2020-03-19 20:12:59updatesEnglishHelp Small Businesses Survive COVID-19 Pandemic has lead the Indian government to issue strict guidelines in respect of self quarantining.https://quickbooks.intuit.com/in/resources/in_qrc/uploads/2018/08/business-owner-calculates-bank-fees-on-transaction.jpghttps://quickbooks.intuit.com/in/resources/updates/small-businesses-survive-with-covid-19-pandemic/Help Small Businesses Survive COVID-19 Pandemic %%sep%% %%sitename%%

What We Can Do To Help Small Businesses Survive COVID-19 Pandemic?

6 min read

The Coronavirus pandemic has lead the Indian government to issue strict guidelines in respect of self quarantining, social distancing and lockdown to control the further spread of Covid – 19.

Though these measures have been taken to ensure safety and welfare of the Indian citizens, these have certainly impacted the small scale sector. The industries majorly hit include the Food and Beverage (F&B), automotive sector, electronics and textiles.

For instance, the restaurant dining is witnessing an approximate drop of 30 – 35% in business. Given the high proportion  of fixed costs in the food service industry, such sharp decline in revenues could mean severe losses to restaurants in upcoming times.

Likewise, the automotive industry, which was already experiencing an overall slow down in demand, would slide further with COVID – 19 outbreak.

Given the financial and economic distress witnessed by the SMEs amid COVID – 19, various stakeholders including government, consumers, vendors, investors and large business must make joint efforts to help SMEs endure the virus.

How to protect SMEs from COVID – 19 impacts:

  • Government

The political leaders, as well as industrial body heads, have been appealing the government to provide financial aid to small businesses. Thus, the finance ministry is expected to consider providing financial relief to traders and small businesses in order to cope with Coronavirus pandemic.

Given this, the following are the ways in which the government extend help to combat the current crisis:

  • Disaster Loans

As per an industry body, the government in close coordination with RBI can provide Corona Cash Loans upto a certain percentage of total sanctioned limits. Such loans can be provided at low interest rates with long term repayment periods. Thus, small businesses can utilize the loan amount to meet working capital needs like payroll, short term debt payments and payment towards other bills.

Besides this, the government can also consider extending Cash Bridge Loans estimated on both Fund and Non-Fund based limits.

This would help SMEs to increase domestic production and in turn help overcome supply chain disruptions. Such disruptions have been occuring due to increased dependency of the SME sector on China for inputs/raw materials.

  • Postponing EMIs

The government can consider postponing loan EMIs.

This extension of moratorium for the repayment of principal and interest amount would provide immediate financial relief to mitigate reduction in demand and deal with operating expenses.

Besides this, banks can also consider waiving service fees and any penalities for both regular and small business customers.

  • Tax Benefits

Since the spread of COVID – 19 would impact earnings of industry segments like aviation, travel and F&B, it would be challenging for businesses to pay corporate taxes.

Furthermore, since GST is transaction-based tax, the supply disruptions and lacklustre demand would mean a tough time for such business to file returns and pay taxes. Thus, the government can consider giving tax benefits to reduce the pain of affected businesses.

Current Measures Taken by RBI

The above-mentioned points include certain steps that the government can undertake to help small businesses battle the onslaught of the COVID-19 Pandemic.

However, RBI has already taken certain monetary policy measures to provide liquidity and stability to certain  financial market segments. These market segments have been grappling with tight financial conditions due to increased COVID-19 pandemic risks.

Such measures include:

  • purchasing of government securities worth Rs 10,000 Crore and LTRO to induce liquidity and to ensure that the money markets function in a proper manner
  • RBI urging the general public to make use of non –  cash digital payment options like NEFT, IMPS, UPI and BBPS for fund transfers, purchase of goods or services, payment of bills. To implement this, RBI has made these digital payment options round the clock.

 

Customers

  • Purchase Gift Cards

To help some of the most hard hit businesses such as restaurants, the consumers can resort to purchasing gift cards in order to support restaurant owners and their workers.

After the execution of partial lockdown, social distancing and self quarantine measures, the restaurants have witnessed foot traffic coming to a halt to avoid the spread of the novel Coronavirus.

Thus, such measures would make it challenging for the restaurant owners to pay rents or disburse payroll as food service has come to a standstill. Therefore, consumers can help them by purchasing gift certificates that can give restaurants immediate income.

They can purchase these gift cards directly from the restaurants or can self volunteer and create online platforms that would help restaurants with donations or gift card purchase.

  • Waived Fees

With the Coronavirus outbreak, the food delivery companies should consider reducing or waiving the commission fees.  As the new rules concerning barring people to go to public places set in, fee waiver or reduction by food delivery companies can be a good step to provide much needed relief to the restaurants.

The food delivery service offered by restaurants which once acted as an additional stream of revenue has now become a major source of earning for the restaurant owners.

Thus, reduction or waiver of fees by food delivering companies can provide financial aid to the badly hit restaurant segment.

  • Order Merchandize Online

You can support restaurants by ordering food online. Though there is a unique challenge for the food delivery companies to deliver food given the risks attached with COVID – 19 virus, the food delivery companies are taking precautionary measures like

  • leaving food in front of the door,
  • maintaining distance with the recipient while delivering food
  • washing hands or sanitizing hands before or after making deliveries

If you are sick and subject to self – quarantine or complete isolation, you can order food online and support your favorite restaurants.  Besides this, you can even give a good amount of tip to the delivery boy in order to compensate them for carrying such risky or unpleasant job that only few people are willing to do.

  • Go For Local Purchases – Both Offline and Online

Local restaurant owners and other small businesses have shut down their physical stores or outlets, prevent further spread of the pandemic.

Though such measures are good enough to prevent general public from getting infected, these are certainly hitting small businesses economically.

Therefore, as consumers you can support them by purchasing merchandise or inventory that you might need while in self quarantine via online stores/platforms of local businesses

If the local businesses do not have online stores, make sure that you purchase through their physical stores in order to support them.

As far as small service providers are concerned, who cannot deliver services at present, make sure that you continue pay their salary, regardless of their incapacity to serve you during self quarantine.

  • Asking Large Customers to Pay

During period of crisis such as Coronavirus pandemic, it is extremely important for small businesses to maintain cahs flows.

Thus, small businesses need to talk to their clients and understand the payment schedule of each of them. The clients having sound financial position can be urged to make payments on immediate basis.

Furthermore, if you have not raised invoices for the goods or services already delivered, you can do so at the earliest, given that the client staff may soon go into self quarantine.

Large Businesses

To help small businesses combat COVID – 19, big companies should come forward to provide financial support to these businesses. For instance, they can consider waiving the commission fees charged for rendering services to small scale business like independent restaurant partners.

Besides this, the larger companies can provide financial assistance to small businesses in the form of cash grants. Such grants help businesses to meet their rent costs, connect with customers and meet overhead expenditure. Furthermore, they can even create their own fund specifically for small businesses or make donations to the one who intend to help SMEs deal with the crisis.

Conclusion

SMEs form the backbone of the Indian economy and are the ones severely hit by the COVID-19 outbreak. Since the coming days seem uncertain, the small scale sector is bound to see further fallout. Therefore, all the stakeholders, be it government, consumers or large businesses, need to make a collective effort to help SMEs endure the crisis.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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