of new ways to manage remote teams and clients and to be flexible with both your processes and time. New, flexible approaches will allow you to adapt to your new business reality.
It’s also important to maintain good contact via phone or video conferencing. As business owners we have a very real need to talk to our clients and our colleagues. Working remotely can mean some form of ‘business as usual’ but no one works well in a vacuum.
It’s easy to be distracted during a crisis. And certainly the health and wellbeing of yourself, your family and your team is the most important thing. However, understanding how to keep your business running and in the black will ensure that you weather this crisis well. You’ll be better able to continue offering your services or products once you’re on the other side.
Stapleton Finance is here to offer assistance with your business at any time, but especially throughout the COVID-19 crisis. We need to work together as business owners. Please do contact me via email or phone.
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