Securing £350,000 Property Finance for a Glamping Business
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When browsing property listings and discovering a great property with a large plot of land, an experienced holiday home-owner spotted the potential for a trendy new glamping business. But when he went to his bank for help, they did not match his enthusiasm or business vision. He turned to the Rangewell property team, who were able to think outside the box when it came to the funding he needed.
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The UK's staycation sector boomed following COVID-19 lockdowns and continues to remain popular as travel restrictions and global disruption limit people's ability to go abroad. Some intrepid landowners have recognised this and launched amazing camping and glamping businesses to reap the rewards associated with domestic tourism.
The holiday sector provides many profit opportunities - especially with the recently renewed interest in staycations in the UK. There are many segments within the sector, but one of the fastest-growing is the luxury camping market, known as "glamping".
Glamping has moved from a novelty to a serious business model that allows holiday-goers to enjoy all of the relaxed informality of camping with the added extras and comforts of a hotel.
The glamping business model also allows the owner to set up a hospitality business with great earning potential - but may pose problems when it's time to secure funding. At Rangewell, we recently helped an investor fund and set up a glamping business. Read the case study below to learn more or discover our full guide on how to start a glamping business.
What was the problem?
Our client was an experienced holiday home-owner, who saw the potential in a site for sale in rural Yorkshire.
“I was looking at buying a cottage initially, so when I saw the site, I was sure that it was the ideal location for a holiday let. There were several acres on the plot, which had been used as a smallholding.
If anything, there was too much land for the cottage. It would need a gardener going in every day, but with a little work, it could be a very attractive place to stay, with a good view over the moors and a small lake.
Then I realised that with all the space available, it might also be perfect as a glamping site.”
His other properties were more conventional, but with experience in providing holiday homes, he could look carefully at the costs involved and draw up a detailed business plan. As we often discuss in other articles, having a well crafted business plan for finance will help win lender confidence.
Our client had also spoken to the local authority and discussed a licence, which is required if a site is to be used for short-lets for more than 42 consecutive days or more than 60 days in a year. The council had no objections to the new venture and accepted his proposal based on a short business plan, which his consultant helped him prepare, which, as well as providing income figures, covered concerns such as drainage and the impact on wildlife.
With the existing cottage on-site, the costs of bringing in water for a shower block, electricity and a wifi link would be moderate. The client already had a pre-existing arrangement with an online booking provider for his other properties, which could be extended to the glamping business.
He also looked at solutions for providing accommodation.
“I looked at several solutions. Treehouses are popular, but they need the right kinds of trees, and the insurance costs are high. Huts could mean year-round business, but the cost of a hut that does not look like a shed is high. Ultimately, I decided on yurts - the traditional kind, with a curved wooden frame.”
He calculated could get six yurts for letting out, and a larger version to use as a social area with games and activities. The costs varied between suppliers, but he budgeted on spending around £50,000, to include suitable furnishings and brought-in services. Together with the income from letting out the cottage, his financial predictions looked favourable.
But they were still not enough to convince lenders that he approached.
The problem is that a campsite has very little value as property. As a business, it might be lucrative, but as a property, it is little more than a field, and in the current climate, most lenders were reluctant to offer the kind of commercial mortgage which is usually used for this type of venture.
“I had hoped that the presence of the cottage would make the banks see things my way - but the Covid crisis had made them even more wary than usual.”
The property was on sale for £500,000. While the client could afford a fairly high 50% of the price via a £250,000 deposit, lenders were still not interested in the investment.
Needing to find a lender who could understand the glamping business and its profit model, the client wanted an expert on his side to help navigate the lending market. To find that expert, he came to us at Rangewell for help.
How we secured the glamping business loan he needed
We saw that our client had already been in touch with some of the key players in the holiday property market and that, despite his favourable figures, there would be little chance of securing a commercial mortgage for the site.
Commercial mortgages are always the subject of individual assessments and, although the property's value is one of the factors considered, the performance of the business is also important.
Because the business was not yet in operation and all the figures were projections, lenders were not willing to take a chance of providing the funding required for the site, which was higher than it would merit as a field, despite the presence of the cottage. However, we believed we could find a solution by finding a lender who could offer funding with a Bridging Loan.
With a Bridging Loan, the security is provided by the property - not the credit record of the borrower, or by any record of past developments. They are versatile as a funding source but have a high cost. They are, therefore, intended to be repaid quickly, either by the sale of the property or by another finance product designed for the long-term, such as a mortgage.
They can also be used to secure a property unsuitable for a mortgage. As the client had considerable equity in his other properties, we were confident that we could use a Bridging Loan to provide the funds he needed and approached one specialist bridging company that might be interested and still prepared to lend.
We then approached them with full details of the project. Bridging lenders are able to make rapid decisions and funding was agreed within hours, with the funds released in a matter of days.
The deal we arranged
Costs for Bridging Loans can be high and rates of 1.0% per month are not uncommon, and there would be additional arrangement and exit fees which will also increase the costs.
However, these fees and the growing interest could be rolled up into the loan and repaid with a new type of funding, such as a commercial mortgage, once the business had been running for a season and proved its profitability.
Lending for property development can include a roll-up of interest and associated costs into the loan, which would be paid off once the development is sold.
The Rangewell team were able to secure a Bridging Loan at 8.9% within a matter of hours, with the funds drawing down in a matter of days. The client was able to see exactly how much he was borrowing as all interest for the 12-month term would be calculated on day 1 of the loan and repaid when the refinance was arranged.
With the property valued at £500,000, the lender would provide £350,000, allowing our client to have cash in reserve to equip his site.
The business model is already proving itself, which means the client is not worried about refinancing with more conventional funding in a years' time.
“The funding was exactly what I needed, and we were able to start work improving the site and bringing in the yurts. Despite the lockdown, we were able to open for business and take full advantage of the demand from people who had cancelled their holidays abroad. The business model is already proving itself - which means that I have no worries about securing more standard funding in a years’ time.”
Why we were able to help
Finding the most appropriate lender for your property plans project can be crucial to your success and profitability. That’s why it is important to speak to a property finance team such as Rangewell from the start. Our team is made up of industry specialists, and our property team includes some of the leading specialists in the sector.
Rangewell works with lenders across the UK market. Not only do we know which are most suitable for a particular type of business loan or property finance agreement, but we also know those that can offer the most cost-effective solution for any individual need.
With specialist projects such as glamping businesses, we'll help identify the right lender and then call on our network, which includes virtually every name in the UK market, to find you the most appropriate and affordable funds for your need.
If you have a property project that needs funding, just call us and one of our experts will be able to discuss the options. We will work out the most cost-effective ways to provide the funding you want - whatever the challenge your business plans present - and in most cases, our services are absolutely free.
Property deals cost less with help from Rangewell
- Individual arrangements tailored to your circumstances
- Adverse Credit – no problem
- Repayments geared to your revenue stream - including interest roll-up
- Understanding the funding challenges for your sector
- Personal service
Talk to Rangewell – the business finance experts