Updated: 15th January 2021
The hospitality industry has been one of the hardest hit by coronavirus, with the lockdown and ongoing social distancing measures compromising the ability to trade. Although essential to protect people from the virus, social distancing limits the number of customers to cafes, restaurants, and other eating and drinking establishments, making financial recovery very difficult.
So if your café is struggling because of coronavirus, is there anything you can do to boost your business cash flow and deal more effectively with these extraordinary trading conditions?
If you believe your café business is approaching insolvency it’s crucial to seek professional insolvency help, but licensed insolvency practitioners (IPs) can also provide valuable advice and support before this point.
Real Business Rescue are insolvency specialists and will provide reliable independent guidance on your best options. So what might these include?
Lack of cash is a major concern at any time, but in these challenging times it can quickly lead to a slide into insolvency and permanent business closure. The government-backed Bounce Back Loan Scheme (BBLS) aimed at smaller businesses offers emergency funding with no repayments being required for 12 months.
But specific coronavirus loans aren’t the most appropriate type of funding for every business. Merchant cash advances can be a good option for café owners, and this is a form of finance based on the value of your card sales. It offers regular cash injections to support cash flow, and enables your business to recover its financial footing.
HMRC’s Time to Pay arrangement (TTP) offers extra time to pay tax arrears, sometimes up to 12 months. You would need to support a TTP application with detailed sales and cash forecasts, as well as plans for how you’d repay, but if accepted it could give your café business the breathing space to get back on track.
We have vast experience of negotiating Time to Pay deals with HMRC, and could communicate with them on your behalf. If you do have tax arrears it’s important to contact HMRC quickly, however, as it can positively influence a future application.
If your debts are increasing whilst cash flow is stalling, you run the risk of entering insolvency, but in some cases you may be able to renegotiate debt repayments informally with suppliers and/or other creditors.
Maybe you’ve had a previously strong relationship with your suppliers and haven’t missed any payments in the past? If so, they may be more open to reducing your debt payments for a while. Alternatively, we could contact them on your behalf – the fact that you’ve sought professional advice can instil confidence and demonstrate that you’re not missing payments in a deliberate manner.
If it’s not possible to rescue your café business and there’s no alternative but to close down, it’s worth knowing that it’s preferable to enter liquidation voluntarily rather than allow a creditor to petition for your winding up.
A Creditors’ Voluntary Liquidation (CVL) involves selling all business assets and repaying creditors as far as possible, but the fact that you’ve entered the process voluntarily is important.
It shows you’ve placed the interests of your creditors first, and helps to reduce the level of scrutiny your business is placed under when the liquidator carries out their investigations into the circumstance of your financial decline.
If your café is struggling because of coronavirus, it’s important to act quickly. Please contact one of our partner-led team for independent professional advice. Real Business Rescue operates an extensive network of offices nationwide, and we offer free same-day consultations.
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