A pub can be a difficult business to get started and to keep running smoothly. Long working hours, licensing laws, dealing with staff, suppliers and (sometimes drunken) customers can all add to the complications.
Somebody who is currently a manager or a tenant (or with a previous track record) in the licensed trade is at a distinct advantage when it comes to obtaining a pub mortgage. A mortgage provider will normally expect the publican to put down a deposit of at least 20 percent of the value of the pub. An existing pub business will need to present at least two years’ accounts for inspection and a new business will require a business plan including detailed cash flow forecasts.
Pub Mortgage Criteria
A number of brokers specialise in obtaining mortgages for potential owners of licensed premises and their help and advice can be particularly useful for people new to the pub business.
A pub mortgage lender will require the following details from the potential borrower:
- Where the pub is situated
- Value of initial down payment
- Trading accounts for existing business or income forecasts for a new venture
- Confirmation of liquor licence and any other required planning permission or permits
- Whether the borrower has any previous experience in the licensed trade
- Whether the borrower has any adverse credit history
- Whether the pub is tied to a brewery or is a ‘free house’
In addition to financing the purchase of new pub ventures, commercial pub mortgages are available to publicans who are already in business, for other purposes. They include:
- Purchase of freehold by sitting tenant
- Refurbishment of premises
- Consolidation of existing loans
- Buying out a partner’s share in the business
Pub mortgages are normally available for terms of between 10 and 30 years.
- Previous experience in the licensed trade improves your chances of obtaining a pub mortgage
- Detailed trading accounts or income forecasts are required before a pub mortgage will be granted
- Pub mortgages are available for the development of existing pub businesses, as well as for new projects