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Small businesses & the covid19 relief package.

What is your biggest worry right now?

We’re guessing it’s how to pay your bills and manage your business & income for the next few months. This article aims to provide some clarity and helpful tips and resources on this topic for you.

The Central Bank of Sri Lanka has committed a 50 billion rupee Covid 19 relief fund to support covid-19 hit businesses including self-employment and individuals. They released a Circular No.05 on the 27th of March detailing the criteria and terms for applicants, and this is something you need to read well from end to end. They previously released Circular No.04 of the 24th of March referring to the announcement of the decision to the banks.

Banks too have stepped up and are offering their customers additional relief in other ways and we’ve put together a resource table of clickable links that you can use to directly access their relief options. While we are thankful for initiatives like these, it does take some analyzing to determine if they will be helpful to you.

The process of applying or working your way through these processes can be a bit overwhelming if you’ve never done it before and a bit confusing as well. That’s why we’ve put together a quick FAQ on the process and included some tips to remember when assessing your situation for the next few months.


You should never borrow money lightly. That’s why it’s important to seriously consider your business’s needs and goals before committing to a loan. Ask yourself these questions to determine if taking out a working capital loan is the right solution for your business:

What is a working Capital Loan?

A working capital loan is a loan that is taken to finance a company's everyday operations. Such as salaries, rent, utilities, supplier payments etc. These loans are not used to buy long-term assets or investments and are, instead, used to provide the working capital that covers a company's short-term operational needs.

Have I Explored All Other Options?

Before jumping into a loan agreement, you may find other ways to solve your business’s cash flow needs. Try cutting back on unnecessary expenses or giving customers incentives to pay invoices quickly or proactively renegotiate payment plans to ensure the customer too has more time to pay you, ensuring that there WILL be a payment rather than not at all. You may be able to convert some of your services online. Making changes to the way you conduct business may allow you to smooth out your cash flow without having to take out a loan.

How Will I Use The Money?

Whenever you borrow money, you should have a plan. If you take out a working capital loan without a clear idea of how you want to use the money, you’ll be putting your business in a poor financial situation. Evaluate which issues your business is trying to solve (e.g., delivery of promised services, salaries, sudden sales drops etc.) and carefully consider whether a working capital loan is the best solution for these issues.

Will This Loan Put My Business In a Better Financial Situation?

You don’t just need to know how you’ll use the money; you also need to know that the loan will ultimately be beneficial for your business.

Depending on the fees and repayment schedule, a working capital loan could send your business into a debt spiral. Before getting a working capital loan, make sure you can afford the repayments. Ask yourself: Do the benefits outweigh the costs of the loan?

Do I Understand The True Cost Of This Loan?

Speaking of costs, before committing to a loan, you need to make sure you understand all of the loan’s rates and fees. Know everything you can about the loan’s interest rate,cents-on-the-rupee costs, additional fees, and more before you sign any contracts. This way, you can be confident you are getting the best deal. It is more than okay for you to call up your bank and grill them on every question you have and ask for explanations until you understand everything you are getting into.

Who is eligible to apply?

Please read section 2 [i] of circular no.05 2020 [link provided] seriously,read it.

What are my chances of getting the loan?

If you do not have a security or collateral to provide then pretty slim.

We are in the same position as you, and we did our homework on trying to apply for the relief package as well. What we learned was most SMEs and self-employed individuals are likely to get turned down. The main reason might be because the banks can ask for collateral which at this point in time may not be practical for many small businesses.

BUT! We would still encourage you to try to apply wherever possible if by now you have assessed that you or your business absolutely needs the cash influx right. You just might get approved.

What will the bank ask me for if I apply for a working capital loan?

  • At least 3 years of audited accounts

  • 2 year cash flow forecast

  • A property [land or house deed] or collateral that you are willing to provide.

  • Working capital breakdown for April & May

Will I get it as soon as I apply?

No. It is subject to approval.

Is there a deadline?

Yes! All applications must be submitted to your banks or financial institutions [licensed] by APRIL 30th 2020.

How much can I get?

The simplest way to put this, is that you are eligible to receive exactly 2 months working capital for April and May 2020 specifically.

Advantages of a working capital loan

  • It will allow you to continue paying salaries and other running expenses for a few more months, giving you some breathing space to plan for some new sales pipelines and rethink your business plan.

  • Gives your business a cash influx and possibly halts your personal resources draining out.

  • It’s an alternative fund raising option that doesn’t dilute the ownership of the business.

Disadvantages of the working Capital Loan:

  • The repayment mechanism might end up being overwhelming for you if not thought out carefully. Although it states repayment in 2 years at 4% interest rate, keep in mind that with your 6 month grace period or debt moratorium, you will be left with only 18 months to repay the entire amount. So for example:

You can use the free loan calculator offered by commercial bank to make your own calculations.

  • You could be asked to provide collateral which may be disadvantageous to you.

  • You could risk a poor credit score if unable to meet the payments on time.


It can be quite pressurizing to realize that the deadline is just next week, but here are a few tips to not feel overwhelmed.

Direct links to banks and their relief directives.

Commercial Bank

Nations Trust Bank

SDB Bank

Seylan Bank

Sampath Bank

Peoples Bank


NDB Bank

Union Bank

HNB Bank

Best of luck!

Please visit & like our Facebook page and join our group for the Sri Lanka Entrepreneur & SME Network to join a community of passionate individuals who are working together to make it through the COVID19 crisis.

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