The Covid-19 pandemic has undoubtedly adversely affected a significant number of businesses. Businesses have had to cope with lockdowns and forced closures which have led to the Government providing unprecedented support. Many businesses have taken advantage of the various Government coronavirus support schemes, whether by furloughing staff, utilising CBILS and Bounce Back loans or applying for business rate relief.
The Government extended its temporary insolvency measures, including the temporary suspension of statutory demands and winding-up petitions and the temporary removal of the threat of personal liability for wrongful trading from directors until 30 June 2021, of which you can read more about on our blog here.
The enhanced Government coronavirus support and temporary restrictions have led to insolvency rates remaining significantly below pre-pandemic levels.
However, Government support initiatives such as the furlough scheme will soon begin to wind down and businesses who have taken Government backed loans will be expected to repay them.
Businesses must plan for recovery now
Business debts have continued to increase since the start of the pandemic, but debt recovery has almost completely shut down, creating an artificial environment.
Debt repayment has been artificially suppressed with the extensive Covid funding support packages and because many of the normal credit control and collection procedures have been on hold. This can’t continue indefinitely and lenders under the Covid funding support programmes will want to see their loans repaid. As we emerge from the pandemic and the focus moves from business support to business recovery, repayment of monies will gain momentum.
It’s anticipated that debt recovery will be many businesses’ key priority as a source of much needed cashflow.
For businesses which have taken Government backed loans, these need to be factored into cashflow.
Whilst loan terms may be slightly more generous than the usual high street loan, nevertheless, repayments will be an additional burden on most businesses cash flows. For some businesses, all the loans have effectively done is disguise the deteriorating cash flow position by replacing turnover with borrowing.
Cashflow forecasting will help to both anticipate and avoid “pinch points” especially as demands on working cash flow and debt repayment begin to compete.
Planning and taking professional advice is vital in positioning any business to meet the challenges caused by the effect of the pandemic.
Time to look to the future
Many companies may find that they still have a viable business, but the effects of the pandemic have caused the actual company, rather than the business itself, to be burdened with debt that it may be incapable of discharging without it affecting trading.
Our Business Recovery team has extensive experience in helping directors and shareholders restructure such businesses so that existing levels of debt can be managed, allowing the directors to focus their full attention on getting their business going again, rather than worrying about the accumulation of the debt accrued throughout the pandemic.
Thriving, prosperous businesses will be vital in forming the cornerstone of the economic recovery and business owners will want to re-establish the business they had pre-pandemic without the worry of being debt laden for years to come.
We can advise and tailor a solution to address the issues that you may currently be worried about.
If you are worried about your business’s finances, it does not necessarily mean the end – but you should seek professional advice as soon as possible – early intervention is key to survival. Restructuring assistance is available and possible but timing and planning are key.
About Cowgills
Cowgills is a leading independent firm of Chartered Accountants and Business Advisors based in the North West of England – from Greater Manchester to Liverpool. We use our sector experience to deliver tailored financial solutions and support for businesses.
Get in touch with our Head Office in Bolton, Greater Manchester, for any financial advice or questions about managing following the end of Government coronavirus support today on 01204 414 243.
Disclaimer
The information was correct at time of publishing but may now be out of date.
