Action to be Taken by Business to Survive the Coronavirus Crisis

A few businesses will be thriving during the Coronavirus pandemic, as turnover is driven to them, but most will be experiencing a reduction in business and wondering how they will survive. This article is for them as it outlines the action to be taken by business to survive the coronavirus crisis.

The overriding principal, in this type of crisis, is to stop measuring your business in terms of profit but instead worry about cash. A lack of cash will close the business much quicker than a lack of profit, and therefore the most important report that you should have produced, is a forecast cash flow.

Government Assistance

The UK Government has announced a number of measures to assist businesses to survive this crisis. Dixcart has produced a summary of these, which can be found here and we will endeavour to keep this summary up-to-date, as more assistance or changes to the assistance are announced. We will therefore not repeat these here.

Every business should take advantage of some of these measures. You will only know which are appropriate for your business, by having a senior member of your team go through them all, to decide which will help you. Following this an action list should be produced and quickly undertaken, to take advantage of the government measures.

As further measures are announced, these too should be reviewed to see if they are helpful to you, and appropriate action quickly taken.

On the 25th March, the government announced that companies were to receive a 3 month extension period, to file accounts during COVID-19. Whilst this is useful – this definitely isn’t time to – NOT keep records up to date. After all, if you do not know where you are, how are you going to know where you are going? In the current crisis, business and most importantly cash is reducing quickly, and you must stay on top of record keeping to know what is happening. Whilst the government is giving extra time to pay taxes such as VAT they are still expecting the returns to be completed on time. Please see the VAT section in this article.

You will also require your latest accounts and management accounts, if you are going to apply for loans (please see below), or to ask for extra time to pay landlords and/or other lenders and creditors (please see below), as they may well ask to see them. It is therefore important to have accounts prepared and records up to date.

On the 29 March 2020 we were informed that the Government was amending insolvency law to help companies keep trading whilst they explore options for rescue.

Under the plans, the UK’s Insolvency Framework will add new restructuring tools that mirror the USA’s Chapter 11 procedure, a well-established model adopted by countries around the world.  This includes:

  • A moratorium for companies giving them breathing space from creditors enforcing their debts for a period of time, whilst they seek a rescue or restructure;
  • Protection of their supplies to enable them to continue trading during the moratorium; and;
  • A new restructuring plan, binding creditors to that plan

Wrongful Trading Provisions

The Government will also temporarily suspend the wrongful trading provisions to give company directors greater confidence to use their best endeavours to continue to trade during this pandemic emergency, without the threat of personal liability, should the company ultimately fall into insolvency.

The proposals will also include key safeguards for creditors and suppliers to ensure that they are paid, while existing laws against fraudulent trading and the threat of director disqualification, will continue to act as an effective deterrent against reckless misuse of these new measures.

In addition, while laws against fraudulent trading and director misconduct will continue to provide a deterrent against poor practices, wrongful trading provisions in the Insolvency Act will be temporarily suspended specifically to give confidence to directors to continue trading without the threat of personal liability, should the company ultimately fall into insolvency

These changes are designed to lift the worry that all directors will have, that whilst trying to keep their companies afloat and taking advantage of the support being provided by the government, the company may become technically insolvent, and previously the directors could have been accused of wrongfully trading.

Dealing with Banks and other Financial Lenders

Although banks are not normally very helpful when there is a downturn in business, the ‘Coronavirus Business Interruption Loan Scheme’ (CBILS) is likely to mean that they will be willing to assist through this crisis. This is available through your normal bank, but 80% of the credit risk is being taken by the government and the loan will be interest free for the first 12 months. If you need additional funds this should be where you turn to first. You will of course need a plan to explain how the loan will be repaid in the future.

As the details of the scheme were announced by the individual banks, some stated that they were looking for personal guarantees.

The government has made it clear that the requirement for personal loans is at the discretion of the lender. However, a lender is not allowed to take a personal guarantee against a borrower’s principle residence under the scheme. Therefore, even if a personal guarantee is required under the lender’s credit policy, it cannot be taken against the borrower’s home.

Some major lenders have announced that they are not going to require personal guarantees on loans, of any size, under the CBILS scheme.

If you use factoring or invoice discounting, do not assume that the historic facility levels will be available during the crisis. Normally the level of borrowing is limited to a percentage of the invoices that the bank will allow to be included in the discounting. As your sales fall, the invoices available will reduce and so will your facility. In addition, the banks will normally restrict the age of the invoice that can be included, therefore as payment slows and debt ages, invoices can fall outside the limit, further restricting the amount that can be borrowed. The banks also have a habit of restricting further which customers’ invoices they will allow to be used in the facility.

If you use other funding such as leasing equipment, or have a mortgage on your property, talk to relevant lenders and see if they will give you a payment holiday. This will not come without a cost, but reducing the cash outflow is the important consideration.

Coronavirus Bounce Back Loan

  • The scheme was announced on 27 April and was launched on 4 May.
  • The Bounce Back Loan scheme will help small and medium-sized businesses to borrow between £2,000 and £50,000.
  • The government will guarantee 100% of the loan and there will not be any fees or interest to pay for the first 12 months.
  • Loan term loans will be up to 6 years. No repayments will be due during the first 12 months. The government has worked with lenders, to agree a low rate of interest of 2.5% for the remaining period of the loan.
  • The scheme will be delivered through a network of accredited lenders.
  • Applications will be made through a short online form. There will be no forward looking tests of business viability.
  • You can apply for a loan if your business:
    • is based in the UK
    • has been negatively affected by Coronavirus
    • was not an ‘undertaking in difficulty’ on 31 December 2019.

If you have already received a loan under the Coronavirus Business Interruption Loan Scheme, you cannot also apply for a Bounce Back Loan, but you may be able to transfer the CBILS loan into a Bounce Back Loan. You will have to arrange this with your lender before 4 November 2020.

Dealing with your Landlord

If you do not own but rent your premises, speak to your landlord and try to negotiate a reduction in your rent for a period; again there may be a long term cost in doing this, but the landlord will not want an empty property at present, so it is in their interest to help keep you in business.

On the 23rd March the government announced that commercial tenants who cannot pay their rent because of coronavirus will be protected from eviction.

The announcement stated:

  • Commercial tenants who cannot pay their rent because of coronavirus will be protected from eviction.
  • Many landlords and tenants are already having conversations and reaching voluntary arrangements about rental payments due in the near future, but the Government recognises that businesses struggling with their cashflow, due to coronavirus, remain worried about eviction.
  • These measures, included in the emergency Coronavirus Bill currently going through Parliament, will mean no business will be forced out of their premises, if they miss a payment in the next three months.
  • This builds on the unprecedented package of support announced for businesses who are affected by coronavirus.
  • Commercial tenants will still be liable for the rent after this period. The Government is also actively monitoring the impact on commercial landlords’ cash flow and continues to be in dialogue with them.

Maximising Income

If sales are falling, look to see what could be done to reverse the trend, but be careful with the credit that you are extending. Having extra sales is of no use, unless it is paid for and hopefully meeting the agreed terms. Sales people often do not think about the recoverability of debt, only getting the sale, so emphasise the importance of cash and do not pay commissions until the invoice is paid.

Cutting Costs

Every cost should be reviewed to see if the service is still needed, or if it can be obtained for less cost. As an example, if the premises are empty does the heating need to be on, or on as high as normal? Are the lights all off? If you are paying for the service based on last year’s usage, which is only adjusted at the end of the year, try for a reduction now. Many costs are related to how busy the business is, but the cash out flow does not necessarily fall as quickly as the inflow.

If there are any capital projects, such as new plant or vehicles planned, review these to see if they can be cancelled or deferred. Review any maintenance and other none essential work to decide if it can be postponed.


The most emotional area is dealing with employees and no one enjoys telling members of staff that they no longer have a job, but salaries are normally the largest cost to a business, and therefore cost savings in this area must be considered. There are however a number of alternatives when cutting the cost of employees and they should all be considered. Especially the new ‘Coronavirus Job Retention Scheme’ that the government has announced. More about this scheme can be found here: How to Claim and What to Claim for Wage Costs Through the Coronavirus Job Retention Scheme.

Before deciding on a course of action, consider what is happening to the business. If orders are falling, then the staff dealing with deliveries may be short of work. At the same time the sales team may be working harder than normal and it could be counterproductive to cut staff here. Look at this area by area.

Before deciding on a course of action, consider what is happening to the business. If orders are falling, then the staff dealing with deliveries may be short of work. At the same time the sales team may be working harder than normal and it could be counterproductive to cut staff here. Look at this area by area.

For departments with a shortfall of work consider the following:

  • Redundancy. It reduces costs permanently, but normally takes a month or so before the effect is felt. It can be costly to action and it reduces the work force permanently, so you could be short of skilled staff when the upturn comes.
  • Reduction in the hours worked. This cuts costs and any excess capacity, but it has to be agreed with the staff affected.
  • Coronavirus Job Retention Scheme. The government will pay 80% of the salary cost up to £2,500 per month. The employee has to be not working, due to the impact of Coronavirus, but retained on the payroll and agree to be involved in the scheme.

For other staff, consider asking them to accept a voluntary reduction in pay. Again, the staff have to agree to this, but during a crisis period, employees can see that without a reduction in costs the business will probably go bust. The scheme needs to be fair and led from the top.

Any changes to working hours or pay rates needs to be both fair and legal. We suggest that you seek the advice of an employment lawyer, before any action is taken.


Dixcart has lawyers, accountants and tax advisors that can assist with all aspects of a review being undertaken by a business, when considering what action they must take to survive the coronavirus crisis. We can also provide support and assistance in putting in place the appropriate action.

If you would like to discuss your plans with one of our directors, please call us on: 0333 122 0000 or send an email to us at If you are already a client, please ask to speak to your usual Dixcart contact.

The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute accounting, legal or tax advice. Professional advice should be obtained before taking or refraining from any action as a result of the contents of this document.