With a pandemic comes many challenges, but also many opportunities. It is therefore imperative that business owners take advantage of each opportunity that emerges. 

Broadly speaking there are two main areas businesses can take advantage of. The first is government financial assistance incentives and the second is a lower cost of capital in an environment where government is trying to boost the economy.

It is critical however that we realise two fundamental truths. Firstly, virus economics is vastly different to normal economic down turns. During a pandemic activity is determined both by government policy and free market systems. Secondly, how governments treat debt is very different to how we treat it.

What this fundamentally means for business owners is that your cost of capital reduces dramatically providing you obtain the right loans for your business and the right government grants. You can also negotiate better terms across a range of items, from your landlord through to suppliers where you have cash ready to go. Cash is king in illiquid environments.

Get your ATO debts in order

When sourcing funding it is imperative that you do not have any ATO debts. There are several ways to mitigate this if you don’t have the money to pay it immediately.

Use a tax debt negotiator to help reduce your ATO debts. Whilst many accountants say they can do this, truly proficient experts also have legal backgrounds.

Use a non-traditional lender for a short period to pay the debt off and then refinance with your bank later. This should give you the breathing room to get your affairs in order and enable your business to grow.

If you can’t pay the debt off in the short term, move to a payment plan and make your circumstances known.

business funding

You and your bank need to be co-aligned. If you aren’t get a new one

The recent liquidity injected by the RBA into the Australian banking system of $200 billion at a quarter of a percent interest rate,  (link here)  in addition to low global interest rates, means banks have a lower cost of capital. What this means for businesses is that banks are open to do good deals. What is more important is your bank aligning with your business / industry as different banks favour different deal types.

Your relationship manager / broker / advisor should be talking to you often about new products / services and government secured loans that can help your business.  If not, find a one that can advise you and give you the time.

The new coronavirus SME guarantee scheme for businesses enables the government to act as a partial guarantor for business loans up to $1 million (link here).  You should be talking with your relationship manager regarding this. 

Accessing Government Grants

Before the pandemic there were hundreds of grants that companies could apply for worth billions of dollars. With the pandemic these gates have expanded. The basic R&D grants, EDMG grants are all the basic vanilla ones that grant consultants often discuss. However, there are a number of more sophisticated grants that businesses can apply providing they work with the right grant consultants (not all are created equal).

Some of the new initiatives that have come into place are:

  • There are a range of state government initiatives to help small business with supplement funding etc that are impacted by coronavirus
  • New government apprentice scheme with up to 50% of salaries being paid for by the government up to $7,000 per quarter (link here)
  • Commercial tenancy regime assisting tenants. This is also a great opportunity to negotiate a new lease with your landlord. Now is a great as many landlords are finding it hard to find good tenants yet alone secure the rents that were paid previously.
  • ATO cash flow boost, crediting employers with some PAYG withholding
  • Removing and crediting any payroll tax liability or paid, pertaining to fy20
  • Job Maker – Offering employers $100 to $200 a week to take on young employees (link here)

Whilst the next 12 months will be critical for businesses to rehabilitate, we as a society must strike a balance between the freedom of people to move allowing for economic activity and the health of the populous.  We can’t pick one at the detriment of the other, but rather we must find ways for both to work together.

Tarek Omar is CEO and partner at Royce Stone Capital, a financial services provider.

The above is not personal advice, and you should speak with your own business advisors.