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Our Head of Restaurant's Ben Wilmot was interviewed for Casual Dining Magazine's December issue on finance options available to restauranteurs in an increasingly tough climate. The article also featured some kind words from one of our clients!
Read the article over on Casual Dining Magazines website, pages 34 to 39. http://flickread.com/edition/html/5bfd0444d3674#34
Read Ben's unedited article below:
At GSM Finance, we specialise in funding fit out costs to the casual dining sector to assist with new openings, refurbishment costs and expansion.
It is clear that is a very tough climate for restaurateurs who want to borrow at the moment and this is a due to a number of reasons, primarily:
The recent spate of big brands entering CVAs has terrified banks, these have occurred predominantly to allow operators to close down poorly performing sites after ill thought out, aggressive expansion plans. What’s more, the nation’s palate has changed significantly over the last couple of years with the rise in street food and more authentic offerings - these big chains haven’t.
Rent and rate rises have obviously crippled businesses whether they are loss-making or profitable. The lack of support from the government has been incredulous despite Philip Hammond’s recent token gesture in his budget to support small businesses.
Brexit has devalued the pound, increasing the cost of importing goods and retaining & employing staff is getting harder and harder.
The result is that is now even harder to get a bank to support a sector which it has always shied away from. The thing is, that a bank loan is not really the best option available to a restaurateur (assuming you can even get one) and there are some much smarter options available to you.
Crowd funding is great if you’re happy to sell some equity and at early stage this makes a lot of sense as the public are still keen to get support brands they like and are not fully qualified underwriters.
If you’re happy to pay a high interest rate, you can borrow against future sales from your card takings. It’s a pretty straightforward way of releasing cash though you may still need to offer additional security.
Then there is leasing, which is where I come in. This, often overlooked and misunderstood tool for funding a restaurant fit out is becoming more and more popular in the sector. I can’t keep up with demand at the moment and here’s why... You can finance a whole fit out through our panel of lenders through either Hire Purchase or Finance Lease, the same sort of thing as you’d buy a car with. Most people think that we can only finance tangible, removable items such as kitchen equipment or furniture.
The fact is that we can cover any aspect of a fit out including building works and labour costs and we have over 30 lenders who want to support you. Of course, this is subject to underwriting and that’s where an experienced broker is invaluable as we understand our lenders, their appetite and what aspects of a fit out they will and won’t cover.
On top of that, with a Finance Lease agreement; the lender will pay the VAT on an invoice on your behalf. That’s an additional 20% of the cost of a fit out that you don’t have to source which helps your cash flow. As we do not charge fees for our services whatsoever, it’s in our best interest to structure good packages for clients otherwise they wouldn’t use us –we’re on your side.
Whilst we can finance 100% of your fit out costs, we prefer to see a blend of your cash and our leasing solutions. This helps keep your repayments down and means you can keep as much equity as possible. We are in this for the long-run and want you to succeed so we can help you grow.
Quote from Eve Bugler, founder of Bababoom:
“For BabaBoom the best approach to funding new sites is a blended one; combining experienced industry investors who bring equity and added value advice, with asset finance so as a founder I retain as much of my company as possible for myself & my team. Ben gets the founder mindset - it’s why so many founders enjoy working with him. We hope to go for the same approach for site 3 and beyond.”