Securing £20,000 Merchant Cash Advance for Hotel
An alternative to conventional funding
When the owners of a small hotel found themselves facing cash flow troubles during the pandemic, they could not access conventional funding from their bank. So, they approached Rangewell in search of a financial solution to meet their needs. Despite a poor credit rating and the turbulent economic situation, we were able to help find a funding package to give the hotel the cash boost it needed to continue.
Table of Contents
The coronavirus pandemic and subsequent lockdowns brought challenging times for the hospitality industry as a whole. Hotels, especially, faced unique problems as they were closed for months. In fact, research from PwC forecasts that the hotel industry is unlikely to reach pre-pandemic levels until at least Q4 2022.
What were the biggest challenges?
Our client owned a small hotel in the West of England. Like many businesses, it had been hit by the downturn.
He said: “Usually, we would have a steady summer season with business travellers making up most of the bookings the rest of the year. This year there was a lockdown, and holiday travellers were few and far between. Business travellers were not coming in at all.”
With a commercial mortgage to pay, along with their other overheads, the client had applied to his own bank for CBILS funding but found that they were not prepared to help. His own credit history was not good, and the lenders he spoke to were pessimistic about the outlook for the hotel sector.
It soon became apparent that his credit history would mean that most forms of lending would not be available to him, and those lenders who might be prepared to help would expect very high rates of interest.
Why we were able to help
We needed to find an alternative to the more traditional forms of finance. By talking to our client about his needs and specific challenges, we were able to determine the best types of hotel finance available to him that he may not have even previously considered.
Merchant Cash Advance was a clear winner for this client as it allows him to repay the money as money came into the business, rather than a fixed amount direct from the bank each month. With Merchant Cash Advance, the finance is repaid via a small percentage of the hotel’s debit and credit card takings.
With the increased use of card payments, there are now many lenders providing Merchant Cash Advance funding in the UK. Their fees and the percentages they take to fund repayment will differ so getting the agreement that is right for your business is essential to keep your costs down.
We found a finance provider who understood the hospitality sector and could offer an attractive fee structure to our client. We helped him make the necessary arrangements - which brought his business the funds it so vitally needed in a matter of days.
What is a Merchant Cash Advance?
Fixed monthly repayments are inevitable with a traditional loan. However, a Merchant Cash Advance - or MCA - presents no such problem.
This is ideal for businesses that receive a high proportion of their takings from card payments and provide funds without the need to make regular repayments - or indeed direct repayments of any kind.
With an MCA, the provider works with the card payment processing company and may offer a cash advance equal to your monthly card takings. They will then take a percentage of every card transaction made to the business until the cash advance and their fees are paid off.
The advance is paid back automatically as customers make card payments - making them particularly suitable for hoteliers and others who now take the majority of their payments from cards.
Instead of further hindering cash flow with a fixed repayment, the MCA will keep pace with the level of business that you do. It means your customers repay your cash advance for you - and the more business you do, the faster the advance is paid off.
The lender will look at takings in a typical month and may base the sum that may be advanced on that level of income. In the case of our client, this was close to £20,000.
This made it simple to provide an advance of £20,000 and meant that, despite his poor credit record, he could have a reserve to call on while cash flow was causing problems.
He added: “People have started heading back to work - you only have to look at the roads to see the proof of that. Things are still slow, and people are working from home if they can, and that means they are still not buying sandwiches at lunchtime in the numbers that they used to.
We are still watching the costs as a result - but thankfully, with our MCA, it does not matter. There is no monthly payment for me to make - my customers are doing that for me.”
Rangewell finds the financial solutions that your business needs
No matter what challenges your business has faced over the last 12 months, our funding experts will be able to discuss your options and work out the most cost-effective ways to provide the funding you want.
At Rangewell, we are independent, and we know the entire lending market. That means we can put your interests first - and if you have not been successful because of your bank’s lending policies, we will work to find one that works for you.
We can help you arrange all types of business funding, including Merchant Cash Advance. Get in touch if you are facing a funding challenge - we can help you find the answers.