Finance options for the leisure industry
Never before have potential borrowers had such a wide range of choices in terms of potential lending sources.
That’s particularly so for the leisure sector, due to its ongoing performance.
However, the key word here is ‘potential’ because there are significant differences between the types of borrowing on offer. Some may be more suitable for your situation than others, though they all share one characteristic — your proposition will need to be credible!
Let’s have a look at some of your potential options.
This should be familiar to everyone.
There are, in fact, a number of different options for borrowing leisure finance from a bank (e.g. flexible credit drawdowns etc.) but they’ll typically amount to a debt repayment approach. It’s based on the idea that you borrow ‘x’ and repay it back over an agreed period of time.
Pros: Very familiar, very predictable and funding for SMEs is often approved on a checklist basis. If you get enough ticks in boxes, you might get some funding.
Cons: Not exactly renowned for smiling benignly on higher-risk propositions. This can be a fairly dour and not massively entrepreneurial borrowing culture. It’s also one that can be a bit sluggish in terms of decision making.
Venture capital / private equity houses
This is another well-known potential source.
The approach is usually related to advancing funds in return for some sort of control of or influence over the way you develop and run your business. There might be various options on the table but essentially you’ll be ceding control over a portion of your business and some equity too.
Pros: Typically you’ll get fast decisions. The lenders are often more inclined to accept a higher degree of risk and they can also provide value-add services (e.g. networking and marketing expertise) rather than just money.
Cons: Can be more expensive than debt funding leisure finance through a bank. You also won’t be able to make unilateral decisions about your business any longer.
This has rapidly become one of the biggest sources for leisure funding (as well as other business investments).
Essentially, this is typically undertaken through online sites where a proposition is added and individual investors are invited to inject funds in return for a projected return.
Pros: It can be fast and you’ll retain day-to-day control of your business. It also has a certain cachet associated with being “hip” and connected — that can be useful as a potential marketing, exposure, PR and possibly viral base.
Cons: Success here can vary significantly. Some propositions receive little or no attention even if they’re perhaps meritorious. Some caution is required when selecting site/provider if you wish to maximise your chances of a successful outcome.
This usually involves borrowing that’s secured against an existing asset or one you’re asking for funds to acquire.
Pros: It’s simple and well understood. Decisions can be relatively fast.
Cons: Not everyone is comfortable with someone else owning or having legal right to seize one of their assets (though this should be familiar through things such as HP etc).
Specialist finance providers
In some cases, SMEs seeking leisure finance might not have the expertise or time to analyse all the options involved in selecting an appropriate funding source.
That’s where specialist leisure finance providers come in.
They will essentially look at the funding proposition on the table and add value to it if required. As part of that, they will also identify the most appropriate sources of funding and discuss those with the proposer, taking the funding request on from there into discussions with funds providers.
Pros: Avoids potentially wasting huge amounts of time trawling funding sources, which by definition, are unlikely to be receptive to your proposition.
Cons: Nothing obvious because they are facilitating your funding and you can decide which options (or none) are to your taste.