How To Finance Your Refurbishment / Equipment…

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When opening your first premises, or adding a new one to your portfolio, you are inevitably going to be faced with large upfront costs. These will no doubt include large rent deposits, sometime up to 12 months if you are leasing your premises, Staffing, Stock & Consumables; Marketing, Strip-out, Refurbishment and Equipment costs. How are all these costs going to be paid for?

What are my funding options?

If you are in a fortunate enough position and can afford to, you might be using your own funds, but do you really want to part with all your cash in a high-risk sector?  You could always look for investment, but that will dilute your Shareholding in the company and also mean you have to pay dividends out of your profits and have a board of shareholders to answer to, who may also want to be consulted before any decisions are made.  You could also ask your bank but many businesses are finding out that the High Street Banks are not supporting SME’s or Start-up companies at the moment. You can spend weeks, if not months, trying to get them on board only to be denied after all that time and effort. 

There is another option that will allow you to keep your own funds and keep your Shareholding in the business, and that’s to use Asset Finance and/or an Unsecured Loan. In the same way that you buy a car on finance, usually a Hire Purchase or some form of Lease, you can use one of more lenders to fund the entire refurbishment and all of the equipment you need to set up your business. You can take a Hire Purchase, Lease or Loan over anything up to 5 years and make monthly or quarterly payments, and spread the costs out. 

Using a Broker

The best way to save time and money is to use a specialist broker who should have access to a wide panel of alternative lenders in the finance industry.  Their job is to go and Source the funds you need whilst you dedicate your time to running your business. 

Many of these lenders only deal with brokers so you won’t be able to work with them direct even if you do eventually find out who they are. There are banks, leasing companies and private investors who have funds ready to lend.   The broker will tell you exactly what information you need to provide, and get you a decision in around 48 hours. In the majority of cases, you won’t have to pay the broker anything as they take their fees from the lenders they use. 

Approval Terms

The terms of approval can vary depending on the current situation of your business. If you are a Start-up business, you will most likely need to provide a Director’s Guarantee or Cross Company Guarantee (if you have other businesses) to support the lend. 

If you are an established business, the underwriters will be looking at the trends in your Annual Turnover, Profit after tax, and Net Worth. Ideally they will want to see growth, but if you’ve had a year of losses for whatever reason, then it may still be OK.

What Costs Can be Included?

In short, everything. This means the strip out costs, any labour costs, flooring, air conditioning, kitchen equipment, furniture, EPOS & Software, Signage, Walk-in Freezers, Dishwashers, CCTV, even all the fixtures & fittings like Lighting and Ironmongery. If it’s on your supplier’s quote, it can be financed.

What are some of the Pros and Cons of using this kind of finance?

The cons:

- You will be tied into a fixed term agreement, although you can settle early if you want to. 
- You will be paying interest on top of the cost of the goods.
- You may have to give a Personal Guarantee (NOT secured on your house) – if the business fails you will be liable for the outstanding finance. This is mainly for start-up companies.

The pro’s:
- You can buy more equipment on day 1
- You spread the cost of the equipment over its working life
- You don’t need to dilute your shareholding
- You keep hold of your cash for everyday expenses and general cash-flow or further investment and other costs
- You get a Return on your Investment (ROI) much quicker as you’re paying smaller monthly instalments
- The goods / equipment depreciates quickly so you’re not risking yours / your investor’s cash – you’re using a lenders money instead.

For more information on financing your refurbishment, equipment, call:

Billy Walker
07956 045421
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