Commercial mortgages and loans for pubs

Funding solutions to help buy or refinance a pub are available whether you’re an experienced or would-be publican, an investor or developer. The challenge to getting pub finance is more about knowing which lender to approach and how. That’s where a specialist commercial mortgage broker can help, as Richard explains.

According to CAMRA there are around fifty thousand pubs across the UK and whilst some are trading more successfully than others, there never seems to be a shortage of people who approach us looking for a mortgage to buy or refinance these great British institutions. And you’ll be pleased to hear, we are often able to help!

Here is an overview of what to expect regardless of whether you are looking for a loan for a leasehold or freehold pub.

Experience

In this sector, if you are looking for a mortgage to buy and run a pub then experience is absolutely key. Most lenders will only fund experienced, established operators with a minimum of 2-3 years proven track record in the industry. This applies whether you are looking to run the pub yourself or put in managers to run the establishment. The ability to show you can adapt to changing working climates is important.

We have access to a wide range of both High Street and specialist lenders depending on the specific requirements of the transaction. If you currently run a pub or similar business then you may be lucky enough to have a dedicated point of contact within your bank but you will then be bound by the appetite and policies of that one bank which may not suit your circumstances. This is where we come in and with access to a wider market we can help source the right deal for you – even if it is with your current bank – at least you’ll know that you’ve considered all the options.

If you have never owned a pub before, some lenders will consider those with strong management skills and some form of pub work experience. Just being a regular punter doesn’t count!

If you need to fund the purchase of a pub that is no longer trading and you plan to refurbish or even redevelop it, then a bridging loan will most likely be your only option in the first instance. Whilst it is often easier to secure short term finance, the lender will want to fully understand your exit strategy and will most likely insist that you have development experience (either hands-on or via contractors).

 

Scrutinising the trading accounts

As you would expect, any lender will want to scrutinise thoroughly the pub’s trading accounts to ensure that the loan can be serviced. Whether purchasing a lease or a freehold you will need to provide the latest three years’ annual trading accounts. Lenders will then assess affordability based on the financials and typically lend up to four times adjusted net profits.

 

What sort of pub should you buy?

Freehold pubs: The purchase or refinance of an established, free of tie, successfully trading freehold pub in a desirable location is preferable to most lenders. 

Leasehold pubs: Lenders will consider these but, more often than not require, supporting, tangible security. In the absence of supporting security some banks may provide an Enterprise Finance Guarantee loan. Bear in mind as well that the loan term offered is unlikely to exceed the length of remaining lease.

If the pub is tied and trading successfully the brewery won’t be in any rush to sell the freehold and you will have little control if the brewery increases the cost of stock or rent etc.

 

Mortgage rates for pubs

Expect to receive:

  • Rates range from 2.7% - 4.5% above the Bank of England base rate.
  • Lender arrangement fees range from 0% - 2% of the loan amount.
  • Most lenders will look at a maximum term of 15 years capital and interest repayment with 20 years on an exceptional basis where the borrower has a strong track record in the industry and can contribute a larger deposit.
  • Loan to value varies significantly with some lending a maximum of 55% up to 70% of the going concern value including goodwill which, in some instances, can be up to twice the pub’s profits.

 

Mortgage application processing times for pubs

Typical mortgage timescales apply with some applications taking longer than average. Allow a minimum of between 2-4 months.

How to apply for a loan to buy or remortgage a pub

To get the ball rolling we will need:

  • The latest 2-3 years accounts for the pub you are looking to finance
  • An overview of your background and experience (CV if available)
  • Copies of your latest six months’ personal bank statements
  • A schedule of your assets and liabilities
  • Proof of your identity and address
  • Any information about the property and the business for example management information and last four quarters’ VAT returns

If you’re not at this stage and simply want to talk through the options, that’s fine too. I can be contacted directly on 01732 471673 or richardw@mortgagesforbusiness.co.uk. Alternatively, you can call the main line on 0345 345 6788. Ask for the commercial desk where you’ll be able to speak to a qualified and experience broker.

And last but by no means least, here’s a link to some case studies which demonstrate how we’ve help clients get mortgages and loans for a variety of different pubs.

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