Option to buy your freehold?

With the major PubCos reviewing their estates, recent years have seen many tenants being given the option to buy the freehold to their business, thereby swapping rent for a mortgage and removing themselves from an onerous beer tie.

We have helped many with arranging funding and guiding then through the process to complete the purchase.

The key point for us is that in most cases the marriage of the property purchase to your existing goodwill and inventory invariably means that the business as a whole is worth more than the price you pay for the property.

We work specifically with lenders who recognise this factor and who will lend on the value of the business not just the price you pay for it. This means that subject to satisfactory valuation the average deposit required is usually no more than 20% of the purchase price.

In some circumstances particularly where you have already paid a substantial premium for the goodwill this may well be reduced or if you have other freehold propriety such as a house then this may be used as additional security.

For example:

• Property purchase £300,000
• Assumed value of the business as going concern £370,000
• Maximum loan £240,000 (80% of purchase price and maximum 65% of the value of the business)
• Current interest rates circa Bank Base + 2.3% so loan repayments on this would be around £1,305.00 per month over a 20 year term (Bank base 0.5% at the time of writing)

Financial assessment:

The lender will require 2/3 years accounts for your business to assess whether the business can meet its requirements for the servicing the loan and your own drawing requirements.

The key points here is that when considering the accounts your rent will be added back to the bottom line and they will allow an adjustment on the gross profit to reflect buying without tie.

Everyone’s situation is different so in the first instance do not hesitate to call us to discuss your proposal.

For friendly help and guidance
please call on 01834 849795

We are market experts for:

• Pub Finance
• Hotel Finance
• Restaurant Finance

Looking to buy another type of business?

See our partner site Business Mortgage Solutions for help and guidance on funding for all commercial and retail businesses.