Owning a caravan park can be a dream opportunity for many—a chance to combine lifestyle and business in a rewarding way. Whether you envision creating a thriving holiday destination or providing a welcoming space for long-term tenants, buying into this industry is a significant decision. For first-time buyers, understanding the financial landscape and what it takes to secure a loan is an essential part of the journey. This guide will walk you through the key considerations and help you prepare for the process ahead.
Loan-to-Value Ratios (LVRs): How Much Can You Borrow?
Banks typically lend:
- 50% of the value for a Leasehold Caravan Park Business.
- Up to 70% of the value for a Freehold Going Concern Caravan Park.
The remaining percentage must come from your equity. Understanding these limits helps you assess your financial readiness for such an investment.
Key Factors Banks Consider
When evaluating your loan application, banks will focus on several critical aspects:
- Business Performance and Future Outlook
The bank will analyse the historical financial performance of the caravan park and its projected future cash flows. A strong, consistent revenue stream increases your chances of securing financing. - Your Experience and Plans
Banks want to know if you have the skills and expertise to manage a caravan park successfully. If you’re new to the industry, demonstrating a solid business plan and a commitment to learning can help. - Details of the Lease (if applicable)
For leasehold caravan parks, banks will review the length and conditions of the lease. A long-term lease with favourable terms is typically more appealing to lenders. - Additional Costs
Beyond the purchase price, banks expect you to account for other financial needs, such as working capital, stamp duty, and professional fees.
What You’ll Need for a Finance Application
To apply for a loan, you’ll need to provide comprehensive documentation, including:
- Contract of Sale (draft versions may suffice initially).
- Historical and Projected Financial Performance reports.
- Information Memorandum detailing the caravan park’s features.
- Copy of Lease (if applicable).
- Personal Assets and Liabilities Statement.
- Business Plan outlining your goals and strategies for the caravan park.
- Details of Your Experience in managing similar businesses.
- Valuation Report for the caravan park.
The Four Key Elements Banks Assess
When evaluating your loan application, banks will typically focus on these four areas:
- Security
The bank requires sufficient security to protect its investment in case the business fails. - Equity
Your contribution (30% for Freehold Going Concern or 50% for Leasehold) is crucial. - Cash Flow
Also called serviceability, this ensures the caravan park generates enough cash flow to cover loan repayments. - Management Capability
The bank must be confident in your ability to manage the park effectively, which includes ensuring the loan is repaid on time.
Partner with Rogerson Kenny Business Accountants
Navigating the process of buying a caravan park can be complex, especially if you’re new to the industry. At Rogerson Kenny Business Accountants, we specialise in helping aspiring caravan park owners like you make informed decisions, secure financing, and set your business up for success.
Our team has extensive experience in the caravan park industry, and we understand the unique challenges you’re likely to face. Whether you’re struggling to prepare a finance application, unsure about equity requirements, or need guidance on planning for operational costs, we’re here to help.
Take the first step toward realising your dream of owning a caravan park. Contact Rogerson Kenny today for expert advice and tailored solutions that will guide you every step of the way. Let us help you achieve financial clarity and long-term success in this rewarding industry.
