Business Finance in 2020 – COVID19 Lending Guide

This piece is written for those who require finance in 2020, a uncertain time in many businesses. If you’re seeking commercial finance in this not yet post COVID-19 world, please read on.

First, an introduction to the world of finance when uncertainties arise. The initial reaction of financiers to Covid-19 was a mild panic. Bank’s lending values dropped, information requirements grew more stringent and bank’s decision makers backsides puckered up substantially. Credit appetites reduced with assumptions that business was in for a difficult time.

On the flipside, some businesses saw significant increases in sales, spurred on by locked down individuals receiving a break from their busy working & commuting lifestyles. Businesses with internet sales & delivery channels boomed. Consumers with discretionary income had the opportunity to view their homes in detail, blinds needed updating, the kitchen a little dated or time for a new car in the business for the $150k instant tax write-off. Everyone in the country needed hand sanitiser and later a mask.

Lenders attitudes were based on expectations. Lost revenue and reduced asset prices are assumed. Actions needed to be taken by banks to mitigate this risk, both real and imagined. Smaller banks completed their operations and contacted customers quickly. Repayment relief provided when necessary, as per government mandate. Larger banks had a harder time achieving this outcome. Difficulty emerged in the implementation of their ideas.

Now that 30 June has come and gone, it’s a great time to prepare your financials to support any lending request. This is more timely than regular bank policy requires, but 2020 isn’t a normal time. This is important for one significant reason.

·       30 June 2020 figures show the actual effect of Covid-19 on approximately three and a half months of business results, mixed in with the rest of the year.

Completed June 2020 financials will reduce the stresses felt by financier’s decision makers by providing actual numbers, not expectations, on which many decisions have been based on. Further, it is extremely relevant to business owners who need to make ongoing decisions regarding their business. Consider provision of April to June quarter figures to further outline COVID-19 effect on business and develop strategies necessary to best handle the situation.

Updated accountant prepared figures are a great panacea to financiers worries. Concern about various government subsidies (Jobkeeper/Jobseeker) and their end date are present, and these will remain. It has never been a better time to be up to date with your financial numbers.

When your broker or banker requests up to date financials, don’t panic, just call your accountant.