Range of funding options available as economy picks up pace
THERE have been more than a few green shoots noted in the economy in recent times.
Last month, the International Monetary Fund (IMF) said it expects the UK economy to be the fastest-growing in the G7 this year, predicting growth of 2.9% in 2014, up from a January estimate of 2.4%.
And, according to the latest Deloitte Consumer Tracker, published last week, consumer confidence has climbed to its highest level in over two years with people’s confidence in their level of disposable income said to have increased 7% in the first quarter of 2014 compared to the previous quarter.
On another positive note, it seems the challenge facing businesses when it comes to securing funding and finance has also now lessened to some degree.
Adrian Foster of Christie Finance said although there is “no denying” it has been tough to secure funding, particular for those in the pub sector, “we have certainly seen that situation changing over the last couple of years”.
Phil Brown, senior relationship director for the UK leisure sector at Royal Bank of Scotland, agreed that the funding market has “definitely improved”, saying there is now “much easier access to finance”.
Despite the apparent recent improvements, the preceding years of difficulty in acquiring finance created demand for “alternative sources”, according to Paul Mildenstein, CEO of business funding firm Liberis.
“There is a wide range of options out there from traditional banking and loan models to alternative financing, such as business cash advance, crowd funding, peer-to-peer lending and asset-based financing,” he said.
“They each have their pros and cons and there is no one size fits all, so it’s important that pub operators assess the options carefully based on what they want the money for.”
The broad range of options available to operators seeking to secure funding was also highlighted by Foster at Christie Finance.
“With the majority of banks now looking to attract good quality business there may be the opportunity for a client to release capital from their existing business whilst also refinancing their existing debt onto better terms,” he said.
“There are other avenues that can be explored such as asset finance or brewery loan facilities.”
Ian Morrison of Liquid Finance, which focuses on providing funding to small and medium-sized businesses, highlighted one alternative means of finance open to operators.
“Publicans that have no assets available to secure a traditional loan can now access funding through taking advances against their future card payments,” said Morrison.
“This innovative form of funding is widely being used to free up cash to refurbish and renovate pubs and also to replace tired kitchen and cellar equipment and for some of the more entrepreneurial landlords to acquire additional sites for expansion.”
For those looking to go down a more traditional financing route, Brown from RBS said preparing a thorough proposal is key.
“The devil is in the detail so it’s important for operators to not be afraid of including as much detail as possible when putting forward a funding proposal,” he said.
“For example, you should take a thorough overview when forecasting fixed costs for staff, ensuring you build in additional costs to maintain and incentivise good people who are often vital to the success of a licensed trade business.”
The importance of a robust proposal in helping operators secure finance was underlined by Mildenstein at Liberis.
“A good business model and evidence of sound financial and business management, particularly cash flow, are all important factors when seeking any type of funding because they demonstrate a well run business,” he said.
Foster at Christie Finance said presenting a funding proposal in the right manner is key to securing a
finance deal.
“In the current market we have found that a client has a lot better chance of successfully securing finance when a deal is professionally presented to lenders and includes all of the appropriate information, including valuations, business plan, projections, CV and trading accounts,” he said, adding that although an operator may have been with a bank for a long time “it is always worth speaking to a broker”.
Operators who successfully secure a financial package should still consult with an expert before committing to “help reduce the risk of over complicating their finances and making commitments that they could struggle to maintain,” said Liquid Finance’s Morrison.
“Those experts that can help are ideally suited to find the most appropriate form of funding for each opportunity,” he said.
