There’s an old adage that says “don’t look a gift horse in the mouth”. This does not apply to the latest small business loan scheme from Government – this is a loan, not a gift. The COVID-19 Small Business Cash Flow Loan Scheme, (or SBCS for the shorter tongue-twisting acronym), is a one-off loan for up to five years for SME’s adversely impacted by COVID-19.
This comes down to your unique business position and we think it should be carefully considered. The purpose of the loan scheme is to help businesses meet their core operating costs so if you take the loan for your business, you’ll need to have a need for it, other than eyes on a shiny new toy. We see three outcomes:
You need it
Things are tight and you’re contemplating asking the bank for an overdraft increase or short-term loan. Alternatively, you’re already in overdraft or have a flexible loan account that allows you to make repayments without penalty. Given the harsh default rates, it’s important to forecast, as best as possible, to align the debt with your costs and your repayment ability.
You might need it, soon
You have until the 12th of June 2020 to apply so don’t rush – we are in rapidly changing times. Spend time analysing your cash needs so you have a good handle on your position including where, when and for how long you might need help. Act when you need to.
You don’t need it, but would like the cash
Who wouldn’t like a bit of free money?! It’s no lolly scramble though, run the numbers – to gain a truly interest free loan, you’ll have the money for a maximum of 1 year at a ‘risk-free’ savings rate of maybe 2%, less any fees and your time… It’s probably not worth the hassle!
In all options where you are seeking funding, consider your options, talk to your bank, accountant and industry peers. Money is as cheap as it has ever been and there’s much more to consider than just the interest rate in the window – things such as repayment period, security and guarantees are all important factors.
In any case, we’re here to help you, so get in contact with us. If you’re ready to apply for the Small Business Cash Flow Loan scheme, the application is here.
Want to know what other businesses are doing in regard to their cash flow? Check out what Chris Bagley thought in our latest episode of Owner Insights.
Your Outside team and Ruby
Address: Level 2, 182 Vivian Street, Te Aro, Wellington 6011, New Zealand
Mail: PO Box 24-457, Wellington 6142
Phone: 04 889 2975
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