Many bowling centers are older and need updating to maximize their revenue and cash flow. Others may be looking to convert from a traditional bowling center into a family entertainment center through adding new venues such as laser tag, mini-golf, go-karts, or arcade games and expanding their bar/restaurant and upgrading bowling equipment. However, new equipment and building renovations are expensive and can be difficult to fund from cash flow alone.
Bowling is unique in that much of the equipment has a very long life. Therefore, using real estate financing with its lower rates and longer amortization can be an ideal way to raise the funds for new equipment as well as remodeling or expanding the building. Many lenders recommend matching financing to the type of collateral, so the borrower is not making payments on a long-term loan long after the equipment is worthless. However, bowling equipment has a very long life which makes real estate financing a viable option which may help a center generate the highest net cash flow after debt service.
Although these expenditures may improve the center’s cash flow and can easily be justified to the center owner, it may not be easy to convince a lender that a loan to finance these items is justified. A lender will need a comprehensive understanding of the individual center, it’s owner, and the bowling industry. Historic cash flow will need to be analyzed as will projections of future cash flow. Supporting assumptions to the projections will be needed and the assumptions will need to be justified with third party data. Ken has worked with dozens of center owners in similar situations. His involvement with the BPAA Benchmark Studies and his experience as an owner of two conversions of bowling based family entertainment centers from traditional bowling centers gives him a unique view of the bowling industry. His accounting and analytical experience helps to convert the owner’s plans to a written proposal that a lender is more likely to understand – and approve.