Illustration: Toby Morris

I own a small business. What do I do now?

In the first part of our new series with Kiwibank answering your questions about Covid-19’s impact on New Zealanders’ finances, a reader asks about ways to get their business through the economic downturn and take advantage of new opportunities. Kiwibank’s Nigel Gaudin responds. 

Dear Nigel,

I run a small retail business with five staff and was closed during level four lockdown as a non-essential service. For now, we can cope with the support of the wage subsidy. However, I am concerned about what the next 12 – 24 months will look like as the long term economic effects of Covid-19 are felt.

 I am expecting to experience a moderate to significant downturn because of a tightening in consumer spending. What is your advice on how to weather this without having to let staff go?

My business is currently predominantly based on physical sales, but would function well online. This would require a decent capital cost to set up a more sales-focused website infrastructure. Can I get a business loan under the government Covid package? Is this a good idea to borrow when sales might not reach their pre Covid numbers for a while?


If you have queries or concerns about your personal or business finances please email your questions through to askkiwibank@thespinoff.co.nz – we look forward to answering them. 


Kia ora,

It’s great to hear that you’ve managed to access the government’s wage subsidy, which is certainly the most important step you needed to take to protect your business and keep paying your employees during the lockdown. The next step is to look for ways to preserve or increase your cash flow right now to get through the next two to three months, this will provide the foundations to ensure your business remains viable in the medium term

During alert level four, the only option for most New Zealanders was to buy their non-grocery goods over the phone or online. This will only increase now that we’re in alert level three as more businesses are allowed to start trading, while not physically engaging with their customers. So yes, if you are allowed to resume operations during alert level three, then moving your sales to an online system is essential to bring in cash in this new contactless economy and take advantage of the huge numbers of customers that have moved or will move to online purchasing.

How you finance this is a different matter. Generally, the government’s business finance guarantee scheme is for emergencies caused by Covid-19 disruption, and to help businesses sustain their BAU (Business As Usual) operations, such as paying staff and normal expenses. Therefore this scheme couldn’t be used as capital to finance the expansion of your business to an online sales system. However, that certainly doesn’t mean that you shouldn’t approach your bank to check your eligibility and assess your particular circumstances.

Based on your unique situation and the commercial viability of your business, your bank may have other options to help you preserve cash flow or adapt your business to attract more sales. If you have debt, your bank may offer an interest only period or a payment deferral. You may also be able to take a small temporary overdraft. But certainly, the first port of call is with your bank. Talk to them; find out all the options that are available to you based on your unique position and the nature of your business.

Depending on the products you are selling, if there is a way for you to switch to a basic online or even phone-based sales system without it costing a fortune, then you should definitely do that. Any adaptations you can make to help you sustain sales and cash flow right now will go a long way. Alongside this, increasing your company’s social media presence is now an essential channel to promote your products and grow your customer base. You need to ask yourself, what am I doing on Instagram or Facebook? Can I target customers not just in New Zealand but in overseas markets as well?

We’re going into a new era and it’s not going to be the same as it was. So it’s a time to adapt, to think of new ways to pivot existing infrastructure and resources to exploit new opportunities. For a lot of New Zealand businesses, this will be the way forward. 

Good luck!

Nigel Gaudin, general manager business banking and specialist markets

Kiwibank


Please be advised that our response is based on information you have provided but there may be other things that we don’t know about your situation that would be relevant to the answers provided and would change the outcome. You should speak to your financial adviser before making any decisions or a budgeting service.

Information provided by Kiwibank is limited to providing a general response to the specific question and is based on the limited information provided. It does not take into account any additional financial information or possible financial solutions available. This shouldn’t be relied on as the sole basis for any financial decisions. For information and assistance for your specific situation you should call your financial adviser. Kiwibank is a Qualifying Financial Entity (QFE) under the Financial Advisors Act 2008. For a full copy of Kiwibank’s QFE disclosure, please view this link for more information.



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