By Roxana Mohammadian-Molina, CSO at Blend Network
‘Whatever it takes’ seems to be a sentence on every self-respected politician’s lips these days, but Roxana Mohammadian-Molina argues that it is ‘survival of the fittest’ for SME businesses and proposes three DIY tricks every small business owner should try.
As people around the world continue their imposed or self-imposed isolation, the world economy continues its freefall plunge into recession. A 2 to 3 month lockdown period and the resulting global demand shock inevitably puts the economy at risk and current debate vacillates between those who think it will only be a Greater Recession and those who believe it will be a Greater Depression. The liquidity shock faced by small businesses such as restaurants and shops threaten to quickly infect, for lack of a better word, credit markets. Our base case scenario is that the current lockdown will remain in place for another 6 to 9 weeks, and even then, the world won’t completely reopen overnight. Instead, there will most likely be a transition period before everything gets back to normal. In the short term, the government’s most important priority is to get everyone tested in order to contain the epidemic. That will then allow the government to have a better understanding of the current situation and potential risks and will allow more appropriate decisions to be taken.
So, the inevitable question becomes what do small businesses need to do to survive the coronavirus crisis? This is an important question because although 'whatever it takes' seems to be a sentence on every self-respected politician’s lips these days, ‘whatever it takes’ often does not leak down to those small and medium (SME) businesses who need the help most. So, here are three concrete things that as a small business owner you could do to help you and your team navigate the crisis:
First, if you are a small and medium-sized business, chances are that rent is one of your biggest fixed costs – at least in large cities such as London, Birmingham and Manchester. So, try and get some help with your rent and if you are lucky enough you may even get a rent-free period. Speaking from our own experience and following my own mantra of ‘you don’t ask, you don’t get’, once it became clear that my team and I would not be going back to the office anytime soon, I asked our office landlords what our options were. To my greatest delight and surprise, they offered a three-months’ rent-free period. This is a huge help and will certainly help us manage liquidity while we get back on our feet. So, top tip 1: ‘you don’t ask, you don’t get’.
Second, in order to avoid the prospect of cash drying up, try and secure some short-term liquidity as soon as you can. In theory, the Coronavirus Business Interruption Loan Scheme (CBILS) is available for SMEs through more than 40 accredited lenders, but that’s only if you are lucky enough to get through in the dedicated phone lines and qualify. The reality though is that many small businesses, especially start-ups, won’t qualify for CBILS, and for these I propose a more realistic option: reducing the debt repayments to creditors through negotiations and a payment plan proposal. So, top tip 2: ‘be strong enough to stand alone, smart enough to know when you need help, and brave enough to ask for it’.
Third, once you have dealt with the short-term liquidity issue, you’ll need a damn good strategy to get you and your business on its feet again. Taking a step back and thinking about strategy is key because let’s not forget that the current situation, despite the terrible human impact it is having on communities around the world, will potentially create new opportunities and you’ll have to be ready to snatch them up. Speaking from our own experience, today investors in our P2P property lending platform Blend Network can participate in our deals from only £1,000 not only because of the technology we have built, but also because high street lenders left this business in the aftermath of 2008 global financial crisis. So, the 2008 crisis meant an opportunity for P2P lenders like us. So, as a small business owner you will need to stand ready to find, assess and select those opportunities so that you can emerge stronger and better. So, top tip 3: ‘out of adversity, comes opportunity’.
But here’s what is probably my best top tip to you all: this is the time to build relationships with your customers because customers will become increasingly loyal to those who stuck by them when times were tough and carried on working on rapport.