Refinancing During COVID-19

Can refinancing help your cash flow?

It has always been difficult for business owners to predict when issues will arise in their operations. What’s more, they are usually on the lookout for internal issues that crop up within their own business.

However, in the last few months, all businesses have been hit by a global issue that has occurred outside of their business through no fault of their own. Not only that, but the impact itself has been absolutely huge across the board. 

The important thing now is how businesses face this issue and deal with the challenges it raises.

So what should I do?

Having worked through 3 recessions, a global meltdown and now COVID-19, the advice is act now, not later.

It is essential that businesses plan for their immediate and long-term futures through detailed and thought-out business plans and cash flow strategies.

You need to look at your assets and decide what is essential to your business and what is surplus to requirements.

Click here to find out more about Asset Finance.

So how do I do that?

1. Review your past business  
2. What assets do I need and what don’t I need
3. What can I change in my costs
4. What can I change in my income 

So, what does this all mean?

1. Obtain up-to-date management information on what your business has been doing and complete the accounts for the year early. Where did custom  come from in terms of sales channels and market demographics? What services or products were in demand? Was demand seasonal or dependent on external factors? 
2. Review your previous plans for buying. Do you need that new car this year? Do you need some new equipment to deal with the changes? Are you going to need more supplies or inventory? 
3. What costs can you change? Review your outgoings and find the reasonable savings that can be made.
4. Can I change my income. Can you raise your prices? What can you offer to make your returning customers convert or purchase more often? What products or services can you upsell to them?

Your accountants and/or business advisors will be able to help in providing management and accounting figures. It is important that you use accountants and advisors who have experience in your industry.

You need to look seriously at what you intended to buy. Do you need it now, is it essential to your business operations? How were you going to finance this or were you buying this cash? How does your plan to purchase affect your cash flow projections? What do you need going forward to deal with social distancing etc.

Review all your costs. You will not be able to change a lot of them. But most businesses will be able to make some savings in some areas – and these can add really up! 

Cash is King

An incredibly old phrase but one that is true in times of trouble – if you have cash you can usually weather a downturn.

The cost of finance

Finance costs feature in most businesses, either to assist with acquisition or to assist with growth projects, existing equipment purchases and future purchases.

This is one cost that most people do not look at once they have taken the finance. However, circumstances change so these should be reviewed regularly.

Are you paying too much for your goodwill loan?

What rate and payment are you making on asset finance?

Could you restructure your borrowing to make it more cost-effective?

Review your own home mortgage as well, make sure you are getting the best rate!

Questions we are asked to help with

1. I have short term debt that I took to cover a cash flow issue last year which is expensive, can I refinance? Yes
2. My business acquisition/start-up loan has a high interest rate, can I refinance the goodwill now? Yes
3. Can I buy my premises? Yes
4. Is my asset finance rate competitive? Can I change? Yes
5. I have lots of asset finance, could I change this to a goodwill loan at a lower rate? Yes

These (and a lot more) are asked during normal times. Looking forward, you may need to finance new equipment, cover a period of reduced income or make changes to your practice.

We are happy to have a discussion with you about your needs and whether any changes can be made that will reduce costs.

Click here to read our blog on How to finance a healthcare business.

Reviewed By:

Arun Mehra

Samera CEO

Arun, CEO of Samera, is an experienced accountant and dental practice owner. He specialises in accountancy, financial directorship, squat practices and practice management.