How to apply for pub mortgage finance

Whether you need a commercial mortgage for a pub or modern city bar, the role of a publican is becoming increasingly attractive to entrepreneurs.

Following recent changes to UK licensing laws, publicans now have access to longer trading hours and more control over their businesses than ever before.

This combined with improved pub finance deals makes entry into the licensing trade much easier than in recent years.

Problems getting a pub mortgage

Although owning a pub or bar is easier to finance, they can be difficult get started. Licensing laws may have been relaxed but publicans are still heavily regulated which, from a lenders point of view, makes a business vulnerable to the risk of future legislative forces beyond their control.

Many mortgage lenders consider pubs a high-risk sector of commercial mortgages which can restrict product choice and interest rates. Indeed, some banks and lenders will not offer commercial mortgages to pub owners but a growing number of specialist lenders are more flexible and open to financing this type of business.

So whether you're an established business requiring pub refinance or new to the trade, it’s prudent to understand the pro's and con's of securing a mortgage for a pub, bar or restaurant.

Applying for pub mortgage finance

Commercial mortgages for pubs generally provide 70-85% of the business purchase price but this will vary from lender to lender and also depend upon your circumstances and the property value.

Usually, a pub mortgage lender will look for a deposit of 20-30%, and will require proof that repayments can be serviced. If you're an existing pub business requiring finance to fund improvements, a lender will want to see two years full trading accounts. New pub businesses will need to supply a business plan and projections.

Lenders will also want to know if the business property includes private residential space. For example, if 40% or more of the property is residential space which will be occupied, the pub finance will have to adhere to residential mortgage regulations.

Whichever pub mortgage lender you choose, they will all require some standard details about your business before being able to produce a quotation...

1.Trading history of pub or relevant income projections if you're a startup
2.Your experience running a licensed business
3.Details of your permits and licenses
4.Location of the licensed premises to be financed
5.Level of deposit you can contribute
6.Your credit history

You will also have to confirm if the pub is tied to a brewery or will be an independent freehouse. Pubs that are tied to a brewery are often restricted in what beers and other drinks they can sell which can make a difference to start up costs. Whereas an independent or freehold pub can shop around and stock beers and spirits from a number of suppliers.

Finding the best pub mortgage finance for your business

Sourcing a commercial mortgage for licensed premises with good rates and flexible features that will grow with your business can be a struggle. The market is improving and even if you're unable to secure the ideal interest rate remember that you can re-mortgage with another lender at more competitive rates once you have accrued a reliable payment record and trading history.

As independent commercial mortgage brokers we can help you find the best mortgage for your pub, bar or restaurant from across the UK market. We have helped many pubs and restaurants secure competitive finance with major banks and more specilaist lenders who are experienced and comfortable financing license trade businesses.

To find out more please complete our commercial mortgage enquiry form or call 01246 414413 to discuss your pub finance needs.