The coronavirus outbreak is having a ripple effect on the worldwide economy, from wedding dress shortages to the Australian tourism industry. 

Many businesses are having trouble importing or exporting the products they need due to the coronavirus. If this is the case for your small business, it could impact your business financially. Now is the time to get on the front foot, by:

  • assessing your position; and
  • negotiating with your bank and landlord. 

This article provides practical guidance on how to manage these issues to help your business survive this difficult time.

Assess Your Position

If your business has been impacted by the coronavirus, you need to quickly assess your current financial position. You need to consider:

  • how much capital you have to ride out the loss of revenue or supply;
  • if there are other sources of supply if your current supply is temporarily affected by travel suspensions; and  
  • if you need to assess your staffing levels and contract future orders to deal with the anticipated downturn.

When making this assessment, there may be a number of issues that arise. For example, you may need to consider how any upcoming marketing expenses or conference attendance will be affected. You may need to contact your suppliers to gain a clear understanding of who may be affected and who may not.

Instead of simply going through the motions as if nothing has changed, you should get ahead of the curve and actively assess your current position. Making changes now could prepare your business for any disruption to come.

Develop a Business Strategy

For small businesses, there are two key parties that you will need to consider when dealing with a disruptive downturn:  

  1. your banks; and
  2. the landlord.

Dealing With Your Banks

If you have equipment on finance or a business loan, now is the time to assess those funding arrangements. You need to ensure they are adequate to deal with any cash flow issues that may arise. 

You should develop both a business plan and a cash flow analysis to get on the front foot with your lender and inform them of your projections. The banks may be swamped with requests to renegotiate the terms of business loans. So, it is better to get in early and deal with any potential issues from the outset.

You need to ensure that you pay all loans on time and do not breach the terms of your loan. Instead, you should first renegotiate the loan payment terms with your bank. Banks have the ability to take security if you fail to pay your loan on time. Therefore, explaining your situation to the bank and negotiating any loans should be one of your first priorities if you are having cash flow issues.

If the bank is unwilling to renegotiate, you can defend yourself against the bank taking immediate action against you, using force majeure arguments.

Force majeure principles argue that during certain extreme unexpected circumstances, some contractual obligations (such as loan repayments) should be suspended. 

This suspension occurs as the unexpected event makes it impossible for you to fulfil your contractual obligations, like loan repayments. If you find yourself in a situation like this, your legal advisor will need to carefully consider whether they can raise a force majeure argument.

Dealing With Your Landlord

If you are finding it difficult to pay rent, you should reach out to your landlord. If you do not communicate with the landlord and explain your situation, you may face being evicted from the premises.

Negotiating a lower rent is not easy, but it is possible. Here, you will need to proactively contact your landlord and seek a rent reduction, promising to pay what you owe when your business situation improves. You may need to provide financial information to support your argument that the downturn is temporary. 

If the landlord simply does not wish to lower your rent, you should obtain legal advice regarding whether any force majeure-type argument can be raised in the context. This will critically depend on the terms of your lease, and it will be important to obtain professional advice to better understand the implications of the use of this argument.

For example, it may allow you to stop paying rent, but it may also allow the landlord to terminate the lease.

Key Takeaways

These are difficult and fraught times for many small businesses, particularly importers and those reliant on the tourism trade. It is crucial to take proactive steps and assess your situation early to start negotiations with different parties to gain an accurate picture of your options. If you have any questions about your options if your business is suffering due to the coronavirus outbreak, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.
Tim Mak
Get a Free Quote Now

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • We will be in touch shortly with a quote. By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  •  Top 20 Startups in Australia - 2018 LinkedIn Startups List Top 20 Startups in Australia - 2018 LinkedIn Startups List
  • NewLaw Firm of the Year – 2019 Australian Law Awards NewLaw Firm of the Year – 2019 Australian Law Awards
  • Law Firm of the Year Finalist – 2018 Australasian Law Awards Law Firm of the Year Finalist – 2018 Australasian Law Awards
  • AFR Fast 100 List – 2018 Australian Financial Review AFR Fast 100 List – 2018 Australian Financial Review
  • NewLaw Firm of the Year – 2017 Australian Law Awards NewLaw Firm of the Year – 2017 Australian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer Most Innovative Law Firm - 2019 Australasian Lawyer

Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at info@legalvision.com.au

View Privacy Policy