This podcast was recorded on 24 June, following the announcement of new plans to support the leisure and hospitality sector.

Catriona: Hello, in today’s podcast, Esther Wood, who is Head of Goodman Jones, Leisure, and Hospitality Group is talking to Steve Croswell who is the relationship director at Cynergy Bank who has particular responsibility for the hospitality sector.

Esther: So Steve, yesterday, finally, some good news for the hospitality and leisure sector. What did you think about that?

Steve: Could be good, I think the fact is its sort of been leaked for weeks before could have maybe meant that it had been ready to be announced before it was, and I don’t think it’s given everybody sufficient time because a lot of the operators I spoke to said they’re looking at probably three weeks to get ready and thats kind of giving them less than two. But I think a lot of the people we’re going to open on the fourth anyway. And kind of took it as red and so had made those preparations anyway. But I think the delay in the message, was frustrating because people knew it was coming, but just wanted to hear it.

Esther: Yes, no, I agree. It was a bit of a surprise about the gyms, nail bars, and spas because for sure, I’ve had a few emails, you know, asking me to make an appointment on the week of the 4th of July and now suddenly backtracking.

Steve: Yes, and I’m not a scientist, clearly, but I am not sure the difference between a haircut and having your nails done in terms of that physical contact. But clearly, there must be some difference and some impact on that. Obviously, hairdressers can open, but nail bars can’t. So it’s I guess devil in the detail, but the main thing is the vast majority of hospitality can and will open and hopefully get to some sort of trading momentum going into the summer period.

Esther: Yes. No, absolutely. I mean, it has been crazy these past few months. What are you seeing at Cynergy Bank and what are your thoughts for the comeback for the hospitality and leisure businesses? I mean, especially in that London area.

Steve: It’s probably been a period of three kinds of periods. So the first few weeks were understanding what the customers were feeling. What they were going through. What they were worried about and as COVID took over more, those fears and thoughts became ever more serious. But I think they quickly flipped into how we can best position ourselves to come out of this stronger and better and do a lot of housekeeping and looking at the business. So we spent a lot of time talking to them and understanding, okay, they need covenant waivers and they needed interest holidays, we’ve got all those things sorted for them. And where they’ve got rents, once they got the banking facilities lined up and once you’ve got rent issues agreed, they could then breathe a little bit. And it was then focusing on what the business needs to look like as we come out of it. A lot of them I think have seen some positives because the competition some won’t come through this, unfortunately.

Esther: No.

Steve: So I think some will capitalise on access to liquidity. Will actually be looking for opportunities as we come out. And I think in London specific bit, I think it’s one of the few times where outside of London will do better than London initially. If you’re looking at being a pub or a venue restaurant outside of London, you’ve got typically bigger trading space, bigger outdoor space, where you can perfect social distancing.

Esther: Yes. That’s true.

Steve: We’ve all been to pubs in London. It’s very difficult to do that even without social distancing when they get really busy.

Esther: Absolutely.

Steve: So I think the bigger, the footprint, the bigger the trading space, is going to be the ones that come out of this a lot quicker and probably stronger.

Esther: Yes and I guess we’re also a little bit weather reliant as well. I mean the rain we had last week, if that kicks in again, post 4th of July, we’re going to be limited to space inside.

Steve: And that’s the other thing, isn’t it? It’s all well and good saying you can have hospitality outside, but as long as it’s like this fine, but we know how changeable this country’s weather is. So it’s going to be, I think, a bit hit or miss depending on how good the weather treats us in the summer months.

Esther: Yes. It’s super hard to predict in this country. Now we’ve got sort of an outline to slowly ease us out of lockdown thanks to Boris’s update. Do you think it will make it easier for robust hospitality businesses to get bank finance?

Steve: So, it’s a challenge for banks at the moment because hospitality clearly it’s not a normal situation. You know, there hasn’t been business as usual kind of thing. So most of what we’re doing is all through the CBIL scheme to support businesses. And I think as the property market settles down, particularly valuations, I think that will dictate when secured lenders will start to reenter the market with some confidence. My personal view is I think as long as the trade starts to build from a week after next onwards, we need to almost put a line through 2020 and look at what the business did beforehand and what it could do again, under the same ownership. And just kind of draw a line under this year and say, look, this has happened. If we believe in management, then we will buy into what management thinks they can do now that things are normal again.

Esther: Absolutely, I know the CBILS been super popular. Have you got any sort of tips about how to present your case for funding or if you have learned any lessons from those who haven’t been successful that you could share?

Steve: Preparation is the keyword. So you have to develop a stronger relationship with your bank or lender. Speak to them, be very candid and very honest about what it is you need from them. And then seek the same from them in terms of what information do you need, why do you need it? Because unfortunately, every lender seems to be interpreting the rules in a slightly different way and also is applying their policy and procedure.
So there’s a difference in how lenders are approaching. But I think to have a relationship where you understand, and also the lender needs to take responsibility to kind of coach the applicant through that process and explain to them the information that is needed and the detail we do need because it’s very clear, the CBILS and was it viable in ‘19. Has it been affected and what is the need? They are the three fundamental requirements of the CBILS eligibility test. And as long as you get to look forward to the numbers and the assumptions that go into them, then I think that’s where the key thing comes through because understanding the ability of the operator to provide that information.

Esther: Yes. I mean, in this sector, have you found that many businesses have had cash flow forecasts for the future 12 months or if they had to start from scratch really to present a picture of what they see the next year to look like.

Steve: Complete mixed bag. So you’ve got some that do it as the norm, just as part of their financial reporting. You’ve got others that we have had to do some handholding. It typically comes down to the size of the business. If you’re a bigger business, multisite you tend to need to have this stuff anyway. And it probably got the full-time FD, if you haven’t then our advice is to seek some suitable advice from a professional, an accountant, et cetera, who can help put those numbers together. Because we are going to need them and we are going to ask questions when we do see what they send to us.

Esther: Yes, absolutely.

Steve: So having a robust set financial information is pretty vital.

Esther: Certainly when we’ll be doing year-end audits, we’ll be needing a lot more information on the future forecasts to show that the correct audit report on the accounts. So, yes. Do you find that the structure of the business makes much difference in accessing funding?

Steve: If it’s a UK structure, probably not. No. If it’s all within the UK or crown dependencies, the main thing is as long as we can get a proper suite of security over the structure that’s mainly what a lender will be concerned about. If you’re looking at offshore jurisdictions it becomes a bit trickier and that put it more around the lenders individual KYC, AML processes and procedures, and whether there are jurisdictions that they may not want to accept. But if it is the UK typically you can usually get the security tied up nice and tightly, and it will work.

Esther: Are you finding that most CBILS are secured on individuals or just on the assets of the company? Or is it a little bit of a mixture of both?

Steve: Probably a bit of both. So it depends on the lender’s policy. So at Cynergy, we’re a secured lender. We will have the bricks and mortar. That has enabled us to do things like 25-year profiles when the government guarantee is only six years. So that makes them much more affordable. A lot of lenders will do it on an unsecured basis and rely upon the guarantee from the government. But it means whatever you borrow you’ve got to repay within six years; but bear in mind that the first 12, 18, 24 months are going to be quite dampened in terms of cash flow generation, it’s going to make that quite tough. So there is a real mixed bag in terms of what people are and aren’t doing on CBILS to say. For us, we are secured, but we’ll take the security and provide more flexible terms.

Esther: So if the application for funding isn’t successful, I’m not sure how many of those you’ve come across in the past couple of months, Steve. But what would you, or what have you advised businesses to do?

Steve: I think there are two points to that. The first one is the incumbent upon the lender to be very clear and honest with the borrower as to why the application hasn’t been successful. Sometimes it’s a mystery in terms of, I’m sorry, we can’t help you. You know, credit said no type of thing, but I think we need to be very honest with them and articulate as to just really where it might have fallen down. That enables the borrower to work on that aspect of the business if they can and represent it may be to us or another lender. We’re also able to recommend other banks that we think might be more amenable to what they ask for. And likewise, the bank does have a range of broker contacts that we could also introduce the client to. And I think it’s safe to say, the first point is this is why we can’t do it. And then at least a broker will understand where they might be able to place it elsewhere.

Esther: Yes. Roughly what’s have your acceptance rates been like?

Steve: On CBILS we’re currently a hundred percent. And I think that goes back to what I said earlier around coaching the applicant in terms of what they need to provide us in terms of that information suite, and the more robust information, it answers pretty much all the questions that our credit team or our credit committee will raise. So at the moment, we were at a pretty decent hit rate.

Esther: Yes. That’s excellent news. Okay. So I mean, there are always people that see a crisis as an opportunity. Do you find that you’re being approached by people looking for funding perhaps to support the acquisitions of businesses in the sector that aren’t doing so well and need a hand, or maybe just want to sell out to a new acquirer?

Steve: Yes we’ve seen a bunch of approaches from existing operators who are sensibly geared and sensibly leveraged and either have cash or access to quick liquidity so they are certainly looking. We have people that have sold out and have cash available to deploy very quickly, should they need to, and we’ve still got the overseas market. You know, the UK historically in the last few years has been seen as a very attractive place to buy real estate backed leisure businesses, CK Asset Holdings, buying Greene King, and Stonegate acquiring Enterprise that’s coming. So we’ve seen a lot of activity and I think there’s still money there. I think there’ll be two things; some patient money will sit and wait and other money will be more opportunistic, I think, to take advantage of situations.

Esther: Yes. What about international interest? Have you seen much of that? People trying to get into the UK market, for when it picks up again?

Steve: Yes, I think so. I just mentioned the Greene King thing happened last year. It has been a wall of money out there that likes the UK. So it’s been seen as a relatively safe place to invest. It’s not just because of COVID, it’s the world. I still think we’ll be seen as a relatively resilient place to invest. We would expect to see a return to some normality of activity from overseas investors. How long it takes to get back to previous levels we will see, but I think there still is activity to happen.

Esther: I know it’s really hard to say, but what’re your final thoughts on the next 12 to 24 months starting, I guess from the 4th of July.

Steve: I think the key thing will be how consumers adapt to social distance rules within a pub or restaurant or hotel. I think the operators are very well prepared or they’ve been getting themselves ready for many weeks for this situation. So I think they’ll be on their game and be able to accommodate the new rules. I just think as a consumer, people are going to be excited to go back into a pub. We’ll have a few drinks, you know, but will the one-metre plus rule be respected?

Esther: Yes. Probably only for the first pint!

Steve: Exactly. So I think that’s going to be a key thing. I think as long as people adapt to it, sensibly and respect the rules, I think we can come out of this. I think the weather will be important because if we have a pretty decent summer that will encourage more people to go to these venues and then enable those venues to trade from the outdoor space and probably accommodate more people. So I think the next few months will be pretty important. And I think we probably take stock towards the end of the year based on how reopening has happened, hopefully, the R number keeps reducing and we don’t have any more second spikes. And then you go into the Christmas trade nobody would have booked any Christmas events at the moment. So that should be a lot pent up demand there. So I think that the first weeks will be important, but I would hope that there would be a relatively steady climb out of where we are into normality.

Esther: Okay. Well, that was great. Thank you so much, Steve. I look forward to seeing you in person sometime, hopefully in the near future for a social distance glass of wine in the sunshine.

Steve: My pleasure. Thank you.

Catriona: Thank you both very much. Thank you, Steve. Thank you, Esther. And thank you all for listening. You can find out more information by visiting or If you have any particular questions for Steve or Esther, their details will be available on both of those websites too.


The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

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