Case Study – How CBILS helped a niche country hotel in Somerset.
Updated: Mar 30, 2021
In 2017 we arranged the purchase of a niche hotel for one of our clients. This was financed by a High Street Bank. The property needed some upgrading, and we helped release further funds for this. The new owners greatly enhanced the business, increasing turnover and profits.
Unfortunately, in 2020 the business was significantly impacted by the coronavirus pandemic. The owners were able to agree a capital repayment holiday and a bounceback loan with their existing lender. Sadly, there was little else the lender could assist with and the owners called us for advice. We were able to successfully refinance the whole business using the CBILS scheme. This gave the hotel the benefit of significant cashflow savings and enhanced profitability to help them through this difficult period.
What We Did
We secured a £500,000 financing package via Atom Bank. This replaced the hotel’s existing mortgage, cleared the bounceback loan and other short-term debt. The package agreed also provided a small cash release. The facility was provided on a 5 year interest on basis at 2.96% and no personal guarantees were required.
Using CBILS, all arrangement fees, legal fees and valuation costs were covered by the scheme and the interest rate achieved was less than their original agreement.
The hotel has no finance costs at all for 12 months giving them the breathing space needed to ride out the crisis. The first year’s interest is covered under the CBILS scheme. Assuming the base rate stays the same, the estimated cash saving is more than £150,000 over five years. Some of this is due to switching borrowing to interest only – our client is delighted with this as in the current climate, cash is king!
The facility we arranged has no early repayment charges, so once better times return, the hotel can make overpayments, or revert to a repayment basis with no penalty.
The restructuring of the debt facilities has led to a saving of nearly £22,000 against the bottom line for the Hotel, gained from the lower interest rate.
The client’s total outlay was less than £1,000.
The Coronavirus Business Interruption Loan Scheme (CBILS) is closing on 31st March but on 6th April the new Recovery Loan Scheme (RLS) will launch. This is due to be open until end December 2021.
To explore how the Recovery Loan Scheme can help your business in these extraordinary times, please contact us - we are here to find your way.
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