Matt Sparrow, Senior Funding Advisor at 365 Business Finance, give his advice on what to do when funding is refused.
In what is proving to be a challenging hospitality environment and with the uncertainty surrounding how the UK economy will respond to what remains an unclear Brexit, access to funding for UK smaller businesses, especially those impacted by seasonal factors, is proving very tough.
With lending criteria now placing particular focus on affordability and the ability of a business to service a loan with what are usually fixed monthly repayments over a set term, the local pub down the street is not afforded the luxury of having one or two quieter low revenue months - and that is only if they have managed to find funding in the first place.
It sadly becomes a vicious circle for the local pub, as without the funding to improve, develop and upgrade customers move on to newer, modern, more exciting options. Yes, one could argue that loyal customers will always support their local but decreasing service levels, poor menu options, and dated furniture and fittings will ultimately have a negative effect on footfall. Without development funding the local pub becomes trapped and a victim of circumstance.
There is a light at the end of the tunnel, however, and pub owners now have a variety of flexible alternative funding solutions open to them should they require finance to grow revenue increase footfall, retain customers and enhance the in pub experience.
Flexibility is key to funding a seasonal business and when seeking out a funding solution pub owner must plan and forecast for lower revenue periods and try to identify a product that offers them respite when sales are down, but allows them to service the finance more robustly when sales are up and during busy periods.
One of the more popular and suitable flexible funding solutions on the market is the merchant or business cash advance, a product which allows pub owners to pay back less when sales are down and more when sales are up. The repayments mirror the debit and credit card sales of the business, and in so doing relieves the pressure of fixed monthly repayments during quieter periods.
In truth, this product can be slightly more expensive than the normal inaccessible bank loan, but it offers a great deal of flexibility to the pub owner with its more patient approach to the settlement period. Merchant cash advances also tend to carry no APRs, interest rates or hidden extra charges, the amount to be repaid remains constant and in most cases, funding takes place in as little as 48 hours, allowing the pub owner to respond to any unexpected breakages or breakdowns that may require a capital outlay!
The administrative nightmare of the loan application process is alleviated when applying for a merchant cash advance due to the fact most pubs transact using a card machine making it easy to determine the affordable advance amount - based on the monthly sales driven through the card terminal - in most cases the cash advance is approved based on this transparent figure and as such the approval rate is far higher than that of pub owners applying for high street bank loans.
The local pub is a very British tradition, but for the pub to stay in business landlords and owners will need to seek out alternative lending solutions to those offered by traditional British banks. Business evolves, does not go in a straight line and business owners will continually be faced with new challenges, it is the responsibility of the UK finance community to evolve alongside our local pub and help meet these challenges.
Matt Sparrow is Senior Funding Advisor at 365 Business Finance. To find out more on the topic of funding, make sure to check out Money Talks: How to Secure Funding to get advice on everything from getting in front of a lender, actually keeping them interested and the how to secure the right type of investment for your business.