AS Brexit negotiations continue, the UK’s official exit from the EU (March 2019) ebbs ever closer.
And for many businesses, economic uncertainty reigns.
Despite this, the entrepreneurial spirit that defines the Scottish licensed trade remains alive and well – and finance firms say the right applications for funding from those with a solid business plan can still prosper, regardless of the current governmental ambiguity.
While much is unknown about what lies ahead for the country’s economic future, Rob Orme of Franchise Finance told SLTN “a strong, viable proposition will remain appealing to lenders”.
“To date, our lending panel has remained as receptive as ever to finance applications,” he said.
“If a deal ‘stacks up’ and is presented correctly to a lender, the money is made available.”
Research is key to any funding proposal, whether an operator is new to the trade or not, according to Paul Smith, corporate development director at Barclays Scotland.
He said: “We would expect the approach to be similar in terms of focusing on sound business planning. This should include comment on the local market and competition, key people involved, including details of the professional team supporting the business, market research, unique features expected to make the business successful, level of cash contribution and proposed security.”
It also pays to research other funding options beyond the traditional, according to Maxine Thompson of Liquid Finance.
She said with such a diverse range of options available, it’s vital operators fully understand the alternatives.
“Acquiring finance in the current economic climate can be a daunting task, but be brave and get educated about what is out there,” said Thompson.
“The names of the new alternative sources of funding sound unfamiliar but that doesn’t mean they are not bona fide. Challenger banks, business or merchant cash advance providers, peer-to-peer lenders, crowd funding, specialist invoice discounters and the like are keen to help well-run businesses.
“Find out what’s out there and learn how they work, then you will be more prepared when you start speaking to them about your needs.”
Lenders will look for a robust business plan, financial projections and trading accounts.
Martin Cairns, trade investment manager at Tennent’s, also reckons there are strong alternative financial sources available to the licensed trade. For instance, he said the lending arm of Tennent’s is well-placed to support “all aspects of on-trade growth, from new furniture and new kitchen equipment, to complete refurbishments and capital for portfolio growth”.
“We create tailor-made packages for operators that best suit their ambitions, finding a solution that’s right for them,” he said.
Regardless of the source of capital, when applying for finance, it’s imperative that licensees are ready to explain in detail how they plan to invest that capital.
Cairns of Tennent’s said it’s “vital operators set out the exact purpose for their loan applications”.
He said: “Lenders will want to see clearly where the money will be spent. They’ll also look for a clear business plan, financial projections and trading accounts. Other supporting documentation that might be needed could be property valuations, cash flow projections and volume forecasts.”
This was echoed by Matt Jones of Henry Howard Finance, who said honest and accurate forecasting “will help you and your potential lender agree the right package for your business, over the most suitable term, without under-investing in or overburdening the business”.
Smith of Barclays Scotland said while each lender “is different and will have their own requirements”, there are basics which remain steadfast.
“These include creating a robust business plan, having a credible management team in place and possessing a firm understanding of the market,” he said.
“Cash flow is absolutely crucial for all businesses and lenders will look for financial information including profit and loss, cash flow and balance sheet detail.”
Consulting experts ahead of submitting applications can allow licensees to avoid simple mistakes, according to Chris McDonagh of Stewart Hindley & Partners, who said: “Applying for finance can be a complex task as lenders will consider many variables when assessing debt which isn’t relationship-based.
“As hospitality, and the licensed trade in particular, is considered a ‘high risk’ sector, servicing debt should there be a downturn is paramount to any refinance or new finance application; our advice would be always to consult a suitably qualified broker before approaching a bank.”