Liquidity and Contingency

Being able to predict how long the pandemic is going to last is impossible, Businesses will find it difficult to remain liquid. We can be certain the situation will continue to change and develop.

Being Resilient is a key task for all businesses. The one key priority for everyone is going to be maintaining stability during a fluctuating situation. Grant Thorntons Resilience Wheel can provide a structure and process to help businesses survive.

Actions to consider

Assess

Make sure you're keeping records of losses sustained or caused and compare this to your initial predictions before the outbreak. This way, you can prove the loss happened as a result of the outbreak and nothing further could have been done to avert it. Certain types of debt facilities are more-quickly impacted by downturns in trading. This is especially so for asset-based facilities, where available funding is driven by debtor and stock levels, so careful modelling of the impact of trading on headroom levels is essential.

Check both your rights and obligations under key contracts, and your insurance coverage and notification requirements. This will ensure you know what is insured and what is not and that you're able to negotiate with counterparties to alleviate the impact of any contractual breaches.

Consider how your cash flow and prospects might affect the covenant and funding of any DB pension schemes – and what information and support might be given to scheme trustees to enable them to understand the position and consider any accommodations.

Protect

Make sure you're taking advantage of government support during this difficult time. Review any temporary finance options, such as deferring monies due to the HMRC with a Time To Pay arrangement, and utilise any support that's available to you, including the British Business Bank’s newly announced Coronavirus Business Interruption Loan Scheme, which can offer loans of up to £5 million.

When support isn't available or sufficient, you should be pro-active in speaking to your existing lenders. Offer as much notice as you can and explain the situation to them in full, so you can obtain the flexibility you need.

Consider whether any DB pension schemes might be able to provide accommodations to help your cash flow and protect your business and its covenant.