As every business owner in the restaurant and hospitality industry knows, no two months in this sector are the same: revenues can fluctuate significantly from month to month and seasonal fluctuations are common.
Whether it’s a hotel, restaurant, bar, or events company, all of the hospitality sector faces similar challenges when it comes to keeping cash flowing. And recent economic pressures are now making trading conditions even more difficult for the hospitality sector.
Here, we’ll explore the challenges currently being faced by the hospitality sector, and how different types of business funding can help.
Financial challenges facing the hospitality industry
Energy bills are at the top of the list of every business’s concerns right now, and none more so than the hospitality sector. Keeping large premises lit and heated is no longer as simple as it used to be, and many hospitality businesses are currently concerned about how they’ll cope with a large hike in their bills.
Getting the right location for your hotel, restaurant, or events space is key. Hotels require premises with space enough to have enough rooms and special facilities to offer guests. Getting funding via the usual method of bank lending isn’t always an option when attempting to purchase premises, so getting a mortgage that suits your business can be tricky.
Businesses such as hotels and restaurants require expensive kitchen equipment such as industrial freezers, cookers, and dishwashers. And then there is front-of-house furniture for dining spaces and accommodation.
On top of this, many hotels now also offer gym or spa facilities which are expensive to buy and maintain.
Hospitality is renowned for being an industry that experiences seasonal fluctuations, with peak periods and down time. During off-peak periods, finances can be tight: bills, wages, and expenses still have to be paid, and without a funding solution in place, it can be difficult to keep up with repayments during low season.
The current skills shortage is a challenge that is impacting many sectors, but is certainly hitting the hospitality sector hard right now. There is a lack of workers on the market, especially when it comes to roles that require a specific skill set. Due to high demand, wages are rising, putting added financial pressure on hospitality businesses looking to hire.
How business finance can help the hospitality sector
Whilst it’s certainly not the easiest time to work in the hospitality sector, luckily there are methods of business funding which can help.
Many hospitality business owners use business finance to help ease their cash flow issues. Some funding solutions for the retail industry include:
Most businesses can benefit from investment at some stage: if you’re starting a new company or looking to grow your current business, a business loan can be a good solution to explore. Whilst it’s not always simple to secure a business loan from a bank, the UK’s ‘Alternative Finance’ industry is growing at a rapid pace, and business finance brokers can help to secure business loans ranging between £5,000 – £5m for hospitality businesses.
Merchant cash advance
Merchant cash advances are perfectly suited to the hospitality industry and are a great way to get short-term capital for your business. With every sale you make through your PDQ machine, you can repay your loan in small instalments which will not affect your cash flow, while you use the capital from your advance to fund business growth.
Asset finance is an ideal solution for the hospitality industry, as it helps you to acquire much-needed assets such as kitchen equipment, front of house furniture, or spa equipment even if you don’t have the cash to pay upfront.
Waiting until you’ve got enough cash upfront to purchase an asset can slow down your business growth, which is why asset finance can be so valuable: it allows you to obtain the assets you need for your business without having to wait.
How a finance broker can help with funding for the hospitality sector
If you’re unsure about the best type of funding for your hospitality business, a finance broker can help.
PMD works with over 150 lenders and can open up a number of flexible, independent and competitive funding lines to drive your business forward.
PMD takes the hard work out of securing business finance, liaising with funders on your behalf to ensure the best possible terms are secured, leaving you free to focus on running your business.
If you work in the restaurant and hospitality sector and are considering business finance options, get in touch today to see how PMD can help.