Setting up a unique new leisure business - £220,000 funding with no repayments

Wizardry is not confined to books and films - it now provides the basis for a unique themed bar experience.

Our client was a wizard-themed bar - complete with wands and magic potions - situated in an increasingly fashionable area of North London. Customers can enjoy mixing their own magical potions and casting spells as part of an evening to remember.

The concept bar is a new idea which is providing modern energy for the licensed trade, and the magical bar has proved so profitable that, just 18 months after its launch, its owners were keen to open a second branch to cope with the demand. 

They required £220,000 to secure the lease of a second pub and to convert it to provide the same magical experience.

The challenge

Despite its success, there was a challenge to their expansion plans. With just 18 months of trading, the business is still seen as a start-up by many traditional lenders such as banks. They were, therefore, reluctant to make additional advances to the business.

Banks and other lenders may be cautious in lending to any new business - which they may define as any business unable to provide two years of audited accounts. Furthermore, the pub trade is seen as particularly challenging. Many pubs and bars have closed in recent years - there may be 20% fewer places to go for a drink in the UK than there were a decade ago.

Despite this lack of enthusiasm from lenders, the team were keen to expand their business and maintain their growth momentum - they believe that it will be possible to open many more similar venues in the next few years if they can capitalise on the interest generated now. 

They needed to raise cash now, not when the banks were ready to help, and approached us at Rangewell for a solution. 

How Rangewell helped the business find the money 

We recognised that the themed bar was a unique concept, which set it apart from the standard pub and bar businesses - which have been suffering from declining trade because of a number of factors, including health worries, the smoking ban and supermarket discounts on alcohol.

We looked at their business model and noticed several things that set it apart from most bars - not least its online booking service, which the business had found was vital to keep numbers under control. 

Our willingness to look deeper into the circumstances of the businesses we work with compared with other funding experts frequently allows us to find ways to find funding when others can’t. 

In the case of this client, we were able to suggest an innovative method - which could provide the cash they needed to invest in the second bar, with no issues with their status as an established business, and no need to budget for - or indeed make - any repayments.

Magical results with a Merchant Cash Advance

Although the need to demonstrate several years of profitable accounts might make it impossible to secure £220,000 with a traditional loan, the phenomenal success of the business made another approach possible. 

An MCA, or Merchant Cash Advance - also known as Business Cash Advance - could provide the solution. Instead of being based on the long-term performance of a business and its ability to demonstrate the ability to afford regular repayments with audited accounts, it takes the turnover taken by card repayments as the security for a loan. 

A Merchant Cash Advance can be ideal for any business that receives a high proportion of its takings from card payments or - in the case of our client - which takes payment with online bookings.

An MCA provider will work with a business’s card payment processing company. They will look at the monthly card takings of a business and may agree to offer an advance equivalent to the average sum.

Instead of making fixed repayments, the lender takes a set percentage of every future card transaction the business receives until the cash advance, and their fee, is paid off.

For our client, their bar took most of its receipts through card payments. Raising £220,000 was simple - allowing them to proceed with the magical transformation of the new premises and avoiding the need to make any fixed monthly payments.

There are a growing number of lenders providing MCAs for the licensed trade, and their fees and the percentages they take to fund repayment will differ greatly. 

With this in mind, at Rangewell, we understand that getting the most appropriate agreement for a business can be essential in keeping costs down.

We found the MCA provider who could offer the most competitive fee structure, and helped the pub company make the necessary arrangements - which brought them the funds they needed quickly, allowing them to proceed with fitting out their new venue. 

At Rangewell, we can help you arrange all types of business funding - including MCA arrangements. So if your business is facing a particular funding challenge, simply call us. Our service is transparent, independent, comprehensive and, above all, free.