4 tips to help SMEs get through the COVID-19 pandemic

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    • covid19covid19
    18 April 2020

    Key Takeaways

    • The first priority for SMEs is to manage liquidity and cash flow
    • UOB is working with the government to help our SME clients to meet their short-term needs during this challenging phase
    • SMEs should explore online channel delivery models, staying in touch with customers, reviewing risk protocols and making operational improvements

    The COVID-19 pandemic has affected businesses around the globe. In Malaysia, the implementation of movement control orders (MCO) has taken a toll on many SMEs, forcing them to temporarily shut down their operations. According to a recent survey[1], 91.1 per cent of SMEs reported an adverse impact in their businesses – especially in sales and cash flow – because of the MCO, compared to 61.7 per cent prior to its enforcement.

    Given SMEs’ importance to the economy, the Malaysian government has unveiled an unprecedented RM250 billion stimulus package[2] which includes RM13 billion in financing facilities specifically for SMEs, to provide support to people, businesses and the overall economy.

    Here are four tips that SMEs can use to help get through this challenging phase.


    #1: Focus initial efforts on maximising liquidity and managing cash flow

    As an SME, maximising short-term liquidity should be your top priority. There are two ways you can do this: maximising inflow and minimising outflow.

    Maximising inflow

    • Intensify efforts to collect on your receivables: Even if you have to offer significant discounts to get customers to settle their outstanding amounts early, it might be worthwhile just to boost your cash reserves.
    • Make use of the additional loan facilities available for SMEs: Bank Negara Malaysia (BNM) has authorised more than RM13 billion in financing facilities[3] to support SMEs. This includes a RM5 billion Special Relief Facility, which gives eligible SMEs up to RM1 million in financing for up to 5.5 years at a capped rate of 3.5 per cent to stem short-term cash flow problems. Affected SMEs can apply for this facility through UOB Malaysia.

    Minimising outflow

    • Take advantage of the various relief measures announced by the government and financial sector: Income tax instalment payments can be suspended for three months beginning 1 April 2020[4]. BNM has also allowed an automatic moratorium on bank loan repayments for six months[5]. At UOB, we have gone a step further – our affected business clients can defer their loan repayments for up to one year. We also offer flexibility in extension of trade bills for clients with good track records.
    • Renegotiate with your landlords and suppliers: If rent is a significant part of your business expenses, negotiate with your landlord. They can benefit from the loan moratorium, and finding new tenants during this period will be a challenging task. Also, try to negotiate new terms with your suppliers.
    • Manage employee costs with wage subsidies, employer contribution restructuring and other government incentives: You can use key government subsidies and incentives to help manage costs. These include[6]:
      • A wage subsidy of RM600 to RM1,200 per employee per month for three months for employers with a 50 per cent drop in business since the start of 2020, for workers with a salary of below RM4,000[7].
      • Salaries for contractors in the service sector will be borne by the government.
      • The Employees Provident Fund will introduce the Employment Advisory Service programme in mid-April 2020, which will give employers options on delaying, rescheduling and restructuring contributions[8].


    #2: Explore online channel delivery models

    MCO is intended to ‘flatten the curve’ and prevent the healthcare system from being overwhelmed. As such businesses that can deliver their goods or services through online channels will be less impacted.

    Here are two examples of how brick-and-mortar businesses are using online channels[9]:

    • Fitness club iConFIT put their training programmes online to promote their services, and offer people the chance to buy advance club passes.
    • Co-working space Colony is using online channels to host virtual tour experiences to reach out to potential customers.


    #3: Be transparent and stay in touch with your customers

    Your loyal customers want to support you – reach out to them and be honest about how the pandemic is affecting your business. More importantly, give them a way to support your business. For example, some businesses are taking the gift card route[10] – which customers can redeem after the mandated movement restriction orders are lifted.

    Even if your business is in the B2B sector, being transparent with your customers and suppliers and staying in touch is crucial. This is an opportunity to really connect with them over shared struggles and humanise your brand.


    #4: Review risk protocols and make operational improvements

    Once you can adequately meet and manage the immediate needs of your business, it’s important to plan beyond the short term. Use any operational downtime to conduct a proper assessment of your risk protocols and explore how you can improve them. Start by reviewing your budgets, contracts and other sensitive documentation.

    When looking at what improvements you could make, use this question as your guide: if you had six months to prepare for this pandemic, what steps would you have taken?


    UOB’s commitment

    We are committed to helping our SME clients make it through the challenges brought on by COVID-19. If your business has been affected and needs access to funds to get through the short term, we invite you to apply for the COVID-19 Financial Relief Measures here.


    [1] https://www.thestar.com.my/business/business-news/2020/03/27/survey-suggests-growing-negative-impact-on-service-based-smes

    [2] https://www.thestar.com.my/news/nation/2020/03/27/muhyiddin-unveils-rm250bil-economic-stimulus-package

    [3] https://www.bnm.gov.my/documents/2020/Additionalmeasures.20200327.appendix.pdf

    [4] https://www.nst.com.my/news/nation/2020/03/578956/pms-full-speech-prihatin-economic-stimulus-package

    [5] https://www.bnm.gov.my/documents/2020/FAQs_Additional%20Measures.pdf

    [6] https://www.thestar.com.my/news/nation/2020/03/27/muhyiddin-unveils-rm250bil-economic-stimulus-package

    [7] https://www.nst.com.my/news/nation/2020/04/582073/smes-relieved-urge-fast-payment

    [8] https://www.thestar.com.my/business/business-news/2020/03/27/epf-to-provide-customised-advisory-support-for-affected-businesses

    [9] https://vulcanpost.com/693217/malaysian-brick-and-mortar-business-survival-strategy-mco/

    [10] https://www.cnbc.com/2020/03/23/how-small-businesses-across-us-are-coping-with-covid-19-pandemic.html


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