Updated: 4th January 2021
The severe disruption caused by COVID-19 has resulted in many companies losing major contracts, and with no sign of a fast economic ‘bounce back’ the threat of going out of business is very real.
But you can take action to preserve cash, prop up your business in these challenging trading conditions, and carry on until you can secure new contracts or otherwise prevent business closure.
Cash flow is going to be a key factor for all businesses for some time ahead, so you may find your customers/clients are willing to negotiate a variation in their contracts under these circumstances.
It’s highly advisable to seek professional guidance before attempting renegotiation, however, as other parties may also be experiencing unprecedented financial pressures and could have limited option themselves. It’s also important not to over commit your company and risk further financial decline.
The government’s financial measures to support businesses during COVID-19 are far-reaching, and could provide the funding your company needs to get through.
If you’re an employer, the Coronavirus Job Retention Scheme has been extended until the end of October. This could help you avoid staff redundancies, and make it easier to recommence trading when the time comes.
Two government-backed loans are available for small and medium sized businesses, and could provide crucial emergency finance to help you deal with the fallout when you’ve lost contracts.
The Bounce Back Loan Scheme (BBLS) requires no repayments for 12 months, and the Coronavirus Business Interruption Loan Scheme (CBILS) is interest-free for 12 months.
Certain sectors and businesses are eligible for non-repayable grant funding in England, which could hold the key to survival until new contracts can be negotiated. The retail, hospitality, and leisure sector in particular, has been devastated by social distancing measures and businesses could be eligible for a grant of up to £25,000.
Similarly, if you’re a small or rural business that receives small business rate relief or rural rate relief you may be able to claim a one-off grant of £10,000 from your local authority in England.
Losing major contracts will cause a severe cash shortage, and this can be difficult to deal with when it’s sudden or unexpected. This has been the case for many businesses during the coronavirus pandemic, but you may be able to access an alternative to bank lending that supports your cash flow in the longer term as well as during the immediate crisis.
Although the loss of major contracts is a huge issue for any business to overcome, if your company owns non-essential assets of value they could be used to generate cash, for example.
Similarly, funding may be obtained using the value of your sales ledger. Invoice finance is flexible and provides regular amounts of working capital throughout each month if your business is eligible.
If your company is suffering severe financial distress and has slipped into insolvency, business rescue may still be possible via insolvency measures designed to support continuation of trade.
Restructuring the company’s debt within a Company Voluntary Arrangement (CVA), for instance, may be an option if you still have regular payments coming in. Alternatively, company administration would provide the creditor protection you need whilst a plan is formulated.
Losing major contracts because of coronavirus is worrying, but our licensed insolvency professionals at Real Business Rescue are here to help. We offer reliable independent advice, and can let you know your best options to keep your business afloat. Please contact one of the team to arrange a free same-day consultation in complete confidence.
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