Be proactive and be prepared – A word from Steve Low, Managing Director
This week CPT’s Peter Gomersall caught up with Steve Low and discussion turned to managing relationships with funders during these difficult times. Steve explained;
Being proactive in managing relationships with your funders is important in normal times, however in this economic climate it is essential to keep them fully updated on your trading outlook and financial position. Many operators will have taken advantage of payment holidays, and it’s likely that a number of these will be coming to an end in September. It’s therefore vital that operators get in touch early with their respective funders/brokers and understand what’s being expected of them in terms of restarting payments on agreements due in October.
Extra support for operators is available in the market, but it should not be assumed that this will be on the same terms as previous payment holidays were granted; so an early conversation to understand what options are open to you is essential. For instance, funders are in certain cases able to refinance on a CBILS asset backed agreement, which for loans up to £250K can see ‘personal guarantees’ fall away.
Every broker and funder will ask the same questions; so it’s good practice to think through your approach before speaking to them. Most will require the following information, so present your organisation professionally and pull it together before speaking to them:
- Update on trading performance over the last 6 months. Don’t be afraid to say that the vehicles have been laid up with no income – sadly you are not alone in experiencing this!
- Where do you see the next 6 months – are schools restarting with extra requirements for social distancing – are there any positives? Have you decided to change your business model due to Covid-19 to protect you going forward?
- Detail what support you might have accessed in the form of CBILS or Bounce Back loans – and how you have used them. Any other assistance should be noted such as Local Authority rates relief or Covid-19 Bus Service Support Grant.
- What actions have you taken as the business owner to manage the cash in the business i.e. putting staff on furlough, reducing insurance cover for laid up fleet, personal cash injections etc.
- Bank statements – be prepared to offer 12 months’ worth of statements, which whilst it may sound excessive also gives a view on pre-Covid trading.
- Latest management accounts if you prepare them – or as a minimum prepare a simple Profit and Loss statement.
- You should prepare a detailed Cash Flow projection. It will never be 100% accurate but your very best estimate of your ongoing cash position is vital in assessing any credit decisions.
A good broker or lender will want to understand your business and if you were a solid customer pre Covid-19 they will almost certainly be keen to restructure or extend finance agreements to take account of the payment holidays and assist operators in paying back the accumulated arrears. No funder wants to foreclose on agreements unless it’s the absolute last resort.
“The worst thing any operator can do is bury their head in the sand and hope that any assistance you currently enjoy will be extended – you are merely postponing an inevitable conversation.
Be proactive, be prepared and look to work with your finance partners to find a solution that works for both of you“.
Mistral Asset Finance, a CPT supplier member, provides specialist support in financing vehicle purchases to the bus and coach sector across the UK. For further information, please contact Steve Low on firstname.lastname@example.org