The Cumberland Building Society has revealed that its lending to the hospitality sector has tripled following a sharp rise in new loans.
Since the start of the financial year in April, it has approved 83 advances with value being up 205 percent on the same period last year.
Funding has been provided for a variety of requirements including the support of purchases and refinance for new customers, as well as additional funding for existing customers.
Grant Seaton, Senior Commercial Manager at the Cumberland, believes the Society is reaping the benefits of its relationship manager structure, introduced in October last year, which has been a big hit with business customers.
He said: “We’ve gone the opposite way from most of the banks, which have centralised a variety of operations removing the relationship model that many customers look for.
“All of our customers have the telephone number of their relationship manager, and the number of an associate, so they can get straight through to somebody who knows and understands their business.”
As word of the Cumberland’s approach spread, more and more hospitality businesses have enquired about refinancing existing loans with the society.
Recent refinancing deals include a £2.9m loan for a five-star aparthotel in Lancashire, £1.15m for a boutique hotel in Bath and £800,000 for a luxury lodge park in the Trossachs, Scotland.
The Cumberland, which is based in Carlisle, has long been a specialist lender to the hospitality sector not only in Cumbria but, increasingly, across the country.
Its customers operate hotels, guest houses and self-catering accommodation.
Most are owner-managed businesses and small, often family-run, chains.
It will lend up to £5m per property, up to 65 per cent of the trading value.
Grant said: “The size of our average loan advance has increased from £375,000 to £900,000 and that reflects the types of businesses coming to us.
“We’ve strengthened our team with some very experienced people and that’s enabled us to consider larger deals.
“We recruited two business development managers this year, Martin Rankin and Derek Smith, from Allied Irish Bank after AIB sold a proportion of its SME loan book. Derek looks after customers in Scotland while Martin covers England and Wales.”
The hospitality sector is facing tough times as businesses grapple with a looming recession, soaring energy bills and higher interest rates.
Grant said: “As a responsible lender, we scrutinise loan applications to ensure that the borrower can cope if they hit headwinds.
“If a business does get into difficulty, we pass them to a customer care team that can support them to get back on track or exit in the right way.”
He added: “There has been a little bit of a dip in purchases, particularly with lifestyle businesses where, for example, somebody is giving up a salaried position to go and buy a guest house.
“Those hospitality businesses attempting to trade just below the VAT threshold are getting squeezed and sometimes the business case doesn’t stack up.
“There are still deals to be done though. We recently agreed a £750,000 loan for the purchase of a guest house in the Lake District.
“Our message to hospitality businesses – whether they’re looking to fund a purchase or refinance an existing loan – is to come and talk to us.”
For more on the Cumberland’s commercial mortgages for hospitality businesses, check out the website: https://www.cumberland.co.uk/business