How can you fund a travel agent business?

The old-style travel agent, with a high street shop serving local people, has started to be replaced by internet-based services - although the core business, arranging travel and holiday packages with commission payments, remains the same.

So does the need for funding.

At Rangewell, we understand the costs involved - and present our guide to the most appropriate ways to raise the funding to answer them.

Starting up

It is possible - in theory - to run a travel agent business with nothing more than a laptop and a mobile phone. Some businesses have indeed started this way, but most will soon make the decision to work on a more professional basis.

The problem is that a start-up can find it difficult to raise finance. Lenders are often reluctant to lend because they have no evidence that the new business will be successful. Most prefer to lend to businesses which have been trading for a year or two and can demonstrate their profitability with audited accounts.

However, there are lenders who take a more positive approach. They may be able to arrange funding for start-up ventures, based on solutions such as Secured loans. These require the borrower to make a contribution of their own, and to provide something valuable as security. Many new business owners will use their homes to secure the loan they need.

Your travel agent premises

In the past, most travel agents worked from high street premises. These days, it may be possible to work as an online travel business - but many people still prefer to arrange their holidays in person with someone they feel they can trust. A shop on the high street is no longer the only solution, and many smaller agents work from easily-accessible office spaces - perhaps a suite above a shop  - where customers can call in.

However, you may need upfront funding to secure the lease and, for the shop or office, there may be fitting out and refurbishment required. A bright and welcoming appearance will be essential!

Also, once established, there could be sound business reasons to buy your premises, and you can do this with a Commercial Mortgage. By spreading your repayments over a term of 20 years or more, this could actually decrease your monthly outgoings and provide a valuable asset for the future. 

Your web presence

Whether or not you have premises to welcome customers, you will need a website. It will not only help your customers find you, but it can also let your customers self-serve and book online. An automated service that works 24/7 to generate revenue is a powerful asset for any business.

But of course, the internet is a highly competitive market to be in, and if your website is to bring in visitors and turn them into customers, it will need professional development.

The right web development agency can build a site that is SEO-ready, gives a  professional look to your business and is both secure and stable enough to trust with online bookings. It must also be mobile optimised so it is usable for customers with a smartphone, as well as those with tablets and laptops. 

Costs will vary with the number of pages and features that you want your website to have. The more you invest, the more business your website can generate in return. An Unsecured business loan might be the most cost-effective way to deal with the initial costs involved in creating your web presence. 

Your Equipment 

Your travel business will need some equipment in order to function. You will depend on your IT setup, and your computers and printers will need to be absolutely reliable. You may need specialised software with operating licenses and renewals, training and maintenance. Basic desks and seating may be acceptable for a back office, but if you are dealing with customers, high standards - and higher costs - will be essential.

Asset Finance can be the solution for most types of business equipment and many different businesses use this product to help cover the costs of their equipment. It covers both Hire Purchase and Leasing.

Hire Purchase (HP) can provide a simple way to spread the costs of basic equipment. 

You pay a deposit plus monthly instalments over a fixed term, between 6 and 60 months, after which the equipment becomes yours. Payments are fixed, making it easy to plan ahead and to arrange an agreement that is tailored to your monthly turnover and budget.

Leasing can also spread costs, but works more like a rental agreement - and so avoids the need to make any capital investment. There is usually no upfront cost to find, making higher cost items more affordable.

Your working capital

Your income will fluctuate with the seasons, while your costs, from rent to utility bills and most of all, salaries, will remain fixed. 

The cost of wages and your overheads will keep coming in even in the months when business is slow.

There are a number of solutions. Working Capital loans can be used to cover your everyday operating expenses, such as accounts payable and payroll, when business is slow and cashflow is short. They are simple, short-term loans which provide a cash lump sum quickly and are designed to be paid back in a matter of months. They can be vital even for thriving businesses which face seasonal highs and lows if you look at your likely outgoings over the course of a year, and for a start-up, it might be necessary to have a facility of £50,000 in reserve to call on if you need. Arranging a loan can cost you nothing if you don’t actually need to draw down the cash – but simply knowing you have a financial lifeline could mean valuable peace of mind.

An alternative to a working capital loan may be a Merchant Cash Advance. Most customers will make payments by card and you can use the security provided by these payments to raise cash advances. A lender will provide a cash advance which is usually equivalent to one month’s average takings. 

What makes this kind of funding particularly attractive is that there are no repayments for you to make. Instead, the lender will take a proportion of every card transaction made going forward until the loan, and their fees, are paid off.

Need help with finance for your travel agent business? Find out more about the challenges and the solutions available now

The finance you need for your travel business

Watching the costs will be crucial to your success. Getting the right type of funding for your needs will help keep your costs down overall - and so will ensuring you get the most cost-effective funding.

At Rangewell we can help. We are experts in business funding. We can search the entire lending market to help you find the most cost-effective solutions for each of your business needs. Our service is independent - and absolutely free for you to use. 

We have helped thousands of businesses like yours, so call us today to find the most appropriate funding solutions for the travel industry or apply now.