Hospitality finance for busy seasons and quiet ones

Hospitality finance usually covers three things: getting through the quiet months, investing in the premises, and paying large bills that arrive at awkward times. Pubs, restaurants and cafés often need all three at different points in the year.

The cash cycle differs from most sectors. Customers pay on the day, so there are few unpaid invoices to borrow against, but staff, rent and suppliers still have to be paid on their own timetables. A strong summer or December builds a cushion that is then spent in the slower weeks that follow.

Card takings are the key evidence. Because most sales pass through a card terminal, lenders can see your trading pattern in detail and may base an offer on it.

• Covering a quiet season: a merchant cash advance is repaid as a percentage of card takings, so you repay less in slower weeks.
• A refit or redecoration: unsecured business loans give a fixed repayment plan for costs such as joinery, décor and flooring that a lender could not easily take back.
• Ovens, dishwashers, coffee machines, refrigeration and tills: equipment leasing spreads the cost over the working life of the kit.
• Quarterly VAT: VAT loans spread a VAT bill over several months.
• General cash pressure: working capital loans can cover payroll, rent or stock while trade recovers.

If you are weighing a card-based advance against a term loan, our guide on merchant cash advance vs business loan sets out the trade-offs.

Illustrative example only: actual costs depend on the lender and your circumstances. A restaurant company takes a £20,000 advance and agrees to repay £24,000 through 10% of its card takings. With card takings of £40,000 a month, it repays about £4,000 a month and clears the advance in around six months. If takings fall to £25,000 in a quiet month, that month's repayment falls to £2,500, but the total repayable stays at £24,000.

Lenders focus on how consistent your takings are and how much is left after wages, rent and food and drink costs. They also want to know the business can keep trading from its site.

• Card takings over recent months and how far they swing between seasons
• How long is left on the lease, since a short lease can limit the term a lender offers
• Your premises licence and, for food businesses, your food hygiene rating
• Trading history at the site and of the operating company
• Existing finance, including any card-based advances still being repaid
• Gross margin on food and drink and the share of turnover spent on wages

• Filed accounts and up-to-date management accounts
• Recent business bank statements and card terminal statements
• Quotes for any refit or equipment
• Details of existing loans, leases and advances
• Figures for each site if you trade from more than one venue

• Arrange funding before the quiet season starts, while recent takings look strongest.
• Run card takings through one business account where possible, so lenders can read your trading clearly.
• Set aside VAT weekly from takings rather than waiting for the quarter end.
• Avoid taking several card-based advances at once. Combined deductions can squeeze cash in quiet weeks.
• Get more than one quote for refits and equipment, and check what installation and removal are included.

We are a commercial finance broker, not a lender. We help established limited companies, LLPs and partnerships of four or more partners running pubs, restaurants, cafés and hotels find suitable lenders on our panel.

Every client has a dedicated relationship manager, a real person you can reach by phone, email and chat from first enquiry until the lender pays out the funds. They will help you weigh flexible card-based repayments against fixed loan repayments for your trading pattern.

There is no fee to you. We are paid a commission by the lender when the finance completes, and you can ask how much it is. Commission can differ between lenders. You can check your eligibility in about 60 seconds without affecting your credit score. Lenders carry out their own credit checks later, if you decide to apply, and make their own decisions.

Can a hospitality company get finance after a difficult year?

Possibly. Some lenders focus on recent card takings rather than older accounts, so an improving trend can help, while others want profitable filed accounts. Your relationship manager can explain which lenders on our panel may fit.

Can I finance second-hand catering equipment?

Some lenders fund used equipment from established dealers, although terms may be shorter than for new kit.

Is a merchant cash advance a loan?

It is usually structured as a purchase of future card takings rather than a loan. You still need to understand the total amount repayable and what happens if takings stop.

Can a company with several venues borrow for one site?

Yes. Lenders typically assess the borrowing company as a whole, but may ask for figures for each venue to see how the site being funded performs.