1. Consider the Wage Subsidy Extension Scheme. The Wage Subsidy Scheme ran from 17 March through to 9 June – and is no longer available. A second tranche (the Wage Subsidy Extension Scheme) was announced in the 2020 budget and opened for applications on 10 June. The Wage Subsidy Extension Scheme is quite different from the original scheme – click here >>> for details.
2. Consider the Small Business Cashflow Loan Scheme (SBCS). If you qualified for the Wage Subsidy Scheme, you probably also qualify for the SBCS. SBCS applications were originally open until 12 June – although this has been extended to 24 July. Full details are here >>>.
3. Work on a realistic business plan to return to profitability and solvency. None of us know what the immediate future will bring, so stress test your plan with different scenarios. If there are tough decisions to be made, make them early.
4. 31 March 2020 financial statements. It has probably never been more important than it is right now to know your financial position. You’re going to need latest financial statements in support of a bank application under the Business Finance Guarantee Scheme – and you may need them to demonstrate pre COVID-19 solvency or viability if your wage subsidy or SBCS applications are audited. Get organised – and get these prepared.
5. Financial forecasts. You’ll need P&L and Cashflow forecasts that reflect your business plan. You need to know where the crunch points are – and how much cash you will need, when you will need it – and what happens under the worst case scenario. And your bank will need them if applying under the Business Finance Guarantee Scheme.
6. Make contact with IRD if you need some flexibility with upcoming tax payments. IRD have plenty of discretion to approve flexible payments arrangements right now if you’re experiencing COVID-19 cashflow issues. Click here >>> to see our commentary.
7. Business Finance Guarantee Scheme. If your financial forecasts indicate you will need funding to make it through, approach your bank. This scheme provides for loans of up to $500,000 over three years – although in our experience, its not easy to get these loans across the line with the banks. Click here >>> to see our summary.
8. Creditors. If you are struggling in the meantime to pay creditors as they fall due, talk to them early. Explain that you are committed to trading back to profitability – and that you have a plan. Seek their support – and share enough of your plan to give them comfort. If you later need to propose a Business Debt Hibernation under the new provisions, you’re going to need your creditors on side.
9. Insolvency Relief for Businesses. If none of this is enough, and as a prudent director you conclude you have no option but to cease trading and liquidate, first pause. Don’t do anything rash – and consider the new Safe Harbour and Business Debt Hibernation provisions here >>> before pulling the pin.
See the Elevate CA policy response to COVID-19 here >>>.