Coronavirus: It’s time to spell it out
By Nick Gillett, managing director, Mangrove Global
As a business owner I'm rapidly running out of cash: wages to pay, including for furloughed staff (they've got to eat!), suppliers clamouring for cash, and a customer base who can’t pay. So, I'm pretty much done with complex application procedures and procrastination. I'm reading first-hand about how different countries are responding to the economic impact of Covid-19 on small businesses, and here is my wish list:
1. Pay the money for furloughed employees either as an advance or through whatever mechanic has been set up - we need the confidence that the money is coming quickly, otherwise businesses will simply hoard cash.
2. Make the loans happen. Again, advance money for known business, maybe start with the lowest risk ones that have made historical profits. The government could cap loans at 25% of turnover, irrespective of size; to calculate if it is affordable, fix the interest rate at 2% for the government 80% and 4% for the 20% that is at risk. We appreciate that banks and government need a return on the money, but let's make it fair for everyone, so at least I can calculate the repayments and forecast whether I can afford the loan.
3. Sort supplier payments to ensure suppliers are getting paid. If the money doesn’t flow from the bottom, the whole system will fall apart. I know I could do as some have advised me and simply stop paying my own suppliers until I get paid, but they are businesses too - some bigger than me, some smaller - but all with their own needs. Not paying may simply lead to larger problems in future, making trading my way out even harder and slower.
4. Tackle the challenges for businesses using invoice finance with zero income - we are about to enter a negative spiral as the facility switches to recourse. The Covid loan scheme and the banks need to work together to settle these facilities which means as debt does come in it can be used to finance the business or repay the loan. Most importantly it grants time. Banks can then focus their time and effort on businesses that are on the margins or require additional help.
5. Get a plan in place now that will reward employers for keeping employees on the payroll as we come out the other side - tax incentives, grants etc - businesses will not return to normal overnight, and redundancies are inevitable the moment the furlough scheme is removed if trading is significantly below previous levels.
6. Look to recoup the money plus penalties from companies that are deemed to have taken advantage. Football clubs furloughing the lowest paid spring to mind but I am sure this is repeated up and down the country. I have no doubt there will be a rebalancing act in due course as assistance to the supermarkets seems odd as does the perennial lack of tax on digital multinationals etc. Let’s spell it out.
As an entrepreneur and small business I want to survive. I don’t want to see 12 years of hard work disappear overnight. Everything I have on a personal level is wrapped up in my business: money my family needs, my future in terms of pension and, beyond that, the future of my 38 employees and their dependents. I will consider sharing the risk in terms of debt being placed on the business and accept there is a cost to be paid for a long time to come. This is repeated all over the country and millions of jobs are at risk.
For those of you who don’t agree or don’t understand, most small business owners don’t have lavish lifestyles; they take all the risks and the emotional burden especially when you have employees that depend on your business success and your skills. Currently through no fault of their own, their income stream has ceased, and we are being asked to take on debt to keep the lights on. We will have to repay the debt, we are being asked to keep employees on the payroll and we are being asked to do this with vague promises of support without details and with no timescale. We will do it and we can do it, but we just need it ability to get on with it.
Please do not underestimate the mental stress this is placing on business owners. I am fortunate: I have a great supportive family and an experienced supportive business partner. I work in hospitality, which means my customers and suppliers are all in the same boat, and we are all talking and trying to help each other. Some of the things I read are truly inspiring but not everybody is in the same situation and many owners will be working right now looking for help and solutions with a sense of frustration and helplessness. They are the ones that need a friend and help right now.
Yes, my concerns are all economic and pale into insignificance when compared to the health workers and everyone else helping tackle this virus. But I am not a doctor so I can’t help now, I can’t save lives now. But I can and will do my bit to help the country recover economically when asked if I am still in business.