Many questions
It is a message no one likes to hear. But it is clear that state aid to companies will stop sometime. The deferred payment of tax must then still be paid. Therefore, it is important for both insurers and companies to prepare for the new reality after Covid-19.
In doing so, you should asking themselves the necessary questions (and also answer these as much as possible). Who are my main suppliers? Can my buyers pay the bill? Are orders coming back on track? But also: what is the state of my own financing? Is the bank still cooperating, or do I need to find alternatives? Are any reorganisations planned? Do I have rent arrears? These are all issues that are already frequently troubling companies, we can conclude from the many conversations we have with our customers.
What can you do right now?
We do not recommend that you start passively waiting to see what those answers are and what will come your way. There are several things you can do right now:
- Make your annual figures public: Whether you have credit insurance or not, it is important to disclose your annual figures as soon as possible. This was also one of the tips in our newsletter last month, in which we listed What to look out for if you have changed financing needs in 2021. In addition, make the subject of credit insurance negotiable with your buyers. And deal smartly with those suppliers you know have credit insurance.
- Provide up-to-date figures and (if necessary) a substantiated recovery plan: Credit insurers assess companies on the basis of various information. In most cases, this involves financial statements filed with the Chamber of Commerce (insofar as a buyer is required to do so and has fulfilled the obligation). In the current economic situation, credit insurers would like to have the most recent financial data of your company. This allows them to better assess whether they can positively continue the coverage policy on your company and accept the desired credit limit. Financial statements from 2019 do not say much anymore, as this was in the pre-corona era. Insurers need recent insight. If a negative trend is visible, they want to see a plan on how the company can reverse it.
- Deal well with late payments: Make sure you do not make open-ended agreements along the lines of 'while the lockdown lasts, we cannot make payments'. If your buyer cannot pay on time, make a payment arrangement that does not exceed your maximum notification period of collection. If a buyer needs more time, discuss this with your account manager at Xolv.
What about the WHOA legislation?
We can imagine you are wondering what the impact of the WHOA legislation effective from 1 January 2021 will be. This Homologation Private Agreement Act helps companies that are in danger of going under due to high debts, while they still have viable business operations in house. As we wrote in May 2020, we at Xolv believe it is good that this so-called Bankruptcy Act has been amended. The old arrangement scheme in suspension of payments proved ineffective and remained virtually unused for that reason.
On the contrary, practitioners urgently need - especially in the corona crisis - a workable non-bankruptcy arrangement. It would be disastrous for our economy if one company after another collapses. With WHOA, we can avoid an unnecessary wave of bankruptcies, which is better for the overall economy - and thus ultimately for the majority of creditors. Because a restart or reorganisation often creates more value than can be claimed in bankruptcy. As for the impact of WHOA, a trend cannot yet be indicated, as only a limited number of cases have been published so far.
Will you have to deal with a supplier invoking WHOA? Then contact us, so that we can help you in the best possible way.
