6 types of financial support for hospitality businesses

23 Jun 2021

As the UK’s hospitality sector emerges from the COVID-19 pandemic, the businesses hit hardest such as pubs, restaurants and hotels are likely to need financial support to help keep their doors open once more. Our blog explores the financial options available for hospitality businesses looking for cash flow support.

funding a hosiptality business

Why hospitality businesses need financial support to help them open again

When lockdown restrictions eased in May 2021, hospitality businesses in the UK such as cafes, restaurants and pubs were once again able to open their doors to the eager public. But, having been closed for months, many of the hospitality businesses need additional funding for working capital to help prepare them for custom again. 

Even when hospitality businesses were closed there were still costs associated with rent, utility bills and furlough for staff. With these essential outgoings, finance options need to be made available for businesses to keep going. From extra staff, stocking up on food and drink and of course, providing additional safety equipment to keep both customers and staff safe, opening up means having to use funding before any profits can be made.

Types of business finance available for hospitality businesses in the UK 

The days of having to rely on your high-street business bank for finance are long gone as more alternative lending becomes readily available to businesses in the UK. Alternative lenders have been funding businesses of all shapes and sizes for years, helping to boost cash flow in hospitality venues everywhere. As we continue to emerge from the last stage of lockdown in the UK, hospitality businesses who need some extra support can apply for funding facilities such as:

Unsecured loans

Unsecured loans are available for businesses that don’t own many assets, don’t want to offer security or need finance quickly. Without the need for valuations, unsecured loans are almost always quicker to get because the legal process is simpler. The upfront fee, if there is one, also tends to be lower.

Revolving credit facility

A revolving credit facility is a type of flexible finance that enables you to access funds for your hospitality business on a ‘tap in, tap out’ basis. You can withdraw money when you need it, use it to pay for something, repay it then withdraw it again at a later date. And with a revolving credit facility, you only need to pay interest when funds have been ‘tapped’ into.

Merchant cash advance

Unlike a traditional loan with fixed monthly repayments, a merchant cash advance means you only pay it back as a percentage of your future customer card transactions. It’s flexible to your sales intake too – meaning you owe less when you’re trading less and vice versa.

Asset Finance 

Asset finance lets you access the asset you need without having to pay for it upfront, and when it comes to replacing or renewing assets in the hospitality sector it’s often a more immediate need than having to wait for capital. Assets such as air conditioning units, catering equipment, more furniture or even CCTV are all essential assets for hospitality businesses but often come at a high cost. 

Business credit cards

A more traditional way to access finance quickly is with a business credit card. They can help you manage cash flow, spread costs, facilitate staff spending and keep track of short-term expenses. Whether it’s paying a supplier, redecorating, buying additional stock or boosting your working capital, a business credit card can be the lifeline your business needs. Depending on the credit card you choose, there’s also the added benefit of cash back or rewards.

Recovery Loan Scheme

The Recovery Loan Scheme (RLS), is the latest government funding scheme created to replace CBILS, CLBILS and BBLS. The RLS was launched earlier in 2021 and was designed to support eligible businesses to help them manage cash flow, investment and growth post-lockdown.

Depending on the lender’s assessment of your business and the requirements of the scheme, your business may be eligible for the following facilities: term loans, asset finance, invoice finance or overdraft finance.

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Thomas Boyd
Thomas Boyd

Head of Commercial

Thomas Boyd is the Head of Commercial at Funding Options. Thomas started his career in the finance sector at LendingCrowd. His work over the past five years has focused on supporting the vibrant and growing community of SMEs across the UK.

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