It is fair to say that the hospitality industry has had a very difficult time recently. With prolonged closures during the Covid-19 pandemic, increasing costs, and the cost-of-living crisis hotels, pubs, restaurants, and cafes have been hit hard. If you are a hotel manager, pub landlord, restaurant, or café owner you may be wondering how you will continue to trade during the coming months let alone thrive. Commercial finance could be the answer. There are several commercial finance options for the hospitality industry that we will explore below.
What is Happening to Pubs, Restaurants and Cafes?
Hospitality has been one of the hardest hit industries over recent years. Hotels, pubs, restaurants, and cafes were all forced to close their doors during the pandemic. With no income but costs still to pay, many businesses began to accrue debt despite some government support including furlough schemes and loans. As restrictions eased the government attempted to encourage people back out with the ‘Eat Out to Help Out’ scheme, however, many people took longer than anticipated to start venturing out again. This meant that recovery was slow.
Following a short period of recovery, a further blow to the hospitality industry has been rising costs. The cost of electricity has soared and put huge pressure on the economy as a whole. In a double blow to hospitality not only has the cost of fuel and other essentials risen, there are less consumers as households also face rising costs. The cost-of-living crisis has meant that many families are struggling to pay for essentials let alone luxuries including eating out and hotel stays.
Commercial Finance Options for Food and Drink Outlets
With many hospitality businesses struggling to make a profit an increasing number of hotels, pubs, restaurants, and cafes are closing their doors permanently. However, some savvy businesses are thriving by diversifying and upgrading their offerings. Commercial finance can be a valuable tool to achieve this however, it is important to note that it should be used cautiously. An experienced broker can offer invaluable advice and ensure that any finance taken is appropriate for the circumstances, after all finance that cannot be repaid will worsen the outlook for the business. Book an appointment with MC Commercial finance as a first step to see what options may be available for your business; these options may include:
- Business loan
- Merchant cash advance
- Asset finance
Business Loans for Hospitality
Increasing or diversifying your offering or refreshing your premises may be a good option for turning around the fortunes of your business. While many people are struggling with the cost of living, those that do have disposable income are increasingly trying to ensure that their money is well spent on high quality enjoyable experiences. By offering something unique, and ensuring that the business is well set-up, looks appealing, and is clean is likely to increase both repeat custom but also referrals.
A business loan can provide a cash injection into the business that can be used as required to refresh existing premises, move to new premises, purchase new equipment, staffing costs, anything that is required for diversification. With a solid business plan, and a history of trading a loan may be a viable option. It would be repaid over a set period allowing you to plan your cashflow and expected outgoings.
Merchant Cash Advances in Hospitality
As a direct to customer business that is likely to use a card payment terminal a merchant cash advance (MCA) would be another option. An MCA is based upon previous takings via your card terminal, you can usually borrow an average of one month’s income, this is then repaid via a percentage of future payments via the terminal until the dept is repaid. As a cash injection into the business, a merchant cash advance can be used similarly to a loan and spent in many ways to offer new or refreshed surroundings or experiences to your customers. There are some drawbacks to an MCA including the need to find a lender that works with your payment terminal and depending on average monthly turnover the amount available to borrow may not be enough to meet your requirements.
Depending on your vision, asset finance may be another option for helping to future proof your business. This is a specific type of finance enabling you to purchase a tangible asset that is directly for the use of the business. Examples may be:
- A pub investing in a high-quality coffee machine enabling them to cater for increased daytime trade.
- A café may invest in a vehicle and kit it out enabling them to take their business mobile.
- A restaurant purchasing new kitchen equipment to enable them to offer a better selection of high-quality food.
- A hotel may purchase gym equipment or games tables to increase their offering to guests.
Like a loan asset finance is repaid in monthly instalments. There are different options depending on whether you want to own or lease the equipment. You can find out more here.
Speak to a Commercial Finance Expert
Ensuring that you make the best decisions for your business is of vital importance for success. You are the hospitality expert, seeking advice from an expert in commercial finance should be a top priority before taking on any type of borrowing. Contact MC Commercial Finance now to discuss your business.
MC Commercial Finance Ltd is authorised and regulated by the Financial Conduct Authority
(Reg number 948719).
MC Commercial Finance Ltd is an independent credit broker not a lender.
Company Registered Number: 12472873