Business spotlight: taking advantage of loan availability

31 July: Chris Benbow, FD of training group Mentor FLT Training, explains how with careful financial management and a safety net loan his organisation is moving through the pandemic.

Chris Benbow’s business is technically three companies, under the umbrella of Mentor. The group, for which Benbow is FD, provides safety training services to organisations such as quarry companies, garden centres, supermarkets, builders merchants, distribution companies and manufacturers.

With so much reliance on one-on-one training for its core business, COVID-19 had a massive impact on the organisation. “We still have a lot of incoming paperwork from instructors,” he says. “It's quite an old-fashioned approach and one that we're rethinking but we hadn't quite got it in place before the lockdown.”

The business decided to keep two offices open with a skeleton staff and close its other three. Increased demand from essential service providers such as supermarkets kept the business afloat, with sales at 60% of pre-COVID levels. 

From a finance perspective, decision-making became extremely reactive: re-forecasting and budgeting in April to take the pandemic into account (“it was all basically guesswork”), then looking into getting trade debtor insurance. “It’s something that we as a small business had never done,” says Benbow. “There was a reluctance amongst some of the senior stakeholders to get involved with anything like that.”

Benbow and the rest of the leadership team decided fairly quickly that the group would take on more debt. Reviewing the options, it chose to take the CBILS loan, which it has taken against one of its businesses. “It took about probably two hours of effort, given that we'd already got a budget for the year,” he explains.

The team is now assessing whether it should apply for more loans to keep themselves going. Due to its preparations for Brexit, the group had kept a ‘reasonable level’ of cash in the business and a solid cashflow forecast, which Benbow believes makes the organisation stand out from other SMEs. “A lot of SME businesses aren't capable of putting together and integrating cashflow and balance sheet forecasts for the next 12 months,” he says. “They don't have the skills within the business to do that. And when they start looking outside the business, it starts to get expensive.”

For those businesses with the skills, or those that work with advisory firms, funds are easily available for those with good financial data. “I struggle to see how anyone can’t get hold of money. But then again, I also struggle to see how giving a pub or a restaurant a loan and then restricting how they can do their business for an undetermined period of time is a good idea. It seems a bit silly to me. You either let people get back to doing business or you pay them not to do business. We're in that middle ground at the moment.”

Benbow expects that the easy availability of finance will cause issues down the line – small businesses are likely to try to avoid repaying debt, he says. “If a business hasn't got any assets, then it's not in the interest of the owner to try and keep it going.”

The company hasn’t drawn down its CBILS loan yet and has six months in which it can. “It may be that we end up getting through this without needing to draw down that loan. Even if we do, it'll be at least 12 months from now before we have any costs in relation to it.”

Benbow and his team are now questioning whether the group should take out any more loans for the business, particularly while government measures are in place. It is assessing its financial position and looking at how it can operate at around 70% capacity.

“As of the end of April/start of May, the order book was pretty much empty, which must be true of a lot of businesses. We used to sell at a three or four-week lead time between selling a course and delivering a course. Now, there tends to be a day or two between selling and delivering a course because we've got gaps in our schedule. We've got to rebuild that order book so that we can get back to a normal level of operation.”