What are the funding options for hospitality businesses?

By Lucy Wayment on Small Business UK - Advice and Ideas for UK Small Businesses and SMEs

It feels like the hospitality sector has been in crisis for a while. And it’s not all down to the pandemic either: along with rising energy prices and the cost of living, hospitality businesses have rail strikes, cyber security risks and a Brexit-induced labour shortage to contend with. 

But even during the hard times, plenty of bars, hotels and restaurants manage to thrive. Whether you’re starting a hospitality business, in a position to expand or are looking for some extra financial support during a difficult period, here’s a list of the main funding options right now, so you can figure out what works best for your business. 

Help with energy bills

Like a lot of British households, a large number of businesses need help with their energy bills right now, and that includes firms in the hospitality sector. That’s why the government created the Energy Bill Relief Scheme (EBRS), which was rolled out in October 2022 to help businesses deal with rising energy costs, by offering a cost cap on gas and electricity unit rates. If you haven’t already taken advantage of the scheme, you can read all the details here. 

The government has been keen to stress that EBRS was put in place as a temporary measure, designed to be replaced by something else further down the line. In January 2023 the Treasury did just that, announcing the Energy Bills Discount Scheme (EBDS), which involves a discount on energy prices rather than a cost cap. So support is being scaled back to some extent, but the government says the change is partly because wholesale gas prices have fallen since the first scheme was announced.

As with EBRS, energy suppliers will automatically apply reductions to the bills of all eligible organisations as part of the new scheme, so you don’t need to apply to get your discount. Depending on when you’re reading this, it’s also worth noting that EBRS runs to the end of March 2023, with EBDS starting on 1 April 2023 and expected to last for a whole year. 

Grants, charities and local funding 

Many operators made use of hospitality business grants, the furlough scheme and business rates relief during the height of coronavirus restrictions, but all of these schemes have since been withdrawn. For those seeking out business grants for hospitality today, your best bet is probably a charity or your local council.

If your business is already working to be sustainable, or you’re ready to make your business more green, you might be eligible for an environmental grant. Glasgow City Council is currently offering Green Business Grants, where you can get up to £10,000 to finance projects designed to manage waste, reduce emissions and be more energy-efficient. The West of England Combined Authority has offered a similar scheme too, so it’s worth finding your local council’s website and seeing what’s out there, as new programmes are constantly emerging. 

Local foundations are also teaming up with brands to provide grants. Take Foundation for Future London and its Westfield East Bank Creative Futures Fund, a five-year scheme investing £10 million into a number of east London boroughs. The programme has already awarded millions of pounds to a wide range of businesses, including caterers and cookery schools. You can sign up here to find out when year 4 of the scheme is set to open. 

Organisations like Hospitality Action, the trade charity for the hospitality industry, offers grants too. But unlike council funding, Hospitality Action is more about supporting individuals who work or have worked in hospitality, whether they’re struggling due to illness, addiction, family problems, mental health issues, financial difficulty, or something else. 

Business loans and other lending products

There’s also the option of borrowing money from a bank or lender and paying it back over time. Hospitality business loans are generally for companies that are in a position to grow, but it all depends on your financial history and what you’re looking to achieve. Fortunately, these days there’s a wider variety of providers to choose from, including both high street banks and newer, alternative lenders like Kriya, Fleximize, Close Brothers and more, some of which may be able to provide funding more quickly than high street banks.

There’s lots of reasons why a hospitality business owner might take out a loan, from keg and cask rentals to spreading the cost of a big stock purchase. If you’re looking to invest in a new piece of kitchen equipment, for example, you might consider asset finance, where you can get something big without spending a lot of money up-front, through hiring it or paying the purchase off over time.

As a hospitality business owner, there’s a high chance you’ll turn to a lender when it comes to property too, whether it’s buying somewhere, refurbishing an old space or expanding your existing premises. Maybe you’ve come across the perfect location, but the property needs a lot of work until it’s fit for purpose; perhaps you’re just looking to expand. Either way, there are plenty of specialist lenders out there, who could help you open your next pub, convert an office into a hotel or turn a dilapidated building into a neighbourhood restaurant, as long as you’re creditworthy enough. 

Ultimately, there’s far less government support than there used to be, even though times are still tough for many hospitality firms. But there are still places where you can seek out external funding, from local councils to charities to traditional business loan providers.

Next steps

SmallBusiness.co.uk is working in partnership with Finpoint to help you find the best finance deals.

If you’re looking to make sense of your hospitality funding options, complete this quick application to access the UK’s largest panel of business lenders.

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