Golf clubs are being bombarded with reasons to address and improve ageing, inefficient irrigation systems – but how are they going to afford such projects?
Golf Finance are the GCMA’s specialised Asset Finance partner
Golf is witnessing a changing landscape. Summers are getting hotter, seasons becoming less predictable, hosepipe bans more commonplace, long periods of drought are turning into the norm, and water regulations are tightening.
Our industry has a clear consensus of how critical the situation is, with several studies and organisations providing clear empirical data on the subject. One such example is Golf Course 2030, established by the R&A in 2018, which has produced some excellent information and data on how the circumstances are evolving and how they can be managed.
The consequences of the changing paradigm shines a bright light on the rationale for golf clubs maximising the efficiency and functionality of the central means by which to manage these changes – their course irrigating systems and water sourcing capabilities.
For all the evidence and understanding about WHY irrigation needs addressed, and WHAT is required to improve these systems, there is much less conversation about the HOW – how can golf clubs pay for such plans?
Depending on the level of work involved, these projects can cost anywhere from several thousand for basic repairs, to several million for larger overhauls and developments. For some clubs, the work might well represent one of their biggest ever investments and for the majority will be at least a significant outlay.
Undoubtedly, this will be a hot topic of discussion for management committees and directors’ boards up and down the country. Many will be fully aware of the direction they need to move, but to move forward and give the improvements the green light may prove to be an awkward conversation when the sums involved are so substantial.
While many clubs find themselves in a cash rich position compared to pre pandemic levels, very few will be able to expend the kind of outlay we are discussing here in one go. Even those with exceptional reserves would be prudent to think carefully about parting with the majority of their working capital one a single purchase, which could potentially leave the business vulnerable to unexpected cash flow issues.
For many clubs, a sensible approach is look at this the same way most large purchases are addressed – through financing.
The costs of all or a part of these projects (including sprinkler heads, control lines/valves, distribution systems, software, pump stations and water sources) can be financed either on a Hire Purchase or a Finance Lease agreement, and so split into monthly payments spread over a period of 5, 7 or even 10 years to suit the club’s specific cash flow needs.
Because these plans often fall into an Eco-Friendly category (given they have the potential to improve both water efficiency and efficacy), certain funders now offer similar rates to what are available for machinery and other hard asset purchases. This is excellent for an agreement involving an unsecured asset.
A key point to take note of here is that on a Finance lease agreement, the VAT payments can also be split over the same period, saving the club paying the full 20% of the cost up front. This is especially important when, for most clubs, little of the VAT can be reclaimed.
Through a prudent approach tailored to meet the specific requirements of each unique proposal, these plans can be affordable and sustainable in the long run, putting the business in a secure position of stability both on and off the course.
In considering how to move forward with their irrigation plans, Golf Clubs will take expert advice from suppliers, contractors, and installers, and this guidance and support is imperative in getting these projects right – the financial side should be no different.
For further advice and information, contact the team at Golf Finance at [email protected] or call 01620 890200.
*All finance subject to credit approval. Business users only. Golf Finance is an Appointed Representative of Rural finance Limited. Rural Finance Limited is authorised and regulated by the Financial Conduct Authority, FRN 630701. Rural Finance Limited is an authorised Credit Broker and not a lender. We offer financial facilities from a number of funders and a list is available upon request.
