It’s no secret that Covid-19 is affecting businesses and ravaging economies worldwide. The virus has brought many commerce activities to a standstill. Big businesses and Small and Medium Enterprises (SME) alike are bearing the brunt of this virus, and there’s a growing fear that the global economy may suffer a downturn – the likes of which have never been experienced before.
Just as words like “social distancing” and “lockdown” have become part of everyday lingo, words like layoff, bankruptcy, and furlough have become all-too-common in the business world. However, it is not all gloom and doom. Many governments around the globe have instituted financing schemes and reliefs to prop up businesses. Here are a few that may be worth examining.
Loans and Grants
Many governments are assisting crippled businesses by making loans and grants available, at meager rates. In normal times, many companies would not have been eligible for such facilities. For instance, the United Kingdom has recently launched the Corona Business Interruption Loan Scheme (CBILS). This scheme allows businesses to access funding of up to 5 million pounds. The CBILS is working with over 40 money lenders to make this a reality.
The United States, on the other hand, is providing low-interest Economic Injury Disaster Loans (EIDLs) for those affected by Covid-19. Lawmakers in the country recently passed a $2 trillion stimulus package to shore up the economy. $320 million is being committed to the country’s Paycheck Protection Program. Germany, one of the worst-hit countries, has placed no-limits on business taking loans from the state. Other countries may also provide a government-assisted working capital loan that is available for SMEs.
A few months ago, the idea of moratoriums on loans would have been a daydream. However, moratoriums have become a popular way governments are responding to the financial crisis brought on by the pandemic. From Ghana to Spain, many countries have placed moratoriums on several loan payments. It’s worth taking a look at your country or state’s measures to see which loans you are allowed to rollover. Many countries have extended the deadlines for tax filing.
Some of these moratoriums cover housing. For instance, the Australian government has placed a 6-month moratorium on evictions. This measure includes businesses and households that are not able to meet their rent obligations as a result of the pandemic.
Cost Cutting Measures
Aside from loans and moratoria, many governments are implementing cost-cutting reliefs. In Canada, for instance, the government is offering a 75% reduction in rent through the Canada Emergency Commercial Rent Assistance (CERCA).
In Ghana, the government has announced a 50% reduction in electricity cost and free water for the next three months. This measure has freed many small businesses from expensive tariff costs.
Many companies in various countries are also experiencing tax holidays. VAT and other tax components are being deferred or removed entirely to allow businesses to recover from the downturn. Central banks have even been buying government bonds to help keep interest rates at a minimal level. Governments are equally reducing the insolvency and liquidity ratios for banks and other businesses to help them function.
In a Sum
As Covid-19 rages on, governments around the world are scrambling to put together relief and financial aid for businesses. Many governments have come up with various loan programs, moratoria, or tax deferments. These measures are to keep businesses afloat amid the crisis.
Listed above are some of the steps multiple governments are taking to keep the economy running. Also, many multilateral institutions, such as the International Monetary Fund, the World Bank, and the European Union, have committed billions to keep the world’s economies afloat.
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