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    Coronavirus Crisis – Are we in a bit of a Business Bubble?

    Forbearance  (noun) – patience, tolerance, restraint, clemency

    The coronavirus crisis continues to affect a wide spectrum of businesses, many of which are trying to navigate a path to survival in extremely difficult and unprecedented circumstances.

    Amongst the many unknown factors that will determine the ability of a business to get through this crisis are the ”when” and “how” aspects of the lifting of trading and social restrictions.  Until we have a clearer picture of what the next stages of the coronavirus protection steps look like, many businesses are faced with impossible decisions about how to deal with the crisis.

    In the meantime, the business world has adopted the principle of “forbearance” whilst the crisis prevails.  Some forbearance has been voluntary, some has been led by Government guidance and  some has been imposed by legislation.

    Patience – as all businesses are suffering the same problems at the same time, a degree of patience and understanding has developed on a B2B basis.  It is accepted that debt payments may be delayed or reduced and that there may be problems obtaining supplies.  Where possible, businesses are working together to find ways around these problems.  Landlords are accepting lower rent payments  and finance companies are giving payment holidays for asset finance and loan agreements

    Tolerance  – employees are accepting requests from employers to be furloughed or reduced hours and wages.  Employers have adapted quickly to accept new working from home arrangements

    Restraint – the Government has announced new legislation to protect against aggressive debt collection actions and voiding statutory demands and winding up petitions.   Legislation will also be introduced to take the pressure off Directors by suspending wrongful trading offences during the crisis period.

    Clemency  – Crown departments are allowing the deferment of VAT payments and are open to listen to time to pay arrangements.  In addition, a series of financial packages underwritten by the Government have been put in place to preserve businesses until the crisis subsides.

    But What Happens Next…..?

    The current arrangements cannot last for a sustained period of time and Government is now under pressure to set out the time table and arrangements for the lifting of restrictions.  Patience in the business world is starting to run out and already we are seeing companies starting a return to work.

    The financial legacy of all this forbearance will have to be dealt with at some point and when we start to exit the current restrictions, businesses will become more and more exposed as the forbearance starts to evaporate.

    Businesses trying to get back on their feet will be exposed to debt enforcement procedures for unpaid debts from the start of the crisis.  Finance commitments will once again have to restart and the backlog of debt “parked up” will have to be repaid.  All this at a time when a business might also need working capital to gear back up for trading with the need to fund stock purchases and wages until the cash starts flowing again.   Let’s bear in mind that “business as usual” won’t happen overnight.  Businesses won’t necessarily find it that easy to switch back on and it’s likely to take months to get back to any form of normality.

    This is the period when business will become vulnerable and Directors may need to consider steps to protect their business.   As we start to emerge from the crisis,  there are a number of measures we can advise on to protect a business and to deal proactively with creditors and funders.   

    We are continuing to provide help and support to clients through the period and our Partners and staff are available to speak with you or your clients. 

    Please visit our meet the team page for contact details.

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