Insight from Nick Morgan CEO – We are the Fair
“Whilst the industry in on hold and many furloughed businesses shouldn’t be haemorrhaging money albeit it appears landlords are not engaging in any reduction discussions. Deferment is all well and good, but I refuse to saddle my business with a mountain of debt and then work the next 12 months to pay it off!
I didn’t realise until yesterday that the bank’s modelling for the CILBS is based on accounting for 20% of payroll during and after furlough. I have a fairly good relationship with our bank manager, and he is saying he can only account for 20% of payroll and 100% of other business fixed costs even when extending cash flow forecasts for 12 months to try and reach the maximum lending threshold.
This represents the top up during furlough however post I was shocked to hear no underwriting for a larger percentage of payroll.
This either uncovers the intention for Government to continue the furlough scheme for up to 12 months, however I am unsure how they can possibly underwrite unless every lending market is reset. Alternatively, it could be interpreted as a key indicator that they expect the economy and businesses to recover fairly quickly post furlough.
Unlike many other effected industries, if the outdoor industry misses its season(May-Oct) many suppliers won’t be into their normalised billing cycles until January/ February and based on a reduced lending threshold because of this new discovery means many simply cannot survive as they cannot draw upon the suggested max which was 25% of turnover
Most other industries can expect quicker recoveries, even indoor events as they can trade year-round (if sanctions are lifted). Even pubs and bars should in theory, upon reopening take reduced sales that same day. We have a fairly robust balance sheet so are maybe more fortunate, but many are less fortunate, and this sent alarm bells ringing with our FD and myself yesterday. “