Wondering if your business can survive an economic downturn? We outline 5 tips to help you and your business get to ‘the other side’ of the COVID-19 crisis.
4 minute read
In nature, hibernation describes the process of animals lowering their physical activity, body temperature, and metabolism to the bare minimum during winter months, only to resume their lives come springtime. In light of the COVID-19 crisis, many businesses are now asked to do to the same to increase their chances of re-emerging on the other side of the pandemic.
So what can you do to navigate your business through 'economic hibernation'? Here are five relief measures that could help.
In response to the pandemic, many small businesses are already locked down or operating at reduced capacity. The government’s strategy of economic hibernation is designed to help them resume their operations post-pandemic and minimise its impact.
To date, this has involved an ambitious series of relief measures with a minimum six-month lifespan targeting the three primary costs facing small business: wages, rent and loan or credit repayments.
According to the JPMorgan Chase Institute, more than half of small businesses have a cash buffer of only 27 days. Temporarily suppressing their outgoings, therefore, can help businesses stay afloat and allow the economy to rebound when the worst is over.
Wages are usually a business’ biggest expense. With this in mind, the government’s $130 billion JobKeeper package aims to help eligible businesses retain employees and pay them a wage as they deal with the current landscape.
Businesses can apply from the 20 April and, assuming yours is approved, you will receive fortnightly payments for each eligible employee. Payments will flow from the Australian Tax Office (ATO) directly into your nominated bank account. It’s then your responsibility to pass those payments on to your employees in full. Please visit the ATO for more information.
Those eligible for the JobKeeper program may also take advantage of a new set of measures designed to safeguard commercial tenancies. Under a to be legislated by each state and territory, tenants and landlords will be bound to a set of principles when negotiating lease terms in response to the pandemic.
As well as a moratorium on the termination of leases, landlords are required to offer their tenants a rent reduction in the form of a waiver or deferral proportionate to the tenant’s loss of revenue.
Complementing the above, there have been several measures to help free up cash for SMEs. In addition to government payments of up to $100,000 for eligible operators, your bank may be offering a pause on loan repayments.
This allows you to defer payments on your business borrowing, including business auto and equipment finance loans. The relief is estimated to return as much as $8 billion back into the hands of small businesses. As part of a scheme underwritten by taxpayers, banks are also rolling out business loans at reduced interest rates.
It can also be a good idea to think about other potential revenue streams. Pivoting how your business operates and looking into potential new ways of earning revenue will help your business get through a crisis. Getting what is essentially a brand-new business running smoothly won’t happen by chance. Ensuring you have systems in place to scale up and manage demand, as well as having a flexible workforce can mean the difference between struggle and success through a crisis.
The JobKeeper program is a Federal Government initiative and we provide a link to the external site for your convenience. This information is provided for general information only. Please read the Government’s fact sheet to see if you are eligible and for terms and conditions that apply. You should consider seeking independent legal, financial, taxation or other advice on how the Federal Government initiatives relate to your circumstances.
This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this article, including when considering tax and finance options for your business.
© Bank of Melbourne - A Division of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.