Advice on the Pub Finance market

By | December 1, 2010
Buying a Pub;  the finances
From a potential purchasers viewpoint the acquisition of your own business by finding a suitable pub is still one of the most popular routes into self employment.
From a banks viewpoint it remains one of their least favoured sectors.
Why is this; because statistically, more businesses of this type go wrong, than in many other sectors, and hence expose the bank ( and more importantly, the purchaser, to risk of losing their money).
Why should this be?
Fierce competition
Tight profit margins
Applicants not suitable to run  business.
Sector  vulnerable to economic changes
Regulatory/ and social pressures; eg smoking ban; drink drive rules
From a bankers stand  they look for following parameters
Max loan on freehold pub; 60% loan to value of pub; 
3 years good historic accounts; projections at present defitely out of favour
Sector experience; run a business before? if so what/where/ how did it do?
Robust business plan
Second way out; ie other than forced sale of business if things dont work out.
Having what looks like, pouring cold water on anyone contemplating going in this direction, there are still good opportunities for the right candidate looking at the right business, at the right price.
In future articles we will examine each area of interest to the bank in more detail

One thought on “Advice on the Pub Finance market

  1. Another Steve

    If you don’t have a need to borrow to finance your purchase, now is a fantastic time to buy. Sorry sellers – it really is a buyer’s market except for some very special freeholds.

    New to pubs? Try a tenancy first – DO NOT get sucked into a lease, tied or otherwise, to one of a multitude of pub companies that offer you some kind of “retail partnership” – very little chance of making money for yourself whilst servicing their pre-Crash debts.

    Freeholds abound at prices that we will probably never see again – post-Industrial areas like the north-West, the Black Country (are we still allowed to say that?) and former mining communities in south Wales, Notts., Yorkshire and the like, offer some huge properties which require a re-think. Why not a floor or two of bedsit/studios with a cafe-bar or internet pub on the ground floor? A back-packer hostel or mountain-bike/
    climber/walker lodging place with limited bar opening? Time to think outside the box – time to create the “new” Great British Pub.

    But do leave those pubco leases alone – no security, no profit, no hope!


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