The Glastonbury Festival in 1970s showed us one of the finest examples of diversification. In current conditions should we still use this as a template for success?
The rural hospitality industry is suffering
There’s no denying that. British farmers have encountered peaks and troughs long before Covid 19 emerged – change and obstacles are nothing new to rural industry. Their resilience and open-ness to new business models has helped them survive through generations.
Agri-business diversification is not new and neither are diversification strategies.
Perhaps the ultimate example is Glastonbury Festival in Somerset. Let’s not forget – one of the most successful events in British music history began because of a farmer’s financial shortfall. “Glastonbury” – as we now know it – evolved from an obscure 1920s musical event to a 200,000-body festival crowd on Farmer Eavis’ land to cover his financial shortfall in 1970.
However, due to Coronavirus, Glastonbury was pulled near its 50th anniversary despite its almost invincible status, and won’t reappear in 2021 [A statement from Glastonbury Festival | Glastonbury Festival (glastonburyfestivals.co.uk)]. . While festival lovers may be disappointed, this pales in comparison to the shockwaves felt by the rural hospitality industry.
What’s My Diversification Strategy?
Many landed estate owners are now not only thinking out of the box, but also putting new ideas into action, considering options that might never have seen the light of day were it not for Covid-19. This includes exploiting one of the rural industry’s greatest assets – open space – since social distancing has become a key business parameter.
Refinancing to Guarantee A Return on Investment
Effective change does not happen overnight or without investment, and for many, this level of change can only succeed if it’s underpinned by finance solutions.
Landed borrowers, as well as commercial and residential clients, may be hesitant to approach lenders given the current economic climate. Banks are now stress-testing applications to a level unseen since 2008/9, and are understandably cautious.
However, from our recent experience, lenders still welcome an insightful business plan which has undergone prior scrutiny. There are clear cases of successful applications despite the pandemic – important factors include industry credibility, thorough due diligence, and compelling evidence.
Our relationships with established lenders can help people survive – and thrive. Here, we showcase two of our recent clients’ stories, reflecting on how diversifying their business was the best course of action they could have taken:
Starting a Farm from Scratch : Farming Mortgages
An entrepreneurial client – with no farming background – found the perfect 600 acre residential farm in the Cotswolds for a family lifestyle change. He diversified from digital media to sustainable energy and to leisure. The farm would retain its existing contract farming income.
We built a financial model to reflect this, with sensible assumptions and sensitivity analysis. Lenders knew us, trusted us, understood the sector, and were comfortable with the income means and profile.
The result: We secured a £4 million, 5 year, interest-only facility at 65% Loan to Value, which maximised the gearing and preserved the client’s cash for reinvestment into the property.
Instruction to completion duration: Under two months. The family moved in time to join their new school in September.
Small Business Loans and Faith in Start-Ups : Commercial Lending
A young, international, social media marketing client was referred to us by their accountant during lockdown in 2020. The impact of Covid-19 meant that many of their contracts – although with strong, global brands – were now on hold. Their existing lender had offered a CBILS loan, which would protect jobs, but it wouldn’t give them the growth funding they needed once recovery began. Their meteoric rise is in a new digital industry – traditional lenders have no historic trends on which to base decisions, and as a new company, they were still to make a profit.
Through our wider pool of trusted contacts, we approached more specialist lenders who were open to appraising and supporting an ambitious, young company’s credentials. A credit offer has now been made, and the loan which will secure jobs and growth is now in its final stages of approval.
Pivot Your Career In The Pandemic
A clearer roadmap is now emerging – the Chancellor’s Budget has been announced, lockdown end-dates have been proposed, and a Recovery Loan Scheme now replaces CBILS and BBLS. This year could bring new, unforeseen possibilities.
Increasingly, our wide referral network is approaching us with new clients who have the skillset to successfully diversify given the right support. Our lender contacts include smaller, non-traditional, specialist organisations, as well as the well-known high street banks. There are options to explore that you may not have considered yet. We welcome the opportunity to discuss them with you.