Tackling financial issues

Stephanie Brown
13/05/2017 - 08:00
Steph Brown, senior funding manager, Ashley Financing, an independent, financial funding provider for SMEs, addresses the financial issues those in the hospitality sector are experiencing; offering advice and suggestions for how business owners can combat the common financial troubles such as cash flow flux.

If there’s one certainty in the hospitality industry, it’s that there’s always uncertainty. Some businesses live through a more regular uncertainty than others but to some extent, whether you are a hotel or a pub, a restaurant or a B and B, you’re likely to be subject to wider range of factors that affect business health more than many other sectors.

Any UK business will know all too well the impact of the weather on their bottom line. A wet summer can be great news for some – indoor attractions, cosy restaurants etc, but if you run a pub perched on a Cornish cliff top with a large outdoor seating area, a few days of rain can lead to a big hole in revenues. Naturally, a big hole in revenues can bring a host of worries likely to lead to some sleepless nights.

For example, a business may be locked into supplier contracts; it may have taken on seasonal staff to cope with an expected peak in demand and the rent always needs to be paid. Add to this the recent rise in business rates which, despite some short-term respite announced in the Budget, is increasing the pressure on the ice cream parlour owner who’s peeking through their curtains every morning to see yet more rain.

Of course, there’s always the hope that the sun will return, but it’s the sheer short-term term nature of these fluctuations that makes it all so much of a headache.

Take for example The Three Stags, a gastropub in South East London, which relied on a nearby major tourist attraction for the majority of its customers, with 90% of lunchtime and afternoon trade not local to the area. So, when the museum closed for several months, the pub’s sales and cash-flow took a major hit.

Owner/manager Richard Bell was at a loss. “We needed to make £12,000 a week just to break-even but weren’t bringing in anything near that. I went to my bank for financial help but didn’t qualify for a loan.”

There’s also a further challenge for hospitality business owners brought about by the fact that often the times when you need to invest in your business coincide with the quietest periods of the year. If you own a restaurant in a holiday area, you’ll want to build your new outdoor eating area or carry out refurbishments in the winter months; if you’re a restaurant, you won’t embark on a full interior refit at Christmas. This disconnect between revenue and spend is problematic.

All business owners in the sector are aware of this and will plan their financial year accordingly. However, when trying to source finance, inconsistencies in revenue can be a real headache and may mean that a business is turned down for a loan from a traditional lender. Even if a bank can help, and it’s common that they can’t, particularly if you’ve had some financial problems in the past, the loan terms may lack the flexibility a business needs to meet these fluctuating requirements.

If a bank has turned down a business’ request for finance, then there are other options. We help a lot of businesses in this situation; businesses that need quick access to money over a short-term period. We offer loans that are repaid weekly by direct debit on a day that suits the business in question; we have minimal paperwork and we’re very happy to talk to a business about their needs, offering advice and guidance, rather than simply giving an automated yes or no response.

Our customers come to us with a wide range of financial needs; some need to pay their VAT bill, which may have landed during one of the quieter periods of their year; some need to refurbish their properties; some need to pay for some much-needed local advertising. All of these are common requests and ones that we can almost always offer help.

Our business loan is popular for pub, hotel and restaurant owners.  The loan offers a financial buffer for businesses, whether it’s paying bills or investing in a refurbishment; it provides working capital which is an essential requirement for all businesses to keep operations running smoothly. We look at every application and consider the possibility of seasonal trading fluctuations; we know the sun doesn’t always shine and we know that your January is likely to see a big drop in income following a busy December.

You wouldn’t call an electrician to fix a problem with your sink; the same logic applies to finance. Businesses should find the right provider for the job; one that can support them all year around; one that knows that one day the sunshine will come out again.

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