£350,000 Cash Flow Facility for Pub Chain, Hospitality Sector Case Study

Business Cash Flow Facility in Hospitality

Over the last 18 months the Covid19 pandemic has caused havoc for businesses across the UK, especially in the hospitality sector, in relation to cash flow. When a business is unable to open and their cash reserves dry up, it becomes very difficult for that business to relaunch, which is where cash flow facilities can really help.

Cash Flow facilities will generally allow a business to plug a hole where there is a temporary shortage of money within the business affecting growth and other areas such as acquisitions.

Borrowing Advice for Hospitality Business Owners

The Mesa Financial team is experienced at helping business owners to find the right funding solutions for their cash flow requirements including cash flow facility.

As we all know the hospitality industry has been one of the worst affected over the last 18 months. This particular hospitality client was no different. They own a chain of pubs and the business had been extremely successful for years. These types of venues generally run on relatively small margins which means when the cash stops, it becomes very difficult to pick back up again.

It is also very expensive to get a pub up and running. The business must stock the whole bar again. This is an issue as many suppliers stopped giving credit terms. Furthermore the business needs food stocked. Add to that the additional Covid19 safety measures and the costs can make cash flow a critical issue. When you have multiple venues, these expenses can mount up significantly. Another problem for the hospitality sector was the uncertainty with rules changing regularly and sometimes last-minute.

Unfortunately, due to the low level of trading for our client, the pub chain could not get help from their own bank who declined to assist in their time of need.

The main issue for the Mesa Financial specialist to solve was to inject some much needed cash into the business. This would allow them to stock up each venue, give them cash for the next 3 months and allow them to update the whole operational model.

How the cashflow facility works

Our solution was to borrow the money on a cash flow facility. Due to our relationships we had access to be able to do this on a CBILS facility. This meant the client would not make a payment for the full first year and would not pay any interest during this time. Given the current circumstances this solution is a perfect fit. The lender was able to take a common sense approach on the business underwriting. They could see that as soon as the venues were allowed to open, this business would be cash flow positive within weeks of opening. This is how it looked on paper:

The solution

Borrowing Amount – £350,000
Annual Interest rate – 5%
Term – 6 years

Security – No Tangible security
Benefits – CBILS, no interest or repayment payable in year 1

Benefits for the client

Released an extra £350,000 in cash, to fund short term cash flow hole

Have peace of mind for a whole year and plan for the future of their business

Commit to re-opening all pubs with confidence of delivering to their high standards

Allowed them to keep ownership of the freehold titles for each site

Lending for the hospitality industry

When it comes to borrowing to get through a difficult and temporary period in relation to cash flow, it really helps to speak to specialists. The Mesa team can often find solutions that clients would not be able to achieve on their own. If your bank has refused a loan, it may be that we can find a suitable solution. We are well connected with lenders who work with our team in often highly complex scenarios. Get in touch to see how we can help.

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