Revolving Credit Facility for a Music Festival Owner with a Seasonal Revenue Structure

• Borrower: Newly acquired seasonal business
• Facility: £1.5 million revolving credit facility secured against directors’ properties
• Purpose: Support an aggressive growth strategy as part of a wider buy-and-build project
• Terms: 1.5% interest on utilised funds with no non-utilisation fee

Enness was approached by a business director operating within the music festival industry. The client had acquired three music festivals at a favourable price following the financial pressures experienced by the businesses during the COVID-19 period. The acquisitions formed part of a wider buy-and-build strategy, with the objective of developing the businesses and achieving substantial growth before a potential exit over the following decade.

The client initially approached Enness looking for a traditional term-debt solution. However, following a detailed review of the businesses and their requirements, it became clear that term debt was unlikely to provide the flexibility needed. The acquired businesses had limited historical cash flow and repayment capacity due to their distressed background, while the seasonal nature of the music festival industry meant revenue could fluctuate significantly throughout the year and expenditure could increase substantially ahead of each festival season.

Rather than structuring the finance solely around the businesses’ historic cash flow, Enness reviewed the client’s wider financial position and identified substantial equity across three properties. These included the client’s primary residence, a buy-to-let investment property and a commercial property associated with another business.

Using the strength of these underlying assets, Enness was able to structure a bespoke facility that better reflected the client’s growth plans and the seasonal nature of the business. We secured a £1.5 million revolving credit facility, secured by second charges against each of the client’s three properties.

The revolving structure provided significantly more flexibility than a conventional term loan. Interest was charged only on funds that were actually utilised, meaning the client was not paying interest on capital that was sitting unused during quieter periods. There was also no non-utilisation fee, allowing the client to maintain access to the full £1.5 million facility without incurring a cost simply for keeping the facility available.

The facility also allowed the business to draw funds when required, repay capital when cash flow permitted and subsequently draw again as the next festival season approached. This meant the financing could adapt to the company’s trading cycle rather than imposing a fixed repayment schedule regardless of seasonal revenue.

By securing the facility against the client’s property holdings rather than relying solely on the newly acquired businesses’ historic cash flow, Enness was able to provide the liquidity required to support the wider buy-and-build strategy. The structure also allowed the business to preserve its cash flow and remain agile when new opportunities arose.

This case demonstrates how a revolving credit facility can provide a more flexible funding solution for seasonal businesses where revenue and expenditure fluctuate throughout the year. By considering the borrower’s wider assets and objectives, rather than relying solely on historic business performance, Enness can explore bespoke corporate finance solutions for complex growth strategies.

Risk Warning:
A revolving credit facility secured against property carries risks. If the borrower fails to meet the terms of the facility, the lender may take enforcement action against the properties provided as security. Businesses should ensure that borrowing remains affordable and supported by realistic cash flow forecasts, particularly where revenues are seasonal or subject to significant fluctuations.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal or tax advice. Finance is subject to status, underwriting, asset assessment and lender criteria. Terms and availability will vary depending on individual circumstances and the proposed transaction.