Due diligence pays off in the funding market, finance firms say
THERE’S no getting away from the uncertainty that’s been let loose on the financial sector following the Leave result in the EU referendum.
However, while politicians lock horns from Edinburgh to Brussels, the Scottish on-trade must carry on and that can mean anything from a small revamp to a root and branch refurb, with access to finance as important as ever.
With this in mind, firms offering financial services to the Scottish on-trade have provided some tips on how operators can ensure they get the best deal possible once they’ve made the decision to secure funds for their business.
Stephen Fleming of SJF Scotland suggested that being well organised ahead of a funding application could lead to success.
“Preparation is key and taking guidance and input from experienced advisors is desirable,” he said.
“Indeed, take along your advisor to any bank meeting.
“If you already have a banking relationship sound them out beforehand, this can give an excellent insight as to what the bank will support and what it will not.
“Ask questions, find out what your peers are doing, talk to your financial advisor.”
“Whilst approaching more than one bank might be appropriate, don’t tout it around. The first port of call should be your existing banking relationship which hopefully will be a positive feature.”
Fleming said that banks “like sensitivities when they are appraising forecasts”, so operators should be prepared with “a couple of what ifs” to show the bank that they recognise different scenarios.
“Try to be as realistic as possible, not too optimistic, but not too pessimistic either,” he said.
Maxine Thompson, marketing director at alternative finance provider Liquid Finance, recognised that licensees will typically approach their bank for finance but also suggested operators consider other options.
“What do you do if your bank turns you down; can’t give you enough or takes too long to make a decision?” she said.
“Unknown to many, there are alternatives, and licensees would do well to familiarise themselves on the range of choices available to them.”
Thompson suggested a cash advance as one type of financial support which could be suitable for a range of on-trade projects.
“A cash advance is best-suited to projects like refurbishment, renovations, expansion and new stock lines and pay back is typically around six to nine months,” she said.
Whichever financial route operators decide to go down, Thompson urged licensees to exercise caution when it comes to taking out a loan.
“Operators should be cautious when taking out funding – ask questions, find out what your peers are doing, talk to your financial advisor, ask about customer testimonials and reviews,” she said.
“Most reputable companies will be more than happy to provide customer referrals and quotes.”
Rob Straathoff, chief executive at alternative finance firm Liberis, agreed that caution is key when seeking out finance, suggesting operators are fully up to speed with their own situation before approaching lenders.
“It’s important to fully understand your financial situation and be clear about why you’re borrowing, how much money your business will need and what you can afford to pay back,” he said. “You can then weigh up the options and get the type of finance that suits your specific needs.”
Straathoff offered a number of tips on the kinds of financing available to licensees and how these different options may be more or less suitable depending on what stage the business is at.
“If it’s a new licensee, but the pub has a healthy track record, small amounts can be provided by a revenue-based funder such as Liberis who will advance cash in return for repayment from future earnings,” he said.
“For start-ups, assuming both collateral and security are minimal, then one option to consider is crowd funding.
“These companies bring investors and borrowers together to provide start-up finance in return for equity or a higher return on the investment compared to other savings or interest bearing instruments.
“Subsequent finance can be taken to support cash flow needs as the business matures. If some collateral or assets are available then they can approach banks as well as alternative funders.”