Trevor Scott, chief executive of independent retail business Rugby Fitted Kitchens, breaks down the government’s coronavirus business rescue plan.
Well, who would have thought it?
This was certainly one business disaster scenario I never considered and I’m sure I’m not alone.
While my heart goes out to all the victims and their families and my undying gratitude to all the healthcare workers, frontline or otherwise, who are daily putting their lives on the line, trying to help those who are suffering back to full health, we in business, any business, also have our own crisis to deal with.
How to survive the lockdown? If your KBB business was anything like ours, then I suspect after a pretty average 2019 thanks to the Brexit debacle, you were just seeing the fruits of your labour coming good with enquiry levels up and the orders flowing.
Then… Dead stop. It was like hitting a brick wall at 70 mph.
Kitchens we were installing couldn’t be finished because our worksurface providers, with one exception, bless ’em – they know who they are – stopped templating and fabricating.
We have set these poor customers up with temporary worktops, sinks and either their own hobs or portable induction hobs and finished everything else we can.
A number of kitchens due to be started have had to be postponed indefinitely and the same goes for all the contract work, which we thought would go ahead, but then one by one all the sites closed, too.
Result: a warehouse full of kitchens and appliances we can’t supply, more on the way we couldn’t postpone, and a lot of suppliers quite understandably holding their hands out for what we owe them.
Now, I have been quoted before as saying that very few of us are ever more than three months away from financial disaster. And we’re now a month into that scenario. If the cash stops flowing, then you soon run out unless you have very healthy reserves.
So what can we do to mitigate this situation we all find ourselves in that was not of our making?
Enter the Chancellor on his white horse, offering retail and hospitality SMEs rates holidays, VAT holidays, grants, 80% of our wages bill to be met and – the big one, a Coronavirus Business Interruption Loan Scheme (CBILS).
So how has that been working in practice?
Rates – tick. VAT holiday – tick
Grants – mmm… Well, our satellite showroom in Warwick was no problem and in short order the £10,000 grant was on its way.
Our main Rugby showroom, however, was another story, as this is in a 4,500sq ft trading-estate unit that operates with ‘trade counter’ planning and not full retail. Fortunately, after a chat with the chief rates bod at the council and giving him a virtual Google tour of the showroom, he conceded we could be classed as retail and the £25,000 grant was approved, which at the time of writing had just landed.
The price we’ll inevitably pay for this will no doubt be an upward review of our rateable value…
Our third property, the warehouse and offices for our contracts division, won’t benefit under this scheme.
We have also negotiated rent holidays of up to three months with all our landlords, for which we are very grateful and some service providers have also been willing to support our request for payment holidays.
Remember, if you don’t ask, you don’t get…
Eighty per cent of our wages bill to be paid – sounds good in theory, but apart from our admin and logistics staff, the rest of the team earn at least half of their income in commissions, which can’t be included, so sadly they’re all going to be taking a big hit…
But to a man, and woman, they have accepted the situation and are fully understanding – they’re a great team and I love ’em all!
Also, of course, under the terms of the furlough, they can no longer work, which makes it that much more difficult for those staying on salary to handle the, albeit reduced, design workload.
A good piece of news I discovered only today is that company directors can now be furloughed, but continue to work as necessary to keep the business afloat, which is a relief.
As a business, though, we still have to finance this scheme for the April payroll as it won’t be up-and-running at HMRC until the end of the month, so this cash has to be found, meaning potentially some other things won’t be getting paid…
As for CBILS – well, what can I say without swearing? There had been only 130,000 applications as of April 7 and fewer than 1,000 had been approved.
Why? Banks putting too many hurdles in the way and an intentionally badly written scheme document by the Government.
Apparently 80% of the loan is guaranteed by the Government. Er, well actually, only after the bank has squeezed every last penny it can out of you should you default, as the borrower remains 100% responsible for the loan and the Government’s support for the banks is severely limited under the scheme’s terms.
Loans up to £250,000 to be offered without security? Well, not if you’re with Barclays or HSBC, and perhaps others I’m unaware of. But after many complaints to the Government, and pressure from the Federation of Small Businesses (FSB) and the Confederation of British Industry (CBI), the Chancellor last week had to step in and slap the banks’ wrists, forcing them to offer loans under £250k without security.
At last, we cried, a week or so lost in the application process, but now we can crack on. But no, following an e-mail to Barclays, their response was they are indeed now offering loans of up to £250k without security, but for all loans over £100k they will now require a debenture.
The banks and the Treasury are toying with us all and every day that goes by without the certainty of financial support being in place is a day closer to having to consider if we even have a future…
With the Government dabbling in semantics and not putting any hard cash on the table, it’s hardly surprising the banks are playing us all and no surprise the take-up of this scheme has been so low.
After all, none of us who set up and run otherwise successful and profitable businesses are stupid, so we’re understandably resistant to signing up for a loan that could, should the worst case scenario play out, cost us everything we’ve ever worked for through no fault of our own.
Off course, if we were in Germany, and previously financially healthy, we could now be borrowing up to three months’ turnover to a limit of €500k without security. It would, however, cost us 3% interest – but at least we’d have a business and chance of profitability, which would make the fee seem cheap in the long run…
The British Government needs to get a grip on this ‘fake rescue plan’ and soon!
“Whatever it takes”, Sunak…