On The Spot Blogs
Small Businesses - May The 4th Be With You!
How small businesses can strike back and win the Coronavirus war...
Today is the day the most useful loan initiative for SMEs goes live, the Bounce Back Loan Scheme (BBLS). Coincidence? Parallel universe? It probably feels like it!
Why are they so good?
From today, to enable the smallest of businesses to easily access cash, after answering only 7 questions, loans will be available for between £2k to £50k capped to 25% of your turnover, 100% government guarantee and interest and fee free for a year, after which the interest rate is only 2.5%. Therefore, next year the annual interest will be only £25 for each £1,000 borrowed. Loans to sole trader and partners between £2k and £25k may be the easiest to access.
These Bounce Back Loans are clearly earmarked to help the smallest of sole traders, partners and limited companies survive the coronavirus disruption.
But why would I take on any debt at such a difficult time?
Understandably you may not want to take on debt. Consider what will happen if you don’t?
It’s right to be cautious, but this may be the occasion where to survive you need to Strike Back!
If your business was doing well and profitable and only the coronavirus has affected its recent results, it's likely to maintain its underlying viability in the long run, admittedly with some adjustments.
Yes, you will have a debt to pay back and probably less cash than before, but your business will have survived. Think of it is a medium term investment.
What should I do with this cash?
You may need it to pay suppliers whose services/products you can’t do without, such as rent, utilities, phones, IT, repairs, insurance, non-furloughed staff.
Record your income and outgoings in detail, day to day, for say the next 3 months to ensure you ask for what you need to see you through, allowing for any further grants you're expecting from the government. Beyond that in less detail.
Make prudent assumptions about when your sales will pick up and therefore when you expect to repay the loan, likely a small manageable amount each month spread over a few years.
The affordable low interest rate gives you time and space to update your business model to thrive in the new adjusted world.
How do I update my business model?
Think about what you’d have done if you’d planned a 3 month lifelong dream trip exploring space on a Star Destroyer which needed to be paid for somehow. What would you have thought about in advance?
Perhaps it would be a list like this:
- Establish the availability of different and new communications operable from ‘space’.
- How to carry on looking after existing clients in a different way.
- How you can continue to make new connections and build up new leads.
- How to sell product or services remotely eg sub-contract deliveries, try online services.
- How to deal with a missed meaningful marketing date eg father’s day if you sell gifts.
- Offer a different product or service as a one-off eg sell personalised father’s day online videos.
- How to still send relevant marketing messages.
- How to use the change of venue to your advantage.
- Do you need some new focussed advice that will pay for itself?
- How and when to pay your bills with reduced income? Can some be delayed?
- What cash is needed on each of the days that you’re away?
- How will you make sure you have enough cash every day?
- Are you eligible for grants or loans? You are exploring space after all!
What should I expect the future to look like?
It will be different and probably, initially, harder work than before you went into space. On the other hand, you may find permanent, new markets and customers expanding your business even further. You can make decisions and change direction quickly and have the satisfaction that the success was yours. Anyway, you didn’t set up your own business, which you can run exactly as you see fit, for an easy life. Did you?
At the risk of upsetting Star Wars fans: Live long and prosper 😊.