Finance: bond scheme aims to release cash
An innovative scheme has been launched that avoids the usual need for individual publicans and pub operating companies to produce a quarter of a pub's annual rent upfront as a fidelity bond.
By significantly reducing start-up costs, the aim is to release cash back into a business and to lower the barriers to entry for potential lessees.
Developed jointly by Belmonte Insurance and hospitality EPoS supplier MTech Logic, the MTech Bond allows lessees to deposit just 20 per cent of the original landlord's bond. This is then held in a traditional escrow account and supplemented by an annual insurance premium of 10 per cent of the bond value, payable for the duration of the tenancy. The premium can be paid either yearly or monthly, helping the pub to manage its cashflow.
In return, to minimise the risk of default and to help improve business performance, pub operators who choose the MTech Bond are required to install MTech Logic's hospitality software which provides up-to-the-minute revenue, sales and operating cost data.
The firms behind the scheme claim not only that lessees can free up working capital and improve cashflow, but that publicans can benefit through lower administration costs and reduced risk to the pub business.
"Interest in the MTech Bond from the trade has been exceptional," says Richard Arnison, managing director of Belmonte Insurance. "We've already signed one of the UK's largest operators to roll out the MTech Bond within its estate.
"It will reduce start-up costs, improve cashflow, lower the risk of business failure and attract entrepreneurial individuals to the trade."
MTech managing director Leslie Marshall came up with the idea when he had to find bond cash for his own estate of leased houses, the Independent Managed Pubs group.
"To be successful in today's competitive climate, publicans need to spend more time and money developing their business and spend less time and money on administrative tasks that add little or no value to the customer experience," he says.
"By linking the reduction in start-up costs to operational improvements using MTech logic's software we are providing the necessary tools to build a successful business."
www.mtechlogic.com
