Preparation key to financial success | Scottish Licensed Trade News

Scottish Licensed Trade News

Preparation key to financial success

• Operators should understand their market and have a business plan when seeking finance.

• Operators should understand their market and have a business plan when seeking finance.

A detailed business plan and cash flow knowledge is crucial, firms say

A NEW year can spell new beginnings, but unlike resolutions, new ventures in the on-trade need more than willpower, they need access to finance.
Those preparing to embark on a new business venture should be organised if they want to improve their chances of securing funding, according to finance firms contacted by SLTN.
Russell Pinkerton, senior relationship manager for the leisure sector at RBS, suggested operators focus on the “dos” when securing finance.
“I would advise that operators do have a plan, do understand their market and how they will service it and do monitor business performance daily, weekly, monthly so they can measure against expectations based on known industry benchmarks – this can help them to act quickly if things are not going to plan,” said Pinkerton.
Paul Mildenstein, chief executive of alternative finance provider Liberis, agreed, adding that operators should have an “absolute vision and mission” for their business, supported by a detailed business plan.
“This really will help you keep on the straight and narrow and keep you motivated,” he said.
“Don’t go into business under capitalised, so be aware of all costs that you will face and don’t secure against any assets that you’re not prepared to lose.”
Mildenstein suggested operators make sure they “really understand” the business’s cash flow as well as having clear and documented targets and projections when choosing the best funding option.
“A common mistake is to borrow more than you need,” said Mildenstein.
“You’ll always have more ideas than cash, so separate what’s nice to have from what’s essential; never borrow more than you need.”
Operators who already own at least one business will be required to supply a variety of documentation, said Mildenstein, adding that this should include “everything from historical debit and credit card receivables through to a cash flow forecast, balance sheet, profit and loss and a business plan”.
“Any good business person should have, and be prepared to deliver, all of this information, even if they don’t need to,” he said.
Those who already have one successful venture may be at an advantage when it comes to raising finance, according to Ian Morrison, director at Liquid Finance.
“There is likely to be broader interest from financiers in this instance as the business has already proved, collateral is probably available and therefore the risk is reduced,” said Morrison.
“Liquid Finance funds a great deal of second, third and fourth outlet finance and provides unsecured finance based on the card turnover of the other businesses in the group. Liquid advances are often used to provide the deposit on the new lease or to refurbish the new premises.”
Morrison suggested operators seek professional advice to ensure their exposure to risk is limited.
“Operators should consider utilising expert advice prior to committing to a particular financial package to help them reduce the risk of over complicating their finances and making commitments that they could struggle to maintain,” he added.
“Those experts that can help are ideally suited to find the most appropriate form of funding for each opportunity.”

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