Revolving Credit Facility for a Music Festival Owner with a Seasonal Revenue Structure
8th August 2023
Key Facts:
- Borrower: Newly acquired, seasonal business
- Facility type: Revolving Credit secured against directors properties
- Reason for borrowing: Aggressive growth strategy as part of wider buy-and-build project
- Details: Revolving credit facility, 1.5% interest on utilised funds, no non-utalisation fee
- Revolving credit facility: £1,500,000
Enness recently engaged with a business director within the music festival industry. This client acquired three music festivals at a favourable price due to their distress during the COVID period. This strategic move was part of a broader buy-and-build approach, with a targeted goal of nurturing these acquisitions for robust growth before an envisioned exit within the upcoming decade.
Initially, the client sought our assistance in arranging a term-debt solution. However, our thorough assessment revealed several challenges associated with this route. Given the distressed nature of the purchased businesses, historical financial data showed limited cash flow and repayment capacity. Additionally, the inherent seasonality of the music festival domain introduced unpredictable revenue fluctuations and substantial expenditure spikes, rendering traditional term debt ill-suited to the situation. Recognising these intricacies, Enness swiftly pivoted toward a more sophisticated financial solution.
Upon exploration of the client's broader financial profile, we found substantial equity holdings across three different properties, the client's primary residence, a buy-to-let investment, and a commercial property connected to a separate business. Enness leveraged the client's strong asset position, rather than the business's limited cash flow, to secure a tailored debt facility which seamlessly supported the business's growth trajectory.
Enness secured a revolving credit facility of £1,500,000 for this client, without non-utilisation fees, secured via a second charge against each of the client's three properties. The immediate benefits of this facility were threefold: Interest payments would solely apply to the utilised funds, affording the business the agility to seize opportunities without being confined to a cumbersome capital and interest repayment structure during off-seasons. Similarly, the revolving nature of the facility would enable the business to draw down when appropriate, repay capital when convenient and enter into the next season with the full facility limit again. Finally, without non-utilisation fees, this facility would serve to truly support the business's growth trajectory without cost to the client when not in use.
By grounding this solution in the client's property holdings, the business retained its liberty to explore diverse financing avenues in the future. Simultaneously, it remained empowered to fuel its growth trajectory and adeptly respond to the dynamic shifts prevalent within the ever-evolving market landscape. If you own or advise a seasonal business such as this one, feel free to get in touch to explore if a revolving credit facility might be right for you.
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