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Small Business Revival and Survival During Corona

Here are 8 ideas for small business to revive and survive in Corona times.

1. How the government has reacted to support businesses through COVID-19

All levels of government have acted swiftly to support businesses through COVIF-19.

The Federal Government through their two stimulus packages have provided the following relief for businesses:

  • Increasing the asset write-off from $30,000 to $150,000for businesses with turnover less than $500 million until 30 June 2020
  • 15 month investment incentive (through to 30 June 2021) by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct an additional 50 percent of the asset cost in the year of purchase
  • Minimum payment of $20,000 up to $100,000 for businesses with a turnover less than $50 million that employ staff between 1 January 2020 and 30 June 2020. Payment will be tax free. Businesses to receive payments of 50% of their Business Activity Statements or Instalment Activity Statement from 28 April 2020 with refunds to be paid within 14 days. Balance will be paid following lodgement of July to September lodgement.
  • Assistance for severely affected regions primarily tourism, agriculture and education including the waiver of government fees and charge and administrative relief for certain tax obligations including deferring tax payments up to four months.
  • Support for apprentices and trainees where eligible employers can apply for a wage subsidy of 50 % of the apprentice’s or trainee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer. Employers will be reimbursed to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter). Eligible for employers employing fewer than 20 full-time employees who retain an apprentice or trainee
  • Guaranteeing 50% of new unsecured loans issued by eligible banks to small and medium enterprises. Employers with a turnover up to $50 million will be eligible for the loans. Maximum loan amount is $250,000 per borrow with the loans to be made over 3 years with the initial six month repayment holiday. Loans will be subject to lenders’ credit assessment processes.

Meanwhile the NSW Government has provided the following relief to businesses:

  • Waiver of payroll tax for businesses with payrolls up to $10 million for three months (to 30 June 2020)
  • Brought forward payroll tax cuts by raising the threshold limit to $1 million in 2020-21
  • Waiver of fees and charges for small businesses including cafes, restaurant and tradies
  • Brought forward maintenance on public assets including social housing and crown lending fencing
  • Employing additional cleaners of public infrastructure such as transport assets, schools and other public housing
  • Bringing forward capital works and maintenance.

2. How small business owners access the cash payments

The payments are to be received from the Australian Taxation Office as an automatic credit in the activity system from 28 April 2020 upon employers lodging eligible upcoming activity statements. The cash flow boost is calculated by the ATO and no new forms are required. Employers will receive a payment equal to 100% of their salary and wages withheld (up from 50%), with the maximum payment being increased from $25,000 to $50,000. In addition the minimum payment has been increased from $2,000 to $10,000. An additional payment is being introduced in the July-October 2020 period. Eligible entities will receive an additional payment equal to the total of the previous payment received. This means the entity is to receive a minimum of $20,000 and a maximum of $100,000 under both payments.

3. How small business owners can make the most of such benefits/supports

The small business owner should:

  • Explore the available line of credit of $250,000 as possible way to purchase new income producing assets or simply working capital to help boost growth. If there are no repayments for 6 months and the government is guaranteeing the loan it will always be better to obtain credit when you don’t need it rather  than trying to obtain it when you really do need it.
  • Working out if there are any plant & Equipment or other tangible assets required by the business over the next 12-24 months and bring forward the purchase to take advantage of the incentives of write-off and  investment incentives
  • Consider using the $250,000loan for additional sales initiatives
  • Review any of the government projects being brought forward to determine whether your business can bid for the work
  • Ensure the BAS/PAYG repayments are taken as this will significantly assist cash flow

4. The key considerations during the turbulence (must-dos and must-not-dos)

In these difficult circumstances it is important:

  • The first thing to do is “DON’T PANIC”.
  • The second thing is, this is an unprecedented negative impact to most businesses. The way a business was doing business needs to be reviewed and one must keep in mind that everything can be on the table for renegotiation The governments are introducing a raft of measures to provide the best environment for business to survive in these times. ‘NEGOTIATION” needs to be in every one’s mindset.
  • Cash flow is king, but also on the same level is a requirement to constantly review overheads followed closely by maintaining client/customer base.
  • This means keeping a short-term, medium term and long term view on cash flow. Daily/Weekly monitoring may become the norm. Realistic estimates moving forward including the subsidies provided by the Government stimulus packages outlined above should be factored in. Where the numbers don’t stack up considerations have to be made as to how to make the equation work. Can you negotiate with landlords, defer critical payments, reduce staff hours, negotiate better terms on supplies. In these times everything has to be considered negotiable.
  • Seek professional advice where necessary in order to obtain an independent view of the business and help you think through some of the ’what if’ changes you may be considering.
  • Don’t make decisions that haven’t been thought through;  
  • Liaise with suppliers, landlord, banks etc to seek some assistance as they have an ongoing interest in the business continuing to trade. If parties work together then better outcomes can be achieved.

 5. How you foresee the situation moving forward

There is no quick fix to this situation. The effects will be felt for at least the next 6 to 12 months and probably longer. Due to the stimulus packages provided by the Governments and the unknown outcomes as a consequence the true effect of the situation may not be felt for another 3 to 6 months. It’s too difficult to predict whether this will be a soft landing or a thud but whatever the landing it’s unlikely to make itself known for the next few months (in a  macro sense). Regardless, the actions taken by the government in the recent announcements of lockdowns and the like  will likely result in more stimulus packages to come. It remains to be seen whether the problem is simply being delayed and masked and one view is that unless there are genuine debt forgiveness programs adopted the stimulus packages may just be pushing the problem down the road. We have to wait and see.

 If that is the case, companies may have to consider more intrusive programs to grapple with liability heavy balance sheets  with underperforming businesses. Things such as Voluntary administrations followed by either Holding Deeds of Company Arrangements or the usual Deeds of Company Arrangements  may become very helpful to protect a business whilst at the same time eliminating debt that would be impossible to repay. Strategies around these types of options need to be thoroughly explored with the companies lawyers/accountants and insolvency practitioners.

6. How small business owners should plan for the next few months (or even longer)

Small businesses should always consider their cash flow however it is now more important than ever. Small business owners should expect an uncertain and volatile environment in the next six months and as seen lately with the closures of places of large gatherings all best laid plans can be altered by government actions in trying to prevent the spread of the virus.  Small businesses need to consider the points noted above. Negotiation, no matter how big or small, is the name of the game along with trying to get the cash flow trimmed to make the business feasible. Seek assistance also, to get input into how to move forward. Don’t try and do it on your own.

7. The opportunities hidden in the challenges

In any situation there are opportunities for small business owners. Whether that be reviewing the business model and looking at other means of income away from the traditional practices. This has recently been demonstrated by the influx of home delivery by restaurants or gin producers utilising the equipment to produce hand sanitizers.

Each business needs to rethink its offerings both customer base and the way delivery occurs. Is the skill set the business has developed, transferrable to other markets. It’s time to think outside the square.

 8. Survival options

In these difficult times it is often best to seek assistance from professionals in the field and please remember you are not alone.

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