How long will my loan last?
It’s great to see businesses now taking a tentative outbreath for the first time since the pandemic began.
You may also have taken advantage of deferring your VAT or Self Assessment payments, or arranging time to pay for other taxes including PAYE or Corporation tax.
We’ve also helped small businesses to receive CBILS or Bounce Back loans.
So you may start to be able to breath again, but what do you do now?
The cash is in the bank but what do you do with it? How do you know if it’s enough to see you through?
Do you know when you have to start repaying loans or your deferred taxes?
Will you use the funds to grow or diversify?
We’re talking to business owners who want to use the cash for a new website, new employees, or even a jacuzzi. Some are using the funds to cover their running costs, and some are thinking about using the funds to grow.
But how do you know if these are the right things to do, if you don’t have a plan?
We know how easy it is to spend the same amount of cash a few times over.
Let’s take a look at Marianne:
She’s just got the £50,000 Bounce Back loan, and is feeling good. What is she going to spend it on?
- Wait I’ll use it to move offices (£6k)
- I can take on a new employee (£33k)
- We really need the garden doing at home (£5k) *you are not meant to use it on personal spending by the way!
- My VAT needs paying off (£10k)
- Oh and then my running costs while we’re closed are £30k each month, and we’re not opening for 2 more months.
The above costs add up to £114,000, and we haven’t even thought of the time it’ll take to ramp up the business to its previous income levels, once Marianne does re-open.
Some things Marianne hasn’t considered:
- How much does she need personally to live on?
- When does she need to start repaying the £50,000 loan, and how much will the repayments be?
- When are the taxes that she’s deferred due to be repaid?
- What will her business income be in the coming months?
You can see the problem. Marianne doesn’t have a plan, but we will work with her to build a one page business plan, and hugely important – a cashflow forecast.
A great cashflow forecast will show Marianne immediately that she’s short by £64,000 if she goes for all the above spends.
But more importantly the cashflow will show us when Marianne is going to have problems with her cash.
It will allow us to look at a few different scenarios:
- What if Marianne delays taking a new person on for a couple of months.
- What if she defers the VAT until March 2021 (when HMRC have allowed her to defer to) at which time the business should be improving.
- But what if business doesn’t improve?
- What happens when Marianne starts to repay the loan?
Lots of questions, but if we consider Marianne’s goals, and look at the numbers behind them, we can decide together when and what Marianne is able to do.
Marianne will have clarity, focus and a master plan.
To find out more, join our Survive and Thrive Webinar on Tueday 9 June 2020.
If you’d like us to help you put a plan and a cashflow together, book a 60 minute zoom call with me!
We’re here for you
Sign up to our Survive and Thrive webinar to help you get back up and running.
Stay safe. Stay strong.