When an unprecedented challenge hits a company, no matter what the size of the company or the challenge, it does not mean that the necessary solutions are unfamiliar or need to be re-invented. This was the case with Brexit whereby solutions here to the supply chain included relocation of staff or operations. Although COVID-19 presents a very different challenge than Brexit to SMEs, a similar approach in finding workable solutions is required.
The real challenge lies within combining the tailored solutions to fit the organisations business model, particularly in SMEs. Tacit knowledge and cross-sectoral expertise will assist greatly in engaging such a challenge. This is the core reasoning for this collective of organisations namely, mascontour, Time & Place Consulting, and J.O.S Solicitors to come together in solidarity to assist SMEs globally.
With this regularly updated guide for businesses to deal with the COVID crisis we now include:
- A new list of supranational financial schemes from around the globe helping national governments to implement plans to facilitate grants and loans for SMEs; and in some cases where you can apply directly.
- Updated key management considerations and tactics to help SMEs deal with the burdens.
We hope this helps you get your bearings. Do not hesitate to contact our crisis management and funding experts who are located globally.
Supranational financial schemes from around the globe
Many national governments are implementing plans to facilitate loans for SMEs within their jurisdictions, in dealing with this current crisis. For example, the European Investment Bank together with the national banks throughout Europe are cooperating in devising fiscal solutions to help ease the financial fallout for SMEs. Such financial supports will provide crucial assistance for most SMEs in helping to sustain cash flow and survive in the short term. Here a global overview.
- International / Global
The IMF approved immediate debt service relief to 25 of the IMF’s member countries under the IMF’s revamped Catastrophe Containment and Relief Trust (CCRT) Grants for debt relief. CCRT allows the IMF to provide grants for debt relief to the poorest and most vulnerable countries with outstanding obligations to the IMF to help address disasters, including public health disasters. Source
Furthermore, the IMF established the short-term Liquidity Line (SLL) to further strengthen the global financial safety net as part of the Fund’s COVID-19 response. The SLL will strengthen further a country’s liquidity buffers and thus help in managing liquidity pressures. Source
Other tools available to IMF:
- Emergency financing. The Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI) provide emergency financial assistance to member countries without the need to have a full-fledged program in place. These loans—which could amount up to $50 billion for low-income and emerging markets—can be disbursed very quickly to assist member countries implement policies to address emergencies such as the coronavirus. Emergency lending to low-income countries available under the RCF is about $10 billion, and for emerging markets under the RFI it could amount to about $40 billion.
- Augmenting existing lending programs. The IMF can modify as needed existing programs in support of countries to accommodate urgent new needs arising from the coronavirus.
- New financing arrangement. The IMF can also provide support through a new financing arrangement under its existing facilities such as Stand-By Arrangements, although some of the tools listed above would generally be preferable, including because they can be disbursed quickly to address the urgent financial need.
The World Bank Group is prepared to deploy up to $160 billion over the next 15 months to support COVID-19 measures that will help countries respond to immediate health consequences of the pandemic and bolster economic recovery. The broader economic program will aim to shorten the time to recovery, create conditions for growth, support small and medium enterprises, and help protect the poor and vulnerable. Source
The Global Fund is making funding and flexibilities available to support countries as they – while responding to the COVID-19 pandemic – continue to deliver impact through existing Global Fund grants. Source
From the overall global coronavirus package of €15.6 billion, €3.25 billion are channelled to Africa, including €2.06 billion for sub-Saharan Africa and €1.19 billion for the Northern African neighbourhood countries. Another €1.42 billion in guarantees for Africa and the neighbourhood are available through the European Fund for Sustainable Development (EFSD) to help small businesses with liquidity and working capital and enable more people to get the medical care. Source
The United Bank for Africa Plc (UBA) donated U$D14 million through the UBA Foundation, to catalyse a comprehensive pan-African response. The donation will provide significant support to Nigeria and 19 other African countries, by supplying relief materials, critical care facilities, and financial support to governments. Source
The African Development Bank (AfDB) announced the creation of the COVID-19 Response Facility to assist regional member countries in fighting the pandemic, with a total of $10 billion made available. The Facility entails $5.5 billion for sovereign operations in African Development Bank countries, and $3.1 billion for sovereign and regional operations for countries under the African Development Fund. An additional $1.35 billion will be devoted to private sector operations. Source
The African Development Bank (AAA) has also raised $3 billion in a three-year “Fight Covid-19” Social bond, to help alleviate the economic and social impact the Covid-19 pandemic. Source
Central banks from countries like South Africa, Nigeria, Angola, Kenya and Ghana are teaming up to provide new monetary policies. Source
The Asian Development Bank put forward $20 billion for its response to the pandemic and approved measures to streamline its operations for quicker and more flexible delivery of assistance. Some $2 billion from the $20 billion package will be made available for the private sector. Loans and guarantees will be provided to financial institutions to rejuvenate trade and supply chains. Enhanced microfinance loan and guarantee support and a facility to help liquidity-starved small and medium-sized enterprises. Source
The Asian Infrastructure Investment Bank is proposing a new Crisis Recovery Facility which will offer an initial $5 billion of financing to both public and private sector entities facing serious adverse impacts as a result of the pandemic. The facility will offer dedicated financing for the next 18 months for qualifying projects within its membership. Source
Resources will be reoriented to assist countries in Asia and the Pacific (€1.22 billion) to address the crisis and its impact, targeting specifically the action on most vulnerable countries and population groups. Source
- Europe / EU
It provides additional flexibility on the use of EU structural funds. Member States will be able to transfer money between different EU structural funds (e.g. Investment for Growth and Jobs, ERDF, ESF, Cohesion Fund) to meet their particular requirements. For instance, budget earmarked for an infrastructure project could be used to support SMEs or invest in short-term employment schemes. Source
For the agricultural sector, loans or guarantees of up to €200,000 at favourable conditions will be available to farmers and other rural development beneficiaries under the EU Agricultural Fund for Rural Development (EAFRD). Source
Furthermore, the European Maritime and Fisheries Fund (EMFF) will be amended to enable a more flexible reallocation of financial resources within the operational programmes in each Member State. The amendments will provide support for temporary cessation of fishing and aquaculture activities. Source
The EU Commission put forward SURE, a new initiative aimed at providing financial assistance of up to €100 billion in total to Member States in the form of loans to cover the costs of national short-time work schemes, support to the self-employed. Member States will deploy these resources at national level in support to existing plans, in order to complement national spending allowing firms to temporarily reduce the hours of employees or suspend work altogether, with income support provided by the State for the hours not worked. Still to be approved by EU Council and Parliament, SURE looks also to support national schemes providing self-employed income replacement. Source
- Commission Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak
The EU Commission adopted a temporary framework setting out, inter alia, the possibilities Member States have under Union rules to ensure liquidity and access to finance for undertakings, especially SMEs. Member States can provide aid to companies in the form of direct grants, tax and payment advantages or other forms such as repayable advances, guarantees, loans and equity provided that the total nominal value of such measures remains below the overall cap of EUR 800 000 gross per undertaking (the threshold is reduced to €120 000 for the fishery and aquaculture sector, and € 100 000 for the agricultural sector). The deadline for Member States to grant such aid is 31 December 2020 but the Commission will assess a possible extension.
The framework also includes aid in the form of guarantees on loans and subsidised interests for loans for both SMEs and larger companies, in the form of deferrals of tax and/or of social security contributions, and investment in Corona-relevant R&D. Source
Some examples of Member States’ state aid schemes approved by the Commission:
- France: Direct grants to companies with a maximum of 10 employees and having a yearly turnover not exceeding €1 million.
- Germany: Support for companies with direct grants, repayable advances, tax or payment advantages as well as with aid in the form of loans, guarantees and equity (Bundesregelung Kleinbeihilfen 2020 & Bundesregelung Darlehen 2020).
- Ireland: €200 million scheme, in line with EU State aid rules, to provide financial support to Irish companies affected by the coronavirus outbreak. The fund will be administered by Enterprise Ireland and will enable access for necessary liquidity and funding to sustain businesses in the short to medium term.
- Italy: Financial support granted by the State-owned "Guarantee Fund for SMEs", through financial institutions, in the form of (1) state guarantees on investment and working capital loans, and (2) direct grants in the form of waiving of the applicable fee on the guarantees awarded. The scheme also applies to self-employed workers.
An ongoing consultation with Member States is seeking to extend the scope of the framework by enabling Member States to provide recapitalisations to companies in need, in the form of equity or hybrid capital instruments.
The EU Commission has unlocked €1 billion from the European Fund for Strategic Investments (EFSI), under the COSME Loan Guarantee Facility and the InnovFin SME Guarantee under Horizon 2020, to support the EIF in issuing special guarantees to incentivise banks and other lenders to provide liquidity to European SMEs and small mid-cap companies SMEs will be able to apply directly to their local banks and lenders participating in the scheme. Source
A €25 billion pan-European guarantee fund to support companies (with a focus on SMEs) will be funded by EU Member States pro rata to their shareholding in the EIB and/or other institutions. In this way the EIB Group will be able to provide support to local banks and other financial intermediaries. The EIB estimates that up to €200 billion will become available for SMEs through financial intermediaries in all the EU countries. Source
Furthermore, the EIB has launched a lending programme enabling direct lending for private sector investments ranging from €15 million to €200 million, with the EIB loan amount ranging from €7.5 million to €50 million. Investments will focus on agricultural and bioeconomy projects targeting environmental protection and natural resource efficiency, renewable energy, innovation, competitiveness, and energy efficiency. Source
ESCALAR is a new investment programme jointly launched by the EU Commission and the EU Investment Fund (EIF). In its pilot phase, ESCALAR will provide up to €300 million backed by the European Fund for Strategic Investments (EFSI), aiming to increase the investment capacity of venture capital and private equity funds and thus to expand access to finance for SMEs and promising companies to scale up at EU level. Source
- Latin America
The Inter-American Development Bank (IDB) makes available more than US$7 million in non-reimbursable resources under the 2020 Call for Proposals of the Regional Public Goods (RPG) Initiative to finance proposals for regional cooperation and policy coordination in the framework of Latin America and Caribbean countries’ response to the pandemic. Source
Furthermore, the IDB made available a total of $12 billion to Latin America and Caribbean countries for the purpose of responding to the health crisis and its consequences. IDB Invest, the private sector institution of the IDB Group, will contribute up to $5 billion to support these efforts, including assistance to SMEs with financing programs and short-term liquidity guarantees, foreign-trade financing and guarantees, loan restructuring, and support for strategic supply chains. Source
The Central American Bank for Economic Integration (BCIE) approved the $1.96 billion Emergency Support and Preparedness Program to mitigate the impact of the coronavirus pandemic in the region. Another of the program's actions is to provide support to the financial sector, with an amount of up to $350 million to finance structured operations in eligible countries that contribute to the reactivation of the economy through the use of different financial products. The main focus will be to support the sector of micro, small and medium enterprises (MSMEs) to strengthen "the business in the region. Source
CAF has made USD 2.5 billion available for Latin American Countries which will allow authorities to offer a rapid and timely response to mitigate the effects of COVID-19’s expansion and contribute to the continuity of business operations and the recovery of economic growth. Source
The Latin America Investment Facility is one of the European Union’s regional blending facilities, aiming to mobilize funding for development projects by combining EU grants with financial resources from European and regional financial institutions, governments and the private sector. The purpose of LAIF is to help Latin American countries finance projects in key sectors that are essential for the achievement of the Sustainable Development Goals, such as energy, environment, water, transport, social services, and support to SMEs. Source
To address the coronavirus crisis and its impact, €918 million in resources will be redirected for Latin America and the Caribbean targeting specifically the action on most vulnerable countries and population groups. Source
Key management considerations and tactics
- Understand your customers loyalty to your product and effect on future sales
Understanding consumer behaviour in B2B or B2C has always been at the heart of every business. COVID-19 is not only a crisis because of the fact it is a highly transmittable disease, but also because it creates distrust, scepticism and fear amongst the population. Evaluate if your customers will still consider your product as a necessity. Despite the fact your marketing strategy says otherwise.
- Evaluate internal operation systems
You will need to evaluate how your business operates internally to see where it can demonstrate agility in adapting to necessary organisational and operational change. All aspects of the supply chain up to the end product or service, particularly if it’s a manufacturing, retail or products-based entity should be scrutinised.
Given the level of globalisation, many businesses rely heavily on countries such as the United States and China in the provision of part supplies and raw materials integral to the overall finished product for sale. The earlier a company can understand and identify weaknesses within its own supply chain will enable it to identify either alternative suppliers from different jurisdictions or secondary methods to achieve a finished product or service delivery.
- Review your internal employment policies and contracts
An immediate review of the company’s employment handbook and employee contracts is paramount to help employers identify and update specific policies relating to sick leave, short-term/temporary lay-off, remote working, reporting illness, staff travel restrictions and of course health and safety procedures in the workplace.
Such policies, if existent, should both guide and inform employers on how best to prepare and initiate all necessary actions as required in dealing with staff members who may need to self-quarantine, work remotely for a period or care for a family members who becomes infected with the virus. Overall, these polices will need to be adaptable to change and updated as required.
If an employer does not have the basic employment law structures in place such as an employee handbook and employee contracts, they will be left in a precarious legal position. Employers could face potential lawsuits if they fail to act fairly and appropriately with employees or breach any rights and entitlements in the absence of such contractual terms.
- Communicate clearly to stakeholders
Businesses have stakeholders at every level - staff, suppliers, customers, shareholders, banks and in some cases even media, depending on the brand and size of the business. It will be crucial for senior management to pro-actively communicate clearly and confidently to its many stakeholders on how the business is coping with and managing the crisis, adopting key messages as required to suit the audience. In times of economic peril, it is important for those in leadership roles to convey a sense of calm and denote a confidence they have matters in hand, as to avoid mass hysteria or panic.
Keeping up to date with communications from your local government will also be required by business owners, as to ensure proper protocols are been adhered too, particularly in the event a positive case occurring within the confines of the business premises. A ‘holding statement’ may also need to be issued to the media in high-profiled instances, to bide valuable time for a more definite response on what actions are being taken by the organisation.
- Review insurance policy
Check what insurance policy your business has in place and ascertain if you have a policy that includes compensation for “Business Interruption”. Then review what exemptions apply; if any by your insurers or brokers. There has being a growing concern across Europe that insurance companies are attempting to renege or wriggle out of such polices, therefore it is crucial for companies to diligently read the small print and make valid claims early. Then where necessary, challenge any unreasonable refusal via legal correspondence and/or file a formal complaint to the insurance ombudsman or relevant authority.
- Look beyond your traditional business elements
Never forget to lift your head to see what is happening outside of your organisation. Government authorities, civil society organisations and industry associations are highly active in times of crisis. They must be, as it is their role, and because in some cases they may lose their raison d’etre if they are not proactive. This support can manifest itself through an ease of state aid regulation, or platforms for pooling knowledge, or centralising supply chains.
- Try to look ahead
It is difficult in times of crisis, especially when you are looking to survive. When you build your strategy keep in mind that once the crisis is over, you need to be ready to grow again. Often organisations ignore key issues that might sling them into the next crisis once one is over. Of course, it is important to prioritise, especially with limited resources. But, ignore the future, and your business might not survive the subsequent crises.
This is also why…
- You shouldn’t entrench your business
Finally, never look at a crisis response as one of building walls. Former US President JFK once said: “The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger—but recognize the opportunity.” Keeping this in mind, we recommend you read all the above again.
We as mascontour, Time & Place Consulting, and J.O.S Solicitors are dedicated to pooling our knowledge of business management, change management, political understanding and foresight, organisation development, crisis management, profiling, employment law for business and individuals, corporate law, commercial litigation, media relations and public affairs to help find solutions for SMEs around the globe.