ACCESS to finance is likely to be tricky for hospitality operators again this year – particularly if they are new to the sector – but that doesn’t mean there is no money available.
That was the message from two commercial property companies, who said operators may have to look away from the high street and to sources such as ‘challenger’ banks if they are going to secure funding to expand their businesses.
Speaking to SLTN recently, Brian Sheldon of property company Christie & Co, said accessing finance for hospitality businesses “is tough”.
“I think the mainstream banks of old are still in a bit of a flux and a bit of a quandary,” said Sheldon.
“However, there’s lots of new banks on the scene. Christie Finance, our sister company, are very astute on who’s lending what.
“There’s money out there, but I’d say the loan to value is probably what it was 30 years ago as opposed to what it was in 2008/2009.
“And indeed the business has to be sound and the operator has really got to have a real business plan.”
However, Sheldon added that established operators with several venues under their belt are likely to find it easier to secure backing than newer entrants to the industry.
The issue has been compounded by several lenders leaving the market, according to Christie & Co’s recent Market Report, which stated that 2022 had seen ‘the withdrawal of a number of fringe and specialist lenders from the commercial lending market’.
“The reduction in commercial mortgage providers will not be welcomed by business operators and investors as fewer options exist, reducing competition,” said the company’s John Mitchell in the report. “Such lenders have played an important role in recent years as the high street lenders continue to limit their appetite to lend in some of our key areas of specialism.”
And in a separate report on the UK hotels sector from Graham & Sibbald, the managing director of Montane Finance, Scott Murcott, said the banking landscape in the country ‘has changed dramatically through COVID’.
“Positive feedback from lenders suggests that competitive finance will be made available for owners and operators, seeking to acquire or refinance existing loan facilities,” he said.
“With High Street banks having substantially reduced their appetite for the hospitality sector and in particular, new lending, we have witnessed the birth and expansion of new challenger lenders who hold the scope, ambition, and credibility to aggressively increase market share within the SME sector.
“In 2023, we expect to see High Street and institutional funders to continue to lend within a conservative framework.”
He added that ‘experience and track record remain the prerequisite’ for securing finance from these sources.
