The fluctuating nature of Covid-19 restrictions, particularly for businesses, has made it difficult to keep going, never mind maintain hope that a profitable basis of trading lies just around the corner.

Of course, some businesses have performed well as a result of Covid-19 : think food chain, doorstep delivery services, anything that can be provided online such as training, and small contractors who have found a plentiful source of work amongst those who have been forced to stay at home and find that the house repair/renovation that has been delayed indefinitely now becomes a matter of urgency.  Others however, have not enjoyed the same uplift : think public house, hotel, general retailer, hairdresser, tattoo parlour and sports centre.

Some commentators bemoan the fact that a supermarket remains open selling all sorts of goods unrelated to food e.g. newspapers, household goods, electrical items and mobile telephones whereas the shops selling specific product ranges have been closed : an uneven playing field.  In fairness, the high street has been struggling for years and unless there has been an attractive online offering that supports the retail outlet, smaller shops have found it difficult to maintain profitability and continue. Rightly or wrongly, we have seen many of our high streets become a collection of cafes and betting shops.

The view is often expressed that not all businesses have been treated the same in terms of government support. There are valid pleas from the bars and restaurants that they should remain open because their physical distancing and track-and-trace protocols are more stringent than a supermarket and thus, that some are being dealt with less fairly than others.

From an insolvency perspective there have been far fewer business failures than anticipated in the last six months or so and this may be because many people with a business struggle to see the benefit in a formal insolvency process if nobody is around to purchase the assets and use them to better effect.  Returning to a licensed establishment for a moment, if it operates from leased premises and the key assets are financed, why would someone pursuing a debt wish to close a business when there is little or no prospect of financial return.  Far better perhaps to wait until trading has resumed and there is a possibility of payment. The insolvency practitioner’s skills may be better used to assist with the preparation of business survival packages and liaising with creditors such that the interests of all stakeholder groups are preserved meantime.

In an effort to protect the financial position of businesses and individuals during Covid-19, the Scottish government changed the rules in order to stop a creditor from liquidating/sequestrating a debtor in order to recover a debt until 1 April 2021 at the earliest. Indeed, some now talk about that date being extended until, say, October in order to allow a business to resume activities and establish a sustainable position before addressing the historic debt that has accrued. If creditors have to wait a little longer to be paid, it could mean that landlords who have not received rent for many months, HMRC who have been patient in not pursuing unpaid VAT, PAYE and corporation tax, the local Council, as well as suppliers of goods/services and utility companies will have to be practical and accept a longer period over which old debts are settled.

If the business dream is to be kept alive until a sense of normality returns, what is to be done? Most businesses now have experience of staff consultation and furlough arrangements and this will be put to good use in the months ahead. In terms of financing the business, attention may well turn to what existing/additional sources of finance might be available in order to support a resumption of trading activity.  The Institute of Chartered Accountants of Scotland have produced a splendid 42-page guide which provides information on a plethora of sources of finance (www.icas.com/professional-resources/coronavirus) and is highly recommended.

For many, a bounce-back loan has been obtained, and perhaps a Coronavirus Business Interruption Loan application is the next step, which will require a realistic cash forecast and an appointment to see one’s bank manager/accountant. If investment is sought, business equity might be available from family/friends, wealthy individuals looking for an interesting investment (either hands-on or hands-off), business angel groups or a crowdfunding platform. Indeed, even during all times that furlough arrangements were in place, employers were required to fund employee pension contributions which means that there are numerous pension funds looking for good investment ideas.

Landlords, understandably upset because rent has not been paid for many months, may well be keen to ensure that an existing tenant remains and thus, willing to work with the current occupant in order to provide long term security of rental income.  The Meston Reid & Co team has been involved in helping to prepare cash forecasts on the basis of experience gleaned from businesses who have failed and hence, that any new activity is able to avoid the usual classic mistakes when seeking to open for business and be successful.

Given the fact, frustrating or otherwise for creditors, that there is little that can be done to collect a debt in Scotland in the short term, anyone keen to establish a new business idea or resume an existing trading activity, has time to think/plan carefully rather than feel rushed into making decisions that return to haunt. Whilst this process will not prove successful for everyone, and a formal insolvency procedure may be required in order to tidy what is left, the current lockdown restrictions on trading offer an opportunity to think ahead and keep the business dream alive.

The views in this article are those of Michael J M Reid, licensed insolvency practitioner and partner of Meston Reid & Co, chartered accountants, Aberdeen.  They do not purport to represent those of the firm in general.