A leading industry accountant is recommending travel firms revisit their CBIL funding ahead of next year’s Atol renewals.
Speaking at Tuesday’s Barclays Travel Industry State of the Nation – Part 1 (3 November), Chris Photi said: “One point that I would raise for those of you that are license holders, particularly the smaller license holders, is ‘have you raised enough in relation to your CBIL’?
The Coronavirus Business Interruption Loan Scheme (CBILS) provides financial support to smaller businesses affected by coronavirus. Companies can apply for more than one such loan (within a limit), including with the same lender. The scheme has recently been extended until 31 January 2021
“A lot of companies acted prudently to approach their banks in March based on an original cash flow that perhaps had travelling starting at the back end of the summer and asked for a fundraise based on that model,” explained Photi.
“Barclays, along with the other main banks, have taken a broadly pragmatic view on that with the government support, and have been supportive.
“But as things have developed, the question mark is, have you raised enough?
“For the September 2020 renewals a number of license holders would have had a liquidity shortfall, and based on their last published accounts, this is more for the ‘under 20 million’ license holders.
“The CAA would have been appeased by the fact that post balance sheet date, a substantial CBIL had been raised, and that money was used to satisfy the CAA in relation to their September renewal.
“But what we’re urging you all to do is look forward to your September 2021 renewal or your March 2021 renewal.
“Run the Atol self-assessment tests that are available on the website and see if the funding that you’ve raised is going to be sufficient to get you through the next renewal.
“The simple fact is if there isn’t and there was scope for you to have raised more funding than you actually did, it might be sensible to revisit and have another look at your liquidity tests.
“Do not lose the opportunity to make the fullest use of this valuable government support mechanism.”
Photi said the CAA “are not showing any great desire in reducing their liquidity tests”.
“I have to say the CAA were pragmatic in the September renewals, and we did see the shading of those, but nevertheless, the CAA wants to see a sustainable liquidity profile for travel businesses, which isn’t easy to do when you have no income coming in,” he said.
He said this was why many businesses had chosen the “hibernation” route whereby they have cut their costs, have made the fullest use of the furlough scheme, perhaps have had to run or are in the process of running redundancy consultations.
“They’ve been hibernating their business to maintain minimum overheads so that they can maintain a reasonably positive liquidity that will hopefully fund them into a bounce back scenario,” said Photi.