Getting finance on the right track | Scottish Licensed Trade News

Scottish Licensed Trade News

Getting finance on the right track

Financial support is available to on-trade operators that prepare well

Whisky may be the water of life but it’s cash flow that keeps the licensed trade afloat, providing the basis for everything from day to day operations to taking the next step with a new venture.

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Raising finance can be a daunting prospect, but it doesn’t have to be, according to finance firms.
Financial services providers told SLTN there are a range of options, and some simple steps, that should have operators well on their way to securing what they need for their business.
Adrian Foster, associate director at Christie Finance, said that although there is “no denying” that times have been tough for borrowers in the pub sector in recent years, things are looking up.
“We have certainly seen that situation change for the better over the last 12 to 18 months,” said Foster.
“With the addition of ‘challenger’ banks to the market as well as an improvement in appetite from the ‘Big Five’, we have found that there are certainly a lot more options available for first time entrants to the sector and those operators looking to expand.”
The finance options available to the licensed trade have expanded in recent years, with a number of new firms launching into the market.
Liquid Finance is one such firm,  offering alternative finance through business cash advances which are repaid as a proportion of future credit and debit card sales.
A spokeswoman for Liquid Finance said that while there are now alternative finance options available to publicans, there are still those in the licensed trade who are unaware of the full range of options available to them.
“Recent research carried out by the National Association of Commercial Finance Brokers (NACFB) indicates that close to 50% of small businesses are not aware or are not taking advantage of this shift in the finance world,” said the spokeswoman.
“It is important that business owners look at all the alternatives available to them. They should speak to their broker, to their peers and to other bodies such as their local chamber of commerce or FSB office.”
Liquid Finance advised operators to “consider utilising expert advice” prior to committing to a financial package as this can help to reduce the risk of “over complicating” their finances or “making commitments that they could struggle to maintain”.
“Those experts that can help are ideally suited to find the most appropriate form of funding for each opportunity,” said the spokeswoman.
She added that timing is also key, and  that waiting too long before attempting to secure funding “can cause more stress than necessary”.
Paul Mildenstein of Liberis, another alternative financing firm which offers cash advances on future card payments, agreed that operators should investigate the range of options available to them, but also suggested looking to the business itself to see where savings could be made.
“Know in your own mind how you will afford the repayments and never borrow more than you can afford to pay back,” said Mildenstein.
“Also, see where you can reduce costs. It’s a good exercise to do in business anyway, but it’s very good to do before you go for funding because it might be that you need to borrow less.
“There’s usually always something that can be renegotiated to save money, such as a supplier agreement.”
Seeking finance may be necessary, but it isn’t the only avenue open to businesses and Mildenstein suggested operators “don’t always go for the loan first”.
“Look out for opportunities for grants or anything low cost,” he said.
“Do your research because there’s such a wide choice of funding available now.”
Alternative finance can be the right choice for some businesses, but while lending may have tightened up during the recession, the traditional route does remain open for some.
Andy Moorhouse, head of leisure at RBS, said there are a number of things banks look for when assessing an application.
“Those businesses with an established track record which can demonstrate viability going forward will, of course, have greater success in securing finance,” he said.
“We also look for a good management team which is monitoring its competition and always focusing on and ready to adapt to emerging consumer trends.”
For any application, Moorhouse said that a robust business plan is “essential”, adding that seeking professional help in this area could improve the chances of success.
He said: “A strong business plan is really essential – one that tells the reader what the business is trying to achieve and how it will do so, and thoroughly covers financials including historical performance and detailed future revenue projections.
“I think it’s always best to get professional support from financial advisers, lawyers, etc. in preparing the plan to ensure it is thorough.
“This should also enhance the prospect of a positive outcome.”
Paul Smith of Barclays agreed that operators must present a “sound” plan when applying for finance.
“Banks will be looking for a clear line of sight in terms of financial information, covering past, current and projected financial performance,” said Smith.
There’s no need for operators to prepare their business plan in the dark, said Smith, who recommended publicans ask the bank what information is required in advance to help build an effective case for the business.
“Aim to provide a full set of up to date financial information to give the bank the best opportunity to support your proposal as quickly as possible and to avoid delays,” he said.

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