Sidney Phillips - Pub Mortgages, Business Mortgages, Commercial Finance

RECENT COMMENTS FROM OUR CLIENTS

"Thank you very much for your help and advice over the past few months. The service we have received from you has been absolutely first rate and I would not hesitate to recommend you to anyone wishing to buy a licensed business"

"So far it has been plain sailing as far as I am concerned exactly what I wanted. Just like to thank you for making it so easy"

Lending to leasehold pubs differs from the freehold sector in that any lease with less than 35 years remaining on it at the end of the loan term, is not considered by the lenders to offer any security whatsoever. All you are generally buying with a lease is the goodwill, fixtures and fittings of the business, the value of which can easily disappear in a period of poor or distressed trading. Also in the event that you default on the rent, ownership usually reverts to the freeholder even if a loan is outstanding on it.

Assuming therefore that for loan purposes the lease itself is valueless we need to consider how we can raise funding against it. This is either considered on a secured basis, using a house or other freehold property as collateral security or the lender will be required to lend with support of the Enterprise Finance Guarantee Scheme.

If a house or other freehold property is available as collateral security and if sufficient equity is held, then this can be offered to secure the loan, allowing you potentially to borrow most of the purchase price However despite security being offered we are increasingly seeing lenders also wanting to see an element of cash contribution as well especially to cover the initial purchase costs (stcock, advance rent etc.)

If no other security is available then, subject to a combination of your experience and the accounting information for the business, then up to 70% of the purchase price may be borrowed with support of the Enterprise Finance Guarantee Scheme.

In addition to the purchase price of the lease you will need to budget for purchase costs which may include up to 3 months rent in advance (rent is usually plus VAT) and stock at valuation, as well as legal and finance arrangement fees. We usually suggest a budget of £15,000 – £20,000 to cover this, depending on the amount of advance rent required.

If you would like to call us on 01834 849795 with a brief outline of your circumstances we will be pleased to advise you as to what you can realistically afford.