A finance boost for the leisure and hospitality sector
Businesses in the leisure and hospitality sector have had a particularly tough time in recent years when looking to raise funding from the banks in order to grow their businesses. Whilst both the recession and the Eurozone crisis have played their part in the restrictions in bank lending, most of the banks are over exposed to leisure and hospitality businesses as a result of high levels of lending to the sector during the boom years.
A number of new products have come on to the market in recent months which aim to offer hospitality businesses access to additional capital to expand and develop. Two recently introduced schemes from Boost Capital and Ashley Business Cash adopt a similar approach by giving businesses a cash advance, which is then paid back over an agreed period through future credit and debit card sales.
The main lending criteria of both funders are that the applicant (be it a hotel, restaurant or pub) must be an established business and process a minimum of £3,000 in credit and debit card sales each month. Because this lump sum, plus the fee charged by the lender, is paid back at variable amounts linked to monthly sales, it should allow the business owner to manage cash flows and deal with any fluctuations in levels of business.
Boost Capital markets their scheme as an alternative to a business loan and claim they will advance up to £500,000. They do not require a business plan or cashflow projection from the applicant and there is no requirement for the business owner to provide personal security. Ashley Business Capital will only lend a maximum of £25,000, although this can be topped up and extended to ensure an ongoing source of capital for the business.
This funding can be used for any business expense whether it be for the opening of additional locations, to hire seasonal staff, to invest in new fixtures and equipment, to upgrade or make repairs to business premises, to invest in advertising and marketing or to cope with seasonal working capital requirements.
Both schemes are expected to prove popular with leisure and hospitality business owners. Boost Capital expect to lend at least £10 million to UK businesses in the coming year.