It pays to be prepared

In light of Brexit uncertainty, good planning is key, say finance firms

THERE’S no denying the uncertainty felt across the country following June’s Brexit vote.
And with the news that prime minister Theresa May intends to trigger Article 50 within the first three months of 2017, meaning Britain could leave the EU by mid-2019, what impact is the ongoing situation having on the availability of funding for pubs?

According to Stephen Fleming, managing director of consultancy SJF Scotland, more uncertainty will only make it harder to obtain finance; and it will increase the cost for operators who do manage to secure it.
This was a view echoed by Bruce Walker, head of debt advisory for KPMG in Scotland, who said borrowers may experience an increased level of scrutiny from lenders.
“The potential for a further recession means lenders will review the borrower’s business for its ability to withstand a decrease in discretionary spending similar to that seen in 2008 or 2009,” said Walker.
However, while it may become harder to obtain finance, Walker advised that “strong well-prepared borrowers will still be best positioned to obtain finance in this environment”.
This was supported by Paul Smith, corporate development director for Barclays Scotland.
Smith reckoned that businesses which “can demonstrate profitability and [a] strong management team remain an attractive lending prospect for banks”.
Clearly the right presentation is crucial to securing finance, and Fleming of SJF Scotland reckoned “a comprehensive business plan with input from the operator’s key advisors” is essential.
Walker of KPMG advised that borrowers must have “a clear understanding of how much funding is required, and they need to be prepared to explain why the funding is required”.
He added that licensees must be able to demonstrate how funds will be repaid in the event of further economic downturn, in order to convince lenders that they would not be at risk of defaulting on the loan.
Operators looking to raise finance should be aware that any lender will expect both a solid business plan and a worthy management team in place, according to Smith of Barclays.
Walker of KPMG said there are several key criteria lenders are likely to look at.
“They are likely to want to review management accounts, including a financial forecast for at least the coming year,” said Walker.
“Lenders may also expect to see a business plan, especially where there is a planned change in strategy or operations.”
For well prepared operators looking to secure loans, both Fleming of SJF Scotland and Walker of KPMG told SLTN that bank lending is an option to consider; Walker claimed that a third option, high street lenders, are “likely to provide asset-backed lending in the current market”.
Whatever route licensees decide to pursue, Smith of Barclays advised them to get started “sooner rather than later”, as it will “help you establish the best form of lending for your business”.