How to fund a pub acquisition

In recent years, we’ve seen a marked rise in the availability of funding for an acquisition in the pub sector, as the resilience demonstrated by the industry and the range of opportunities it presents has led to an increase in confidence.

If you’re looking to enter the hospitality sector, or grow your existing portfolio of sites, here are some of the key factors you need to consider when looking to secure finance.

Research all the costs involved

To buy a pub business, in addition to a deposit, you will need to account for the additional costs involved in an acquisition. These costs vary depending on the type of business you purchase, but typically include legal costs, stamp duty (on freehold purchases), purchasing of stock at value, any repairs or improvements that need to be made, bank fees and working capital.

Consider what type of funding you may need

Funding is available for both leasehold and freehold opportunities, and can be secured in a variety of forms including:

• A commercial mortgage to help you acquire a trading freehold pub
• A business loan to support the purchase of goodwill on leasehold acquisitions
• A bridging loan to enable you to acquire a closed pub and re-establish the business

In addition to securing finance to purchase a new site, you can also seek funding if you are a sitting tenant who has the opportunity to buy the freehold of the pub you are already operating.

Or, if you are (or will be) purchasing in cash, you can apply for a mortgage to back fund your cash purchase in order to reinvest in the site or expand further, depending on the scenario.

At Christie Finance we offer a full range of services to assist you with business funding, ranging from a mortgage or loan to secure a property or refinance existing debt, to funding to assist with cash flow, tax and improvements. We support you throughout the process to ensure the transaction completes as smoothly and swiftly as possible.

Plan for your funding application

As part of the funding process, lenders will evaluate all aspects of your application, including your educational and employment background. For first time buyers in particular, lenders will seek confidence in how well a new entrant can operate their first acquisition, what their career history is and what direct experience they can bring.

Consider the knowledge and qualifications you have, which will assist you in the running of a hospitality business. A sector-specific degree and/or business and finance qualification will demonstrate your aptitude to lenders and investors.

Experience in the sector is another key consideration for all lenders in the hospitality industry. If you are an aspiring publican, think about the environments you have worked in, whether it’s a sports bar, cocktail bar or a traditional pub, as well as the operations you have been involved in, such as stocking, cellar management, financial management etc.

While this is desirable, Christie Finance have significant experience supporting clients with both direct and indirect experience and skillsets.

Prepare your business plan

A well-prepared business plan is also crucial to securing funding and ensuring long-term success. Your business plan should consider both the current performance and future prospects of the business. Consider how you will run the operations and implement any changes and improvements. Address key factors such as staffing, supplier choice, location, demographics, competition, opportunities and how to create or leverage your USP.

Get started today

To secure your funding, the process is typically as follows:

1. Initial meeting to discuss your needs
2. Application pack and information sent to you
3. Business proposal produced and issued to lenders
4. Indicative terms presented to you
5. Formal credit process is completed

As an example, Christie Finance recently secured a £638,000 funding package against a £650,000 purchase price to support a sitting tenant in acquiring his freehold. The deal from instruction to drawdown took eight weeks.

Whether you are a first-time buyer taking the leap and buying your first pub, a sitting tenant looking to acquire your freehold, or an experienced publican looking to add to your portfolio of sites, Christie Finance can support you in securing a funding package to realise your ambitions.

For more information on funding a pub acquisition, contact Nathan McFarlane, +44 7775 807074 / Nathan.mcfarlane@christiefinance.com.