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How does a business pay its staff and survive during what could be the many months of COVID-19?

View profile for Stephen Downie
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As with all businesses, certain variable costs are linked to the turnover they generate and can ebb and flow with changing demand.  However, other fixed costs remain, regardless of the success of the business. 

It is these fixed costs that need to be met, even if there is little or no demand for the goods or services you sell.  At times like these, liquidity is key and the government has publicised or may publicise the following:

  • Corporate financing for all UK companies where the government will purchase short-term debt
  • Business interruption loan guarantee schemes which guarantee up to 80% of the loan and pay all interest charges for the first six months
  • Business rate holidays for retail, hospitality and leisure businesses
  • Cash grants of up to £25,000 for retail, hospitality and leisure businesses operating from smaller premises
  • Cash grants of up to £10,000 for some small and rural businesses from their local councils
  • HMRC will consider proposals by a business to pay its taxes over a period of months, through time to pay agreements
  • Temporary suspension of tax payment deadlines (including VAT) is also being considered.

Most of the above options can be explored at the UK government website.

However, there are also other solutions available. These include:

  1. Asset financing as a form of obtaining funds to ensure your business’ survival
  2. Invoice discounting to avoid the delays caused by non-paying debtors (who may be facing similar short-term problems)
  3. Refinancing at better rates (the Bank of England base rate has been reduced to 0.1%) so that funds can be released with minimal impact on the monthly cost to your business during this period
  4. If the business is in vital need of funds or simply cannot survive, but is otherwise viable, then a restructuring mechanism may be appropriate whereby the business and its assets are separated from its debt and the business cannot continue.

Additionally, now is a time when a business should consider how to prepare for acquiring new businesses or refinancing: this pandemic will not last for ever and afterwards there may be opportunities for all.

In summary, there are options, but with this being life for possibly the next four months, it is important that business owners act quickly rather than leaving it too late, by which time the demand for the above may have exhausted most or all of these remedies. 

Being front of the queue is vital.

This article represents our understanding of the law in England and Wales as at 20 March 2020. Its contents are not intended to serve as legal advice and should not be considered as a substitute for taking legal advice.