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Funding for clients to support your accountancy practice

Published on 17th February 2020

A £70,000 loan for a hotelier client

The UK hotel industry ranges from large corporate chains to the traditional seaside B&B. Many sectors are fiercely competitive - and the operators within can experience volatile trading. 

This has led to the business sector being seen as a major risk by many lenders. 

The challenge

We were recently approached by an accountant whose client was a small hotel business on the outskirts of London. The client had committed to a major programme of refurbishment and improvement - but their bank pulled out of lending at the last minute. 

“My client had been badly let down through no fault of his own. I was very keen to help - but if I was going to find an answer for them, I would have to do so fast.”

The client had large premises in a converted country house, and with the M25 close by, had enjoyed some very profitable seasons, mainly with business travellers. However, in recent years, customers were not coming in the same numbers as they had done in the past - the opening of one of the major chains nearby had reduced their residency levels. 

The problems were getting worse, and with takings almost 20% down on the previous year, the client looked at the possibilities of investing in the business.

He believed that the leisure market might offer the best prospects, and decided that the best approach would be to create a spa, which would support him in extending his customer base.

“It made sense. It would mean bringing more people into the spa during the day when business was at its slowest, and it would mean tapping into the affluent female market. My client had shown me his financial predictions, and they seemed sound to me. It would bring in more visitors who would stay for the evening when the bar and restaurant could offer more sources of revenue.”

The client had been proactive, found a company that could fit out some underused outbuildings as a spa area, complete with treatment rooms and who could also refurbish the pool.

He had approached his bank and explained his business proposition.

The bank saw how the proposal could work and saw no problem in advancing £70,000 to cover the project.

The client had already authorised work to begin when the bank called him to say that they were withdrawing the offer.

“The bank had looked more closely at my client's accounts for the last year, which I had just prepared, and withdrew the loan offer. They felt the fall in profits showed that the hotel was in trouble and, as a result, it no longer met their lending criteria. 

Suddenly, I had a client with a major funding shortfall - and no way to fill it.” 

The accountant knew that fast action was required, and called us at Rangewell. 

Do your clients have problems finding the funding they need to grow? Would you like to help them and introduce a new revenue stream for your own business? Find out more about becoming an accountancy partnership

How Rangewell helped

We looked at our lenders, and saw that to provide £870,000 at short notice would be costly. Lenders who saw the same potential affordability problems that deterred the bank would also be unwilling to lend.

Those that could offer this level of funding might impose punitive interest rates. 

However, although no lender was prepared to offer the full £70,000, it was possible to find smaller loans - both of £35,000 - from two separate lenders.

Both lenders demanded high rates of interest - with 15% and 18% - because of the risk the client presented. However, we were able to negotiate an early repayment option. If the client was able to repay his loans early, he would not face any penalty - substantially reducing his costs. 

“My client was in a very difficult position. Rangewell found me a lifeline that I could throw him - and which meant that I could help him save his business for the short term - and for the longer term, help him get back to full profitability.”

At Rangewell we know that getting the agreement that is appropriate for your business can be essential in order to keep your costs down. We can help you arrange all types of business funding - including finding solutions when your business circumstances are challenging.

We can help you arrange all types of business funding for your clients - helping you deliver an even better service to them, and creating a potential additional income for you.

Simply call us at Rangewell or find out more about becoming an accountancy partner.

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Richard Mitchell

Richard Mitchell

Content writer