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Wilfred van der Lee
07 Apr 2020
The coronavirus affects us all and the direct impact is obvious; people are at home and hospitals are filling up. Fighting the virus is now the first priority, but in the slightly longer term the challenge is how to keep the economy going and prevent businesses from going bankrupt. Entrepreneurs are faced with rising costs and loss of revenue because customers and employees are sitting at home and supply channels are drying up. At the same time, opportunities may arise that require investment.
There continue to be many possibilities to attract financing. Governments and central banks are keen to keep the economy going and they make a lot of money available. However, attracting financing requires two things: a good business case – knowing how much financing you need and for what – and knowing which options are available. Future-proof financing requires an overall picture of the needs of your company and an overall picture of the possibilities.
There are three important buttons that you can turn as an entrepreneur to finance business operations: the invested capital, external capital providers and your company’s results. In addition to the regular options, there are now also specific instruments that offer extra options due to the corona crisis.
In the short term, most profit can usually be achieved by limiting the company's capital requirement. Obvious examples of this are: shortening the payment term by sending invoices to customers earlier (or even in advance) and postponing non-essential investments. You may also consider making arrangements with suppliers to temporarily pay bills later. Suppliers may also be able to provide credit and settle turnover bonuses1 earlier. In the context of the corona virus, it has been stated that the Tax Authorities will grant deferred payment to entrepreneurs who are in danger of liquidity problems.
In the long term, it is important to find a financing structure with which the company can move forward in the future. Crucial in this respect is a clear, well-substantiated forecast of the results to give capital providers clear insight into the performance of the company. This also applies if there are renegotiations with existing lenders.
n addition to this, it is important to know which options are available to negotiate the right conditions, flexibility and interest rates. Recently, ABN Amro, ING, Rabobank, de Volksbank and Triodos have jointly decided that smaller companies, with financing up to 2.5 million euros, can be granted a deferment of their loan payments for half a year. ABN Amro will do this automatically. With the other banks, you will have to arrange this yourself.
In the context of the coronavirus, the government has introduced a number of specific instruments, including the €4,000 Compensation for affected sectors scheme (TGOS), and expanded other schemes such as the Guarantee Corporate Financing scheme (GO-regeling) and the SME credit guarantee scheme (BMKB). Under the latter two, the government guarantees 80-90% in case of the GO-regeling to 90% for the BMKB loan. Previously the BMKB loan could cover 50% of the total credit request. This has been raised to 75%. In this way the government guarantees a maximum of 67,5% of the total loan provided (90% of 75%). The BKMB credit is intended for companies with a maximum of 250 FTEs, with an annual turnover of up to € 50 million or a balance sheet total of € 43 million. For larger companies, there is the GO-regeling, which guarantees loans of up to € 150 million.
The government also provides facilities for start-ups, scale ups and other innovative companies. These companies do not always have the right relationships with banks, therefore the government has asked the regional development agencies to assist in providing credits to these companies. A budget of 100 million euro has been made available. The expectation is that these arrangements will be made available in the last week of April.
Ultimately, the financing of your company depends on profitability. On the one hand, you generate capital to further expand your company. On the other hand, capital providers primarily look at profitability (including the prospects). Based on this, they determine whether and to what extent they are prepared to provide capital. Important things to consider from this perspective are, for example: looking for purchasing advantages, sharpening the prices and making choices in products and locations. Specifically because of the impending economic crisis, there are possibilities to, for example, apply for wage compensation.
Look at your own turnover that can still be generated. A lot of turnover will continue for the time being, but watch what your clients do and what your suppliers do.
Can your suppliers continue to supply, and which alternatives are available? Clarify this in time so that you can continue to switch if needed. With the lockdown in many countries, it may be that the orders you have to make for your production process can no longer be delivered or that no transport is available. You may even need to stock up on additional supplies. That is not a problem as long as you know that your customers also continue to purchase your products and / or services.
If there is a risk that your clients will no longer be able to purchase your products or services, it is important that you can look for alternatives in good time. Do you have enough staff, or do you have to deploy extra people to be able to continue supplying? Pay attention to which groups are easy to employ for you.
The can give you, as an entrepreneur, the means to continuing your business and to overcome this crisis. We would like to think and work alongside you to create future-proof financing for your company from an integrated approach. A financing structure that allows you to fully focus on all the opportunities you see in the market.