Latest / Outdoor Hospitality Podcast: Glamping, STR, Resorts, Unique Stays, RV Parks, RV Resorts & Campgrounds / How to Get Financing for Your Glamping Business

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How to Get Financing for Your Glamping Business · Outdoor Hospitality Podcast: Glamping, STR, Resorts, Unique Stays, RV Parks, RV Resorts & Campgrounds

• 0:00
  Ken Riley: And I will say to people that, realistically, if you can get borrowing from your bank, that will be your cheapest option. The business plan, the financial model is the bit that really swings it for a lender because they are financial institutions, they understand a financial document. The people that sit in these offices and decide whether they're going to lend or not lend, they're risk managers. The more comfy and cosy we can make them feel about lending to the client, the better rate that client is going to get. And with a lot of glamping, a lot of it is about the feel as much as it is about the financial information.
• 1:04
  Nick Purslow: Hello, and welcome to the Glampitect podcast. Today I'm joined by Ken Riley of GTF Event Equipment Finance. GTF are specialists in providing financing solutions to the glamping industry, allowing prospective site owners the extra help they need to get their glamping dream off the ground. Financing is something that Glampitect are placing more of a focus on of late as it can be a major stumbling block to a lot of people. That's why we're recording the podcast with Ken, as well as running financing webinars and sessions on the Glampitect Academy to help people learn more about this area. We've also got a blog series planned on the topic, so keep an eye on that. This episode is aimed at providing an introduction into what the financing options are for prospective site owners, as well as considerations they need to bear in mind when applying for financing. As ever, I hope you enjoy and find value in today's episode.
• 1:50
  Nick Purslow: Hi Ken, how you doing?
• 1:52
  Ken Riley: Fine thank you.
• 1:53
  Nick Purslow: Thank you for coming on. So you're a partner at GTF event equipment finance.
• 1:55
  Nick Purslow: You arrange financing for people in the leisure industry and the glamping industry specifically.
• 2:06
  Nick Purslow: Just before we get into the types of financing available for prospective governments owners, could you give us a run through of your background and how you came to be at GTF?
• 2:17
  Ken Riley: Well, myself and my business partner, Neil, we specialise in providing finance for the glamping industry. In in reality we've been providing it before it was even called glamping. Our initial specialty was providing finance for the sort of the marquee hirers.
• 2:36
  Ken Riley: Marquee manufacturers then became manufacturers of sort of Safari tents. And so then we started financing Safari tents for farmers in fields, etc 20 years ago before the term glamping was even invented.
• 2:55
  Ken Riley: Obviously, that marketplace has expanded dramatically. We've financed you know, we were in the early days financing purely Safari tents. Latterly we hardly supply any finance for tented structures anymore. They've all moved over to being wooden structures because of the advantages of being able to rent them for 365 days a year. And that's where the edges begin to blur a little bit. In that we do glamping equipment for anything from about 10,000 pounds worth up to a couple 100,000 pounds for a treehouse, for example.
• 3:40
  Ken Riley: And that's again glamping has, the whole marketplace has changed dramatically over the last five years. It used to be quite small sites, 6, 12 glamping units, slightly unique out in the wild, tend to be lifestyle businesses. But the whole glamping industry has started to blur a little bit into the general leisure industry. So we now find that we're actually being asked to finance things that might be on what we would have called traditionally called a leisure park site. And that so that's why our range has gone now from being 10,000 pounds up to being in excess of 200 and then multiples thereof. So for that we have alliances with seven different lenders and a few ancillary ones around the edges.
• 4:32
  Ken Riley: And that enables us to match the individual requirements of a particular claim. Whether it be somebody wanting to start a brand new, a new start business wanting a couple of pods, right the way up to a leisure park who are financing a number of units, you know, 30 units. We're just doing one of the 30 units and anywhere in between so we've got that whole range covered.
• 5:01
  Nick Purslow: Okay. And obviously it does sound like there is a big range there.
• 5:03
  Nick Purslow: Let's say you someone approaches you, I'd say, you know, fairly typical client of ours may may come to us and say they want to set up a standard six pod glamping site. Your typical client, are they genuinely, you know, do they generally want the majority of their project financed? Or is it a case of just a little bit help to tip them over.
• 5:26
  Ken Riley: It's horses for courses, really, we get everything from sort of a new start business, never been involved in the glamping industry recently purchased some land, getting up to the planning permission stage, wanting to put a couple of pods on the land just as a sort of an experiment to see if it's, if it's if it's a viable proposition for them, their area, etc. Right, the way up to sort of existing glamping sites adding, you know, they've already got six, they want to add another three or four to their glamping site, particularly, you know, 21-22 is going to be a very, very buoyant year with everybody not being able to go abroad. So we've got a lot of sites coming along that are expanding their their offer because they know that the market is going to be there. So if the typical site, new start, is probably four to six units, people tend to be going for. But you know, some new start sites go straight in with with 12.
• 6:34
  Nick Purslow: Yeah, and let's get into it to the meat of it, then I suppose. What are the main sources of financing that are available for someone who comes along and wants help with their with their glamping site in terms of financing?
• 6:48
  Ken Riley: Well, I will say to people that, you know, realistically, if you can get borrowing from your bank, that will be your cheapest option.
• 6:57
  Ken Riley: And let me just explain that, I mean, we do asset finance, predominantly we do hire purchase and finance lease, but let me just sort of go through the bank bit of it first. The bank will be able to offer you probably the lowest interest rate because they will take a charge over your land, etc. So they've got plenty of security.
• 7:22
  Ken Riley: They don't particularly get glamping, as a general rule. And banks are really quite good for the working capital elements of starting a new site. Things like groundworks. And just general working capital, where we come in, we tend to do predominantly hire purchase and financial ease, and a little bit of commercial loan.
• 7:48
  Ken Riley: In those instances, let's just take finance lease, for example, that a lender would lend on the actual structures. So they are not taking any charges over land or any kind of property. Their primary security is the actual assets. Obviously, that will then be backed up with a director's guarantee or a personal guarantee, because obviously, they they will sort of fall back before position.
• 8:15
  Ken Riley: And that's the same realistically, whether it's hire purchase, finance, lease, or loan. So they have a lot less security than the bank because they aren't taking the charge.
• 8:28
  Ken Riley: Which is why I would say go to the go to your bank first. Make sure if you can't get it from them because they don't understand then hire purchase or finance lease is your is your way forward.
• 8:42
  Ken Riley: Now, if we just talk about the differentials between them because people sometimes get a little bit confused. What's the difference between a hire purchase and finance lease? It's effectively the way in which the taxation works. A finance lease is effectively a hire agreement as far as HMRC are concerned. So you can fully expense any payments you make to the finance company, because it's technically a hire. Within a purchase agreement, basically, that asset goes on your own balance sheet. And then you, the payments you make to the finance company, part of it is made up with the loan repayment, and part of it is the interest. Now you can expense the interest but you can't expense the repayment of the loan. What you do there is you then claim depreciation or capital allowances against that. But that generally means that it takes quite a long time to depreciate your asset.
• 9:49
  Ken Riley: Whereas with finance lease, if you take it over five years, effectively, it's depreciated over five years.
• 9:59
  Ken Riley: Now, different people will have will have a different reason for going hire purchase or lease.
• 10:04
  Ken Riley: Limited companies tend to go down the lease route.
• 10:12
  Ken Riley: Individuals who are not VAT registered very often go down the hire purchase route. Because with hire purchase, you're paying all of the VAT upfront.
• 10:27
  Ken Riley: Now with a lot of these structures, they qualify for 5% VAT. So why would you stop? If you're not VAT registered, you can't claim it back, you wouldn't go for a lease. And we try to advise our clients as they go through that, just by asking the simple questions, what sort of what sort of business are you going to be?
• 10:44
  Ken Riley: That then tells us what sort of finance would best suit.
• 10:49
  Nick Purslow: So it sounds like it's important to speak to an expert before jumping straight into a lease or a hire purchase.
• 10:55
  Nick Purslow: Make sure you get to an expert so they can tailor it to you.
• 10:59
  Ken Riley: Yeah, we would give them we would give them general advice. Obviously, we can't give them specific advice about their situation because we always recommend they talk to an accountant at that point in time. Because we don't know that other parts of their financial situation. We know what wouldn't necessarily be the best solution, but we don't know what else is within the background.
• 11:25
  Nick Purslow: Okay, so it doesn't sound like there's a one-size-fits-all approach, really, because I was going to ask you, what would you say is generally the sort of cheapest, best option for a prospective site owner. But really, it completely depends on your personal situation.
• 11:41
  Ken Riley: Yeah, right. Okay, what's the cheapest, best way of doing it, if you can get it from the bank that would be the best course. Most can't, and then that's why you come to a specialist like us. It's about, I'd say we have seven different lenders. But these lenders have preferences for particular types of business. It's our responsibility to match up the client's requirements with the best lender, the one that's going to give them the best rate.
• 12:08
  Ken Riley: And let's just sort of cut to that, how do you get the best rate from a from a lender? Now, it's fairly simplistic. If you think about it, these people are risk managers. They take a proposal from us for the client.
• 12:23
  Ken Riley: And what they do is they assess how likely the business is going to be, how confident they feel that their proposal that that business is going to be successful. If they're a little bit nervous about it, well, they'll increase the interest rate. So the best way to get a to get a good rate from a lender is to have a proposal that presents them in the best light.
• 12:49
  Ken Riley: Without blowing our trumpet, that's our job, we're very good at that. We take a proposal from a client, and we help them build that into what we know the length that particular lender is going to be looking for. And it's all about, you know, the major things if you want to have a successful proposal, there are a number of things you're going to want. Obviously, number one is going to be the person you know, they will be credit checked. They have to be for money laundering purposes, they have to be proven that they are who they say they are. That's an obvious first one. So the first bit through a successful lender is the individual, are they a lendable individual?
• 13:40
  Ken Riley: The second one is the type of equipment. Now, there are lots and lots of different glamping manufacturers. But if you think about it, the lender is lending against that specific type of equipment. And so that's their major form of security. So they like equipment that comes from reputable manufacturers, because they know that it's good quality equipment, if they did have to come to sell it, they've got a good residual value. They're less likely to give you a good rate if you're getting your glamping unit from somebody who's never made one before for instance, that they would see as a risk which could put the rate up. Wouldn't mean that they wouldn't finance it, but they might increase the rate.
• 14:23
  Ken Riley: And then the third thing is realistically, the plan.
• 14:27
  Ken Riley: Everybody who presents to a lender has to have a plan. Now, when I say business plan to people, people get a bit edgy about this, they start thinking of you know, 50-60 war pages war and peace. That's not what it's about. It's really quite a simplistic document, might only be eight or 10 pages long. But it basically in that document, you're communicating to the lender that you've thought about your site, you know the type of people that are coming. You've done some rudimentary research around your area to know that your the rates you're going to be charging are realistic, that you haven't got too much competition in the area, all those sorts of people actually want to visit the area where you're starting your glamping site. Again, that's pretty rudimentary, it's only a couple of pages of text.
• 15:19
  Ken Riley: And then they will want to see a financial projection. Now for new starts, that's obviously quite a difficult thing for them to do. When it breaks down quite nicely if you, the one that people fall down on most is justifying their sales, because everybody can know, oh this is what the finance costs, this is what we think it, you know 25 pound a night to claim them.
• 15:42
  Ken Riley: Yeah, it's very easy to calculate those figures. The one that that people sometimes fall down on, most commonly fall down on, is proving what their occupancy rates are going to be, picking a realistic occupancy rate. Lenders are used to seeing these plans, and they used to seeing sort of occupancy rates proposed in the very late 40s, to the sort of mid to late 50s.
• 16:10
  Ken Riley: If you start putting in a proposal that says you will have 80% occupancy throughout the year, they're not going to discount that plan, but they will automatically discount back the the the occupancy rate to what they believe is a is a reasonable level. Now, we all know that in actual fact, at the moment, occupancy rates are far higher than than the 50s. But, you know, we're talking about lenders, they are cautious people. So they will always discount that back. So we all we always advise, yes, you might be able to do 60-70% occupancy, but tell the lender that you're going to do 55, he'll be happy with that, if it proves affordability, which is all this is trying to prove. A lender wants to see a plan, where you're making lots of money, because if you're making lots of money, then you can afford to pay the finance. It is realistically as simplistic as that.
• 17:10
  Nick Purslow: Well, one thing that we do in our feasibility studies is we do like a conservative standard and optimistic estimate for occupancy rates, and then you can track you know, the ROI based on those. So I think maybe that's a good idea to just maybe do a few different projections to see, you know, how things could pan out?
• 17:30
  Ken Riley: You say you do the feasibility studies. Again, that's a very, very powerful document to a lender. You know, we've seen many of your feasibility studies, obviously, but that is quite a powerful document, because that says that's an independent person saying what they believe the occupancy will or should or could be. Whereas if you're inventing your own figure that has less credibility. So that's quite a powerful document.
• 18:01
  Nick Purslow: Yeah. And out of interest, just going back a little bit, you said that banks don't tend to get glamping, they don't tend to, you know, back prospective site owners. Why do you think banks don't understand it and don't really get involved, whereas the lenders that you're working with do.
• 18:19
  Ken Riley: Well, simply that we have specialist lenders who like to lend into the the glamping market space, they understand that market space. In fact, one of our lenders even has a specialist underwriter for the glamping market. Whereas, when you think about bank, you're approaching a bank or bank manager who's lending on all sorts of projects. They don't necessarily understand glamping.
• 18:47
  Ken Riley: And they then get a bit nervous about it. And so if it's something lending outside of their normal remit, they tend to err on the side of No, rather than the side of Yes. I mean, some, you know, you will, you'll come across some fund managers who've been on a glamping site, you know, they've read in the newspaper that the glamping has been very successful, you're likely to be able to get a bank loan from that particular bank.
• 19:20
  Ken Riley: Also, not to put too fine a point on it, most entrants into the glamping space are by their very nature new projects, or sort of fairly new projects, because the whole glamping industry is relatively new. And banks tend to like a business has been around for a number of years. It's got a good track record before they'll let the old adage of the bank will only lend you an umbrella if it's not raining.
• 19:57
  Nick Purslow: So on the subject of the actual application, you've run through what's actually required, what would you say is the actual most important part of that application? And what what do people need to focus on in particular?
• 20:10
  Ken Riley: The focus is really on the business plan. That's what really, if you think about it, that's the proving who you are, getting a reputable equipment, the business plan, the financial model is the bit that really swings it for a lender, because you know that they are fine their financial institutions, they understand financial documents, and it's all about affordability. You know, if you've got a plan that doesn't create enough money to really service it, and you have a profit out of it as well, no matter how much security you can offer to the bank, you might have a million pounds of securit, there will be no point in doing it. Because the the plan says the debt can't be serviced very easily. So it's all about having that good financial model.
• 21:02
  Nick Purslow: I'm glad you said that, because we've literally just started offering business plans. So if anyone's listening and they need one doing, just give us a call.
• 21:11
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• 21:12
  Ken Riley: We very often go back to our clients and help them refine their their financial model, because we've got a lot of experience, it's the first one they've done. We see hundreds a year, and we see the ones that get accepted by the banks and the lenders and the ones that don't. It's worth running it past us because we can very quickly help you refine what needs to change.
• 21:46
  Nick Purslow: Yeah, okay, and the last question is if you could give one tip to a prospective glamping site owner who's looking at getting financing for their business, what would that be?
• 21:58
  Ken Riley: Well, it's not particularly about finance, the tip I would give is that people really need to think about what they're offering for their glamping site. Because there's no two ways about it, there are more and more entrants into the glamping market. At some point in time, there will become saturation. And if you think about your own glamping site, you're then going to have to compete against other glamping sites. And so it's what's unique about your site, and why people will come to your site in the future. I mean, that's, that's more important as a as a tip to somebody coming to the glamping market. And if you've got that right, then getting finance for that business will be much easier because you actually got something unique. You can demonstrate that to the lender.
• 22:58
  Ken Riley: You know when you come back and the lender says, Well, why are you going to have occupancy of 58%? They've already read in the plan. But actually, it's an it's an area of outstanding natural beauty, you're catering for this particular client base. They can understand that. So it's all about having a thought out process.
• 23:20
  Nick Purslow: Yeah, we always go on about the importance of a unique selling point, or at least one unique selling point, you could have multiple, because as you say, there will be a point where we reach saturation, and then it will be, you know, it will be like any other business where you've got to stand out from the competition or otherwise you'll die, really.
• 23:37
  Nick Purslow: It sounds, you know, sounds dramatic, but you will. You've got to stand out from the competition, whether that's the local competition or wider areas. And that can be done in all sorts of ways. Obviously, for a financing application, you want to be able to show it immediately. So you know, it might be unusual accommodation or something like that. It can also be once you're up and running, it can be your marketing, your branding that can be superior to your competition. But yeah, it's a common theme you've got you've got to be able to stand out.
• 24:05
  Nick Purslow: Otherwise, you are going to struggle as the market gets saturated later down the line.
• 24:11
  Ken Riley: And when you demonstrate that to a lender, that automatically starts them off in a confident vein. And as I said before, you know, the people that sit in these offices and decide whether they're going to lend or not lend, they're risk managers, the more comfy and cosy we can make them feel about lending to the client, the better rate that client is going to get. And it's it's all about with a lot of glamping it's it's more in a lot of it is about the field as much as it is about the financial information.
• 24:49
  Nick Purslow: Yeah, that's interesting actually. Going into this I didn't quite understand that really because I thought it was a bit of a binary thing where you either got financing or you didnd't, and there was a sort of just a line in the sand where where people change their minds. But it sounds like this, as you said there, the stronger the plan is and the stronger the feel that the risk manager as you put it has for the project then the better deal they'll get. So it's a sliding scale.
• 25:17
  Nick Purslow: It's not just yes or no.
• 25:19
  Ken Riley: And also it does vary, you get to know when he goes to a particular underwriter, you get to know what their particular foible is.
• 25:27
  Ken Riley: So you when you know which underwriter it's going to go in front of you, would you try and cater to their little individual idiosyncrasies.
• 25:40
  Nick Purslow: Yeah, very good.
• 25:40
  Nick Purslow: Okay. Well, thank you for giving up your time, Ken, really appreciate it. If anyone wants to get in touch with you and ask about financing and glamping, how can they do that?
• 25:50
  Ken Riley: Right, okay. Well, they can just basically call me on my mobile, which is probably the easiest one, which is 07792247248 or send me an email at ken@gtf-eef.co.uk. But I can't stress to people, you know, pick up the phone, give me a call even before you get to the, to the to the nitty gritty, because very often, just a five minute conversation, you can help people be guided in the right direction before they make a mistake. You know, they come back to me and go I'm thinking about doing the financing this way. Actually, can I tell you that won't work. So they've invested a lot of time and energy into something that wouldn't work from a financial sense.
• 26:41
  Nick Purslow: Okay, so we'll put your contact details in the description as well. And people need to keep an eye out for you because I believe you're coming on our Academy, arent' you, and doing a presentation?
• 26:52
  Ken Riley: Yeah, well, that's what they tell me. I haven't got a date yet, but I'm registered for it.
• 26:59
  Nick Purslow: Okay, well, so yeah, if anyone's interested in joining the Academy, the details are on the website. And again, we'll put the link in the description, but we'll do some sessions on finance and stuff like that, so you can hear from Ken there. Okay, yeah. Well, thank you for coming on, Ken. I really appreciate it.
• 27:14
  Ken Riley: Thank you for inviting me.
• 27:15
  Nick Purslow: I'll see you soon.
• 27:18
  Nick Purslow: Thank you for listening to another episode of the Glampitect podcast. I hope you enjoyed and that you found value in today's episode. If you did, feel free to leave a rating or review on Apple podcasts because it really helps us move up the podcast rankings. Thank you.