Belmont Finance (UK) Ltd, a company that has been collecting and administering membership collections since 1994 for a large number of independent health and fitness clubs, has collapsed. Belmont collected membership subscription income for up to 180 UK health clubs and small gyms.
The Belmont Business
Acting as a licensed bacs collections bureau, Belmont’s services allowed typically small independent gyms the option of selling monthly memberships by direct debit. Members fees were collected by Belmont and then transferred each month back to the gym, less charges. Belmont was then responsible for the administration of the member’s account, leaving the club free to do what they do best. However, what happens when a membership collections bureau fails? Well, it seems in this case, that secured creditors (Belmont’s bankers) get repaid, while clubs and gyms do not. This means that some clubs may have lost up to two months of their entire membership income (less new sales, or those members paying other than by direct debit).
What could this mean for a small gym?
Let’s say that the Fit for Life (fictitious) club has 1,000 members and 80% pay by direct debit. The 800 members are on different monthly tariffs, but it averages £39 per month. This means the external bureau is collecting £31,200 per month, on behalf of Fit for Life. The clubs relies on this income to operate the business.
Members use of clubs is unaffected
Members paying by direct debit, belonging to affected clubs, will probably be unaffected. This is because these small independent clubs will put the interests of members first and allow them continued use of the club, even though the direct debit funds (paid by members) may not have reached the club.
The Harlands Group, which operates an external membership collections agency, has now acquired the on-going business activities of Belmont from Vantis PLC, the appointed administrators. Harlands is offering an emergency loan to affected clubs, but I am unclear on eligibility and repayment terms. I have spoken to one of the Harlands directors who is coming back to me with further details.
So how fit was the Belmont business?
I’ve had a quick look over the Belmont accounts for the year ending September 2008 (the last accounts filed with Companies House) and they don’t make for inspiring reading. The company posted a loss of £82,000 for the year and had accumulated net liabilities of £1.1 million. A note in the accounts says:
‘The directors believe that it remains appropriate to prepare the Financial Statements on a going concern basis due to continued support from creditors and future prospects’. The company’s collapse throws up some searching questions:
- Were these small health clubs aware their funds were being administered by a technically insolvent business?
- What auditing does the Bacs organisation undertake of organisations authorised to collect consumer funds via direct debit?
- Is there a more robust system (separate escrow account for example) that would better safeguard membership income due to clubs?
- What financial support can the industry now provide to help affected clubs?
If you have been affected by the demise of Belmont Finance, then please do leave a comment. I have tried contacting clubs using Belmont, but people are understandably focusing on working through contingency plans.
Tags: Business failure