As the COVID-19 crisis intensifies, the threat increasingly looks existential for many small and medium-sized enterprises. Facing collapsing revenues in the weeks and months ahead, particularly in consumer-facing sectors such as retail, leisure and hospitality, most SMEs do not have the financial headroom to survive. Without help they will be forced to close their doors.
However, while there is no sugaring the pill, SMEs in the UK aren’t entirely on their own. Rishi Sunak, the Chancellor of the Exchequer, will today announce further Government help for businesses struggling to cope with the virus, having already unveiled some measures in last week’s Budget. And the Government is not the only source of support. The Federation of Small Businesses recommends talking to all of the following groups about the assistance they may be able to provide.
The message from the insurance industry on business interruption cover isn’t encouraging. If you’re forced to shut up shop for a while, you’ll only be able to claim on such insurance if your policy covers closures caused by any notifiable infections disease; the majority don’t, instead citing particular conditions.
However, if you do have this cover, it’s worth checking the terms – and talking to your insurer or broker for definitive advice. Also look into what other insurance might pay out. Do you have key person insurance, for example, that pays out if a senior figure in the business is unable to work? Could specific event abandonment or cancellation cover be called upon? Also check your liability insurance, to see whether you’re insured against any claims from employees, customers and members of the public related to the virus.
The Government is making it clear that it expects the banks to take a sympathetic approach to small business customers during this crisis. The Bank of England has also made funding available to underwrite banking support to SMEs, both directly and through a scheme that will be run by the British Business Bank.
Talk to your bank about the help that it might be able offer your business. That might include new credit facilities such as overdrafts or loans, or payment holidays on existing commitments. It may also be prepared to relax the terms of your loans – if you have covenants you’re in danger of breaching, for example.
In these tough times, it is going to be crucial to keep cash flowing through your business. Your larger customers can play an important role here and are coming under pressure to speed up their payment processes. The supermarket group Morrisons, for example, has already moved to paying its 3,000 suppliers immediately, rather than expecting them to abide by normal payment terms.
Talk to your customers about who is in a position to pay sooner rather than later. If you have yet to invoice for work or goods and services already supplied, do so as soon as possible. Where you have payments overdue, chase them straight away. Bear in mind that accounts departments may soon be operating on skeleton staff, so focus on the payments process before it’s too late.
Your tax authorities
HM Revenue and Customs has launched a dedicated telephone helpline for businesses looking to find out more about its Time to Pay service (0800 015 9559). This potentially gives businesses more time to settle their tax bills in exceptional circumstances and the Government has already indicated that HMRC will look favourably on claims related to COVID-19.
HMRC is also the authority to talk to about the Employment Allowance, which offers financial support to employers with a National Insurance bills. It’s also likely that the authority will be given the job of helping smaller businesses claim the Government support for sick pay costs that was announced in the Budget.
Elsewhere, you may need to talk to your local authority about your business rates bill, where there was also additional help in the Budget. The detail of how this help will be be delivered is still being worked out, but the support is potentially valuable to hundreds of thousands of SMEs. Some local authorities are also considering grants and hardship funds for small businesses and the self-employed.
It’s possible that your landlord may be prepared to discuss reduced rents or even a rent holiday for a period, particularly if that makes the difference between keeping you as a tenant for the longer term and having a property stand empty. Major landlords are being urged to help SMEs where they possibly can and this is definitely a conversation that’s worth having.
Finally, it’s crucial to keep track of the support that ministers are unveiling for SMEs, entrepreneurs and the self-employed – and to claim all the help you’re entitled to. The picture will inevitably change over time, often very quickly, as the Government responds to the public health and economic impacts of the crisis.
The Department for Business, Energy and Industrial Strategy has now set up a business support service for small business owners in England seeking advice on how to cope with the impacts of COVID-19 (0300 456 3565, email@example.com). Similar services are available in Scotland (0300 303 0660), Wales (0300 060 3000) and Northern Ireland (0800 181 4422).