So I have a client in manufacturing. Since the lockdown his sales have shot up with a best ever profit month in May. The highest for 4 years! Reason is big orders due to Covid. His cash surplus in the bank is the highest for the past 10 years. Its high!
Now the client wants to borrow a Cbils loan (£180k + £300 OD facility) and if he can get away with it a BBloan as well. There is no justification from a cash flow view point even with a pessimistic outlook due to the uncertainty. His reasons?
- The Cbils loans are meant by Gov for funding growth. (He will not accept my comment that the clue lies in the name of the loan)
- I like a lot of cash as unsure about the future despite your advice Mr Expert on finance
- I can save a lot of interest if I use the money to pay off the long term loans I have.
- The banks want to lend so why not take it.
- Others have done so in a similar situation and they got the money
- I can always pay it back if I dont use it.
Now I have a moral issue with it as not needed. On the contrary he is now so cash rich its unbelievable.
Am I being silly? And if not what advice on any action.
Note as I wish to remain anonymous will not respond but definately read. Thanks.