Planning for Covid-19

Planning for Covid-19

Don’t wait for government Covid-19 rescue before you act.

Property owners and businesses should not rely too heavily on government’s Covid-19 relief measures, advises lending specialists, Paragon Lending Solutions. Proactive discussions with banks and other lenders as well as detailed and realistic scenario planning done now could save many businesses and property owners in the coming months.

The South African government has taken bold and swift action in declaring a State of Disaster. The Reserve Bank’s 100 basis point rate cut to 5.25% is certainly welcomed. And, while there is much talk about what relief could still be delivered from SARS, business owners must take immediate action to see them through the worst of the Covid-19 fallout.

“Based on what other governments have done, and given that our own government is already in advanced discussions with labour and business, we have every confidence that there will be relief for business. But good business management always depends on being preemptive. There are some vital actions that need to be taken by business owners and property owners right now,” warns Gary Palmer, CEO at Paragon Lending Solutions.

Relief measures are already in place in the US, UK and Australia including some tax breaks and even mortgage holidays which showcase what is possible at a national level.

As people move into full quarantine mode many businesses could take a significant knock, but it’s important to understand that this will last longer than just a few weeks. International experience has shown that each person who has the virus will, on average, infect a further three to five other people. Stats so far are showing infections doubling every four to six days, although this could be worse in South Africa, given our very high income inequality and population density in poorer areas.

“If you see trouble in making your payments, take action immediately. Many lenders will consider payment holidays or, in other instances may look at extending the term of your loan.”

Palmer says that banks will assess each business or property loan on a case by case basis.

“As with any crisis, whether it be the Day Zero water crisis or this pandemic, each deal will be assessed based on its merits. Some may qualify for a capital moratorium; others could benefit from an interest rollup, it really depends on the individual and their circumstances.”

Palmer also says that it’s incumbent on the business owner to ensure that whatever relief measures they secure now don’t end up costing them in the future.

“Be very careful that you don’t inadvertently incur interest penalties when your deal is restructured. This will hurt you in the long-term. Now is the time to look past short-term gains and set your business up for a healthy future.”

With this in mind, Palmer believes property owners should also take a longer-term view when it comes to how they handle their tenants.

“Tenants will also be taking a hit during this time and they won’t benefit from mortgage holidays. One way landlords can help is to  pass on savings from the latest rate cut to their tenant. This act of good faith will serve you well in the future and help ensure you don’t end up losing a tenant in these uncertain times.”

Finally, Palmer also advises that just as the virus may mutate over time, scenario planning, forecasting and business modeling will have to be revisited from time to time. Staying up to date with local infection data can easily be done by checking reputable local resources.

“Riding out any disaster requires long-term thinking. Pragmatic and timeous planning as well as good lines of communication with your business partners and your lenders will ensure you can weather these storms.”