Chris Dines, CEO of Informed Funding (IF), identifies the best financial and funding options currently available for businesses that need help during lockdown, and shares his expert advice on where to find the most up-to-date information.
Since its launch in 2015, Workspace’s partnership with Informed Funding, allows us to help business owners, founders and directors develop financial strategies and identify the options available to them to attract funding.
This information is accurate as of 27th April 2020.
Guidance for short-term financing
Stay clear headed, stick to some basic rules, and get on the front foot!
Chris says, “Be open with your team and communicate with them all. Avoid panicking and rash decision making. Now is the time to detail furlough schemes and pay cuts for both staff and senior management. There is a lot of pressure to access borrowing, but you will have to pay it back at some point. Do not borrow what you don’t believe you can pay back. Understand your cash flow, find ways to save cash & do not extend borrowing unnecessarily."
Follow these three steps:
1. Save money
Furlough staff. Look at the government’s Coronavirus Job Retention Scheme to see if you can temporarily furlough your staff and get a grant that covers 80% of their monthly wages, up to £2,500, plus NI and pension contributions. One challenge facing company owners is which staff to furlough. Media, PR and marketing companies in particular have been hit by a spending freeze, but clients still need representation. Which staff do you keep on full-time and which do you furlough?
Chris says, “You can be put on furlough at home, get 80% of your salary and not be required to do anything. In the current crisis, that will suit some individuals, particularly people with kids to look after. How do you motivate those you retain that might have to take pay cuts too? Consider a scheme where those that had to take a pay cut but still needed to work get a bonus reward further down the track when you can afford it. Encourage furloughed staff to partake in online training courses, where they can.”
Freeze business rates. Businesses in retail, hospitality and leisure sectors won’t have to pay business rates in the current tax year, find out if you are eligible.
Bootstrap. Go through your business’ costs meticulously and cut back where you can. Do you really need that $299 monthly premium plan on Mailchimp? Consider reviewing your office insurance cover. Chris says, “It’s amazing how many apps companies pay for. Are they all necessary? Are you on the best deals? Try re-negotiating your mobile phone contract. This may seem small, but any money you can save is all part of bootstrapping. If you’re good at bootstrapping, you can build up networks and look for favours from people that can help them drive your business.”
2. Borrow cheap
Coronavirus Business Interruption Loan Scheme (CBILS). The government has ordered banks to lend to “viable” businesses, with zero interest or fees for the first 12 months.
Look closely at the rate rise after 12 months and do not put your house up as collateral: banks cannot ask for a personal guarantee on loans below £250,000. Stick to accredited lenders, where you can, and fill out forms diligently. Make sure your filings with Companies House are up-to-date, even those pesky confirmation statements! Be aware that some non-accredited lenders like alternative finance providers are hiking rates, because the government will not guarantee their loans.
However, there are hurdles and many businesses are ineligible. It can take several weeks from application to approval, and companies need to show a decent set of accounts, i.e. that they at least broke even last year, have a profitability plan and can repay any loans. Chris advises, “If your company recorded a loss last year either for your calendar accounting year or through accounts filed with Companies House, it is extraordinarily difficult to get through the process. Early-stage companies that have raised cash to get a product or technology up and running – but are not profitable yet and with minimal turnover – will not get a loan through this scheme. You have to show that you can generate cash.”
Can’t get a grant or loan? If your business revenues have dried up and there is no way to pivot, consider pausing activities that no longer generate a return. Chris says, “If your market is freezing up, it’s best to try and hibernate with what you’ve got. Talk to your investors.”
Establish Facilities You Don’t Need (Yet). Avoid borrowing if you can, unless you are in a liquidity crisis, especially if you don’t have the means to pay back loans. Get a loan facility, but structure it so that you don’t have to draw on it unless you really need it. Take a look at HMRC’s two new schemes to help businesses hit by coronavirus: (a) VAT deferment (b) Self Assessment tax deferment. Contact HMRC on its new tax helpline to notify them you intend to delay payment. But, keep a running total of amounts due to be paid in 2021.
3. Cut a deal with customers and suppliers
Act in open partnership as quickly as possible and discuss payment terms asap. B2Bs selling into big, blue-chip corporates can negotiate shorter payment terms, for example, instead of the usual 90 days, bargain for 30 days. Even if your workload is reduced, it will help manage your business’ working capital.
What if your customers stop paying? Call them to get the full picture and suggest a part-payment plan. Better to know the full scale of their problems sooner rather than later.
Make a medium-term action plan
You have got to stay positive, this will all change at some stage. It’s not as if the whole infrastructure of the economy is changing, it will still be there when we all get back to work.
Follow these three steps:
1. Change the status quo
Consider changes to your business model. How agile are you to pivot your business? Establish a “catapult team” to start thinking about this. Consider small changes like asking customers to pre-pay for goods in advance of purchasing stock.
Keep in regular contact with your customer base, regardless of whether you are selling to them or not, and find ways to keep providing value to them. That could be a discount on goods or perhaps a useful newsletter.
Workspace customer Much Better Adventures, based at Clerkenwell Workshops, has had to postpone its travel holidays for now but is keeping customers entertained and informed on its social media and website with Instagram posts like “16 awesome adventure films you can watch right now”, a web blog on top adventure books to read and an amusing self-guided adventure in the beautiful setting of...Your Own Home. Founders Alex, Sam and Guy have thanked their customers that have postponed, instead of cancelled, their trips, in a blog post. Strong business relationships remain valuable and, at some point, normal business will resume.
If you’ve built up customer support, tap into that goodwill now. When breakfast pot entrepreneur Bex Walker had to shut down her company’s kitchen and send her workers home, she levelled with her followers on Instagram and encouraged them to buy gift cards, redeemable when things are back up and running, to keep her business afloat.
2. Find disruptive opportunities
Look for ways to create new avenues of business. Say your firm trains IT staff on cybersecurity management. You can’t go in house anymore to train people up, and a webinar doesn’t quite cut it. How about teaming up with a Virtual Reality company? IT staff can put on a headset from the comfort of their home and find themselves in the middle of a “live” cyberattack, which you can help them navigate.
Too short on cash to pursue new avenues? Find ways to make your existing product offer more enticing, that could be something as simple as cutting prices and selling old inventory online for whatever price you can achieve.
3. Level with investors
You have to show real traction when it comes to cash flow. Show your company’s management team can not only survive, but also think innovatively. More than ever, investors will look for business leaders who can adapt to challenges, pivot their business if needed, and spot emerging opportunities
Investor appetite is evolving. Equity investors above angel level will tighten their belts for now when it comes to early-stage businesses, because they would rather risk money on existing businesses they’ve already invested in rather than new, untested businesses.
Leaders, look out for one another (and yourself)
Being able to engage with people in similar positions is really important.
Chris says, “CEOs have to make all these decisions. The vast majority are decent people trying to help. You look after your team, but what about you personally?”
Follow these three steps:
1. Contact fellow founders/leaders in your inner circle to say hello, ask if they need help and see where you can help each other out. Not only is it a good way to check in with others, but it could also pave the way to future collaborations.
2. Speak to others outside your inner circle for advice. This blog post details the tech that business owners are using to stay connected and productive.
3. Keep your team connected. Make the most of tools like Google Hangouts, Zoom, Slack and organise casual events like Friday night online quizzes. For something a bit more imaginative, try The Daily Kick-Off, The Virtual Away Day or Escape, offered by team events organiser, Wildgoose.
If you’re a Workspace customer and have an urgent COVID-19 related financial or funding question please use our rapid response COVID-19 Call-Back Service. IF can connect you with one of their experts for a 30-minute informal call.
Schedule a call with Informed Funding if you have an urgent COVID-19-related financial or funding question.
The current situation is uncertain but there are plenty of resources available to businesses, and the government is updating its advice and support daily. Workspace’s partner, Informed Funding, is on hand to help business leaders too. Workspace’s business centres remain open for essential activities and are fully supported remotely by the Centre Management team; click here for more information. Stay tuned, stay connected and stay on top of it.
Check out Chris’ top suggestions for more information on the resources available to businesses.
1. The government’s business support page is updated daily, and is the best place for the latest and most accurate funding and financial advice.
2. For practical guidance on how business leaders can support employees, head to the Chartered Institute of Personnel and Development website.
3. Find free financial advice for both SMEs & the self-employed via the ederation of Small Businesses.
Author, Chris Dines
Chris Dines has a long career as an entrepreneur and thought leader in the areas of business intelligence, technology and growth company finance. An economics graduate, he qualified as a Chartered Accountant and managed a successful corporate finance team at PwC. He built leading Tech Research business, Ovum, as CEO, achieving an IPO on the London Market and subsequent sale (now part of Informa Group). He has built, from scratch, Knowledge Peers and Informed Funding, with both organisations focused on P2P knowledge sharing in the UK SME sector. He is on the Boards of leading PropTech business Key Agent and leading PR business, William Murray Communications.
