Caravan park and campsite finance

Parks rarely rely on one income stream, and lenders weigh each differently:

• Annual pitch fees from owners of holiday homes and lodges sited on the park. Recurring and invoiced in advance, this is the income lenders value most.
• Holiday home sales. The park buys new or used caravans and lodges and sells them to owners, often with a part-exchange of an older unit. Profit can be large but varies sharply from year to year.
• Touring and tent pitches. Booked nightly, heavily weather-dependent and concentrated in school holidays.
• Park-owned letting units such as caravans, lodges, pods or bell tents let to guests.
• Ancillary income from a shop, bar, café, swimming pool or activities.

A park with a large base of owner pitch fees can usually support more borrowing than a touring site of the same size, because more of its income is contracted before the season starts.

Holding units for sale works much like a dealer's stock; motor trade finance explains how stocking facilities are structured.

Most sites need both planning permission and a site licence from the local council, which sets the number of units, spacing, fire precautions and facilities; GOV.UK explains the caravan site licence. Two conditions shape value more than any other: the permitted opening season and the holiday-occupancy restriction that stops owners living on the park as their main home. A twelve-month holiday season is worth more than a ten-month one, and lenders check that owners are not breaching occupancy conditions, since enforcement can disrupt the park.

Small sites run under an exemption certificate from a recognised camping organisation, and temporary campsites operating for a limited number of days a year under permitted development, have little to lend against on their own; lenders look to the farm or land behind them instead. Infrastructure is the hidden cost of expansion. Hook-ups and lodges need electrical capacity that may require an upgraded network connection, and many rural parks treat their own sewage, which brings the Environment Agency's general binding rules for small sewage discharges or an environmental permit into play.

The most common mistakes are forecasting year-round income on a seasonal licence and underestimating infrastructure costs for new pitches. Holiday home sales are tempting to count on, but they depend on consumer confidence and on buyers obtaining their own finance; a plan that only works with strong sales is fragile. The VAT treatment of holiday caravan sales and pitch fees has its own rules, set out in HMRC's Notice 701/20 on caravans and houseboats, and getting it wrong distorts margins.

Not every project needs debt. Equity from a partner, a joint venture with a lodge or glamping operator, or funding new pitches from the profit on unit sales can all reduce borrowing. Farmers adding pitches as a first venture should read our guide to farm diversification finance, and parks adding activities may find outdoor activity business finance useful.

Holiday park refinance means replacing a park's existing borrowing with a new facility, usually a commercial mortgage secured on the land and buildings. Owners typically refinance for one of five reasons:

• A term is ending or a bank facility is up for review and the existing lender's renewal terms are not competitive.
• Releasing equity to fund new pitches, lodges, facilities or infrastructure without selling part of the park.
• Consolidating several loans, stock lines and asset agreements into a structure that suits the seasons.
• Exiting a bridging loan used to buy at auction or before consents were varied.
• Ownership changes, such as buying out a partner or passing the park to the next generation.

What a refinance lender will revisit

A new lender starts afresh. It instructs its own specialist valuation, so the figure may differ from the one your current lender relied on, and it usually reviews the last two or three seasons of trading split by income stream. Growth in owner pitch fees since the last valuation, a longer permitted season or extra licensed units can all improve terms. Deferred infrastructure work, an ageing owner base or reliance on unit sales may reduce them.

Timing a refinance

Start well before any existing facility expires, because valuation and legal work on a park take time and closed-season accounts are easier for a lender to read once the latest season is reported. Check early repayment charges on the current loan and any stocking finance balances that need to be settled or carried across. Seasonal repayment profiles, which reduce payments in closed months, are worth asking for at this stage.