Pub, Restaurants & Cafe refurbishment loans
If you’re looking to buy or refinance a pub or small entertainment venue that will be undergoing a major refurbishment, you may find that commercial Loan lenders are unwilling to help. Generally speaking, they do not like to lend when major works will be happening to their security.
Where this is the case, a commercial loan in the short term may be the best option for you. Once the works are complete, you could then refinance to a commercial mortgage if needed and repay the amount over a longer period.
Key points when raising a commercial loan.
There are numerous factors to consider when looking to raise funds for refurbishment, we work with lenders and borrowers in this sector to smooth your commercial borrowing experience, we’ve got you covered.
Experience
Experience of running a pub is an important factor in the success of an application. This is especially true of applications where trading history is poor, or there are other problems with the pub. Even if you’ve never owned a pub before, experience in the industry is a massive plus for lenders, especially if you have an experienced team around you.
If you’re looking to buy a pub with no experience in the sector, then a strong history of running your own business will be a major positive. If you’ve not been involved in the pub or hospitality industry previously and you have no experience of running a business, the chances of your application being approved are slim.
Trading performance
Trading performance is crucial to the success of the application and will be a deciding factor in which lenders will consider your application. For applications where previous accounts aren’t available, the lender will want to understand what the plan is for the new business and its likely ability to afford the repayments.
Applications for non-trading pubs or pubs without accounts will require a business plan and detailed projections. It’s important that these are available as early as possible in the application to allow the lender to make an informed decision on whether the loan is acceptable.
Accounts
Where accounts are available, the lender will usually want to see at least two years trading performance through full accounts, not abbreviated.
Where the future prospects of the business are likely to change, projections and a business plan can be used to show the expected future position. If projections are to be used for a trading pub, there will need to be a good reason for the expected change in profitability, such as the cutting of ties with a brewery, or introduction of food.
Types of Loans available
- Pub Mortgages: These are specific commercial mortgages secured against the pub’s property, often used for acquiring a trading freehold or an owner-occupied property.
- Business Loans: These can cover a range of needs, such as financing the purchase of goodwill for a leasehold, refurbishing the pub, purchasing new equipment, or boosting working capital. Arranged quickly and a convenient source of commercial lending.
- Unsecured Business Loans: Also known as a personal guarantee, this loan relies on the business owner’s personal credit history and offers a quicker funding process but comes with a higher interest rate and the risk of personal liability. Perfect if the business itself has little or no previous trading history.
- Revenue-Based Finance: With this option, repayments are taken as a percentage of the pub’s debit and credit card sales, offering flexible, interest-free payments tied to the business’s performance. Many existing Pubs, Restaurants & Cafe’s use this facility to gain an advantage with their daily finances.
- Bridging Loans: Used to bridge the gap between buying a closed pub and re-establishing it as a trading business. A lengthy but comprehensive process aimed at steadying your commercial borrowing, fixed repayments and a steady APR!