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5 Financial Tips for Companies Struggling Due to the Coronavirus

By Contributing Author

The coronavirus outbreak has caused widespread disruption on a scale that has never been seen before. Unlike the financial crash in 2008, the pandemic has affected just about every business sector, with some forced to close their doors to customers and watch their revenues plunge overnight. 

The good news is that there does seem to be a light at the end of the tunnel. The development of a potential coronavirus vaccine means life could return to something approaching normal by spring 2021. With a possible end in sight, this guide aims to help you get your business through the next few months so it can return to profitability.

  1. Be aware of all the government assistance available

Even now, there are new announcements about the type and level of government assistance available to small businesses. Earlier this month, the continuation of the furlough scheme was announced and the grants available on the Self-Employed Income Support Scheme were doubled, so make sure you regularly check what help you could be eligible for on the Gov.uk website. Here you’ll find details of everything from the tax payments you can defer to maintain your cash flow to the low-interest loans you can access.

  1. Apply for a Bounce Back Loan

If your small business was profitable and viable before the pandemic but you are now struggling to stay afloat, a Bounce Back Loan could provide the low-interest, emergency funding you need to make it through the next few months.

Bounce Back Loans can provide small businesses with up to 25% of their turnover up to a maximum of £50,000. The loans are approved quickly and are interest-free for the first year, with an APR of 2.5% thereafter. A real benefit for small business owners is the fact the loans are 100% guaranteed by the government. So, if the company defaults, it would not fall on the business owner or company directors to repay the loan. Applications for the Bounce Back Loan Scheme remain open until 31 January 2021, making this a viable solution for businesses that are short of working capital. 

  1. Make a repayment arrangement with HMRC

If you’re still struggling to pay your business’s tax bills even with the payment deferrals offered in the government’s Covid support package, there is a potential solution available to you. HMRC’s existing Time to Pay scheme has been extended to give companies additional breathing space to settle their existing HMRC liabilities. 

If you have outstanding VAT, PAYE, corporation tax or income tax liabilities, contact HMRC at your earliest opportunity. An adviser will discuss your financial position with you, and if you have conducted your tax affairs well in the past, there’s a good chance you’ll be able to negotiate a Time to Pay Arrangement. That will allow you to repay your tax liabilities in monthly instalments over a typical period of 12 months to alleviate cash flow pressure and prevent further late payment penalties being added to your bill. 

  1. Restructure the business

The disruption caused by the coronavirus will give you the time you wouldn’t ordinarily have to look at the business objectively and identify where it’s underperforming and what costs you can cut. Restructuring the business can mean any number of things, from changing the business structure to stripping back the services and products you offer or refinancing its debt. This process could be enough to streamline the business, reduce its costs and put it in a position to be more profitable once the pandemic is over.  

  1. Consolidate your debts with a CVA

If you have several creditors that you are struggling to repay, such as suppliers, landlords and HMRC, you could choose to consolidate your debts using a formal insolvency procedure called a Company Voluntary Arrangement.

A CVA is a legally binding agreement that must be approved by 75% of your creditors. Once it has been agreed, the CVA prevents your creditors from taking legal action against you to recover the money they are owed and allows you to repay your debts, in part or in full, over a period of up to five years. You will be free to continue trading during this time, and as long as you make the agreed payments every month and keep up with your existing liabilities, you will be debt-free by the end of the process.     

There are better times ahead

While the near-term may still look quite bleak, it’s important to remain optimistic and do everything you can to keep your small business afloat. Better times lie ahead, and the hard work you do now will enable your business to survive this unprecedented period of uncertainty and go on to be profitable and successful in the future. 

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