The last 7 months have been difficult for business owners with many industries being severely impacted by the lockdowns enforced to try and keep the virus under control. Victorians are still living with these restrictions although the dropping case numbers give hope that relief will be forthcoming soon.
The Federal Government was very quick to introduce measures to insulate and protect Australian businesses which certainly alleviated the immediate financial stresses and these worked extremely well as administrators reported a massive drop in the number of financially distressed businesses needing their assistance.
The issue is that the relief measures introduced by the Federal Government are either close to ending or will soon come to an end such as:
- JobKeeper payments to supplement wages
- Relief from lease payments to reduce or defer rental commitments
- Relief from tax payments to defer tax owed
- Relief from bank loan payments to defer loan repayments
In most cases, you will notice these payments only provide a temporary relief – the debt still exists but the need to repay it was deferred. So with these relief measures finishing, many businesses are now discovering the honeymoon period is over and these debts need to start to be repaid. Administrators expect that this period will result in a sharp increase in distressed businesses needing their assistance.
Our advice to clients is to prioritise cash flow budgets and planning now if you have not already done so. Those businesses which were struggling before COVID-19 are unlikely to come out of the honeymoon period in a better position and many businesses which were performing adequately may now be struggling. It is important to seek advice from your advisor and determine the best option for you and your business. Having these tough conversations as early as possible, allows business owners more options and a stronger chance of a better overall result.