"We can help you finance any business you decide to buy not just those sold by Sidney Phillips"
We have been arranging finance and mortgages for pubs, gastro pubs and inns for the past 30 years during which time we have seen a massive change in the property market largely as a result of the rise of the PubCos and the creation of massive lease estates.
With the PubCos now having to review their business model and disposing of sites which do not fit with their future plans, fantastic opportunities are out there to acquire freehold pubs and bars in many cases at a fraction of the price originally paid by the PubCos.
The knock on effect as also seen price reductions in owner operated business being sold with the benefit of accounts and existing trade, offering great opportunities to buy established trading businesses at sensible prices.
This combined with exceptionally low interest rates make pub ownership very affordable both from the level of cash needed to acquire a business and the monthly repayments on your loan thereafter.
Despite the restraints on funding we have been extremely successful in arranging finance for the purchase of freehold pubs throughout the UK both where they are being purchased as corporate disposals, without accounts or where they are being sold by the existing owners as a going concern.
The key to our success is having connected with outstanding people within the lending institutions who not only understand but also believe in the licensed trade.
Where you are buying a pub with the benefit of accounts we have lenders that will lend against the value of the business as a whole, that is to say the property, goodwill and the inventory. This is important as many lenders will only lend on the property value only.
As a guide the usual maximum loan is 65% of the valuation over a term of up to 20 years.
For pubs being sold on a Bricks & mortar basis only which usually applies to pubs being disposed of by the PubCos such as Enterprise Inns, Punch taverns, Marston’s, Greene King etc. then for suitably experienced operators we can raise up to 70% of the purchase price.
Where VAT applies to the purchase price we can arrange short term VAT loans until this can be reclaimed.
The purchasers in question had found their ideal pub to buy, with a combination of locals bar, restaurant, en-suite letting rooms and a great location it ticked every box on their wish list.
The problem however is that this was a retirement sale and the owners, whilst having made a good living from the business for many years, had in more recent times run the business as more of a lifestyle and as a result accounting information showed declining trade and modest profits.
With 35% of the purchase price in their account, they approached their own Bank who were initially were very supportive but as the weeks dragged by it became clear that finance was not going to be forthcoming.
At this point they contacted their financial adviser and whilst they had previously arranged their domestic mortgages did not have the expertise to put together a more complex finance proposal to source a commercial mortgage for the pub.
At this point the purchasers were forced to give up on their ideal pub and started to look around for other cheaper pubs as a compromise and based on the selling agents recommendation contacted us to see if finance would be available.
During our conversation they mentioned their previous difficulties and we suggested that we would review the potential for financing this purchase, given that the pub was still on the market.
It was clear from their paperwork that their home spun business plan had not fully outlined the potential of the business under their control and the cash flow forecasts, even though prepared by an accountant, failed to meet the stress tests on profitability required by a lender.
We worked with then to redraft their business plan to highlight how this underperforming business would increase both turnover and profitability, mainly through marketing the letting accommodation and we completely re-worked their financial projections.
To meet lenders criteria however we needed to negotiate a small reduction in the purchase price which was achieved on the understanding that contracts could now be exchanged quickly.
On the strength of this carefully structured proposal we secured the borrowing required. With an interest rate of Bank Base + 2.5%, zero lenders arrangement fees and a 15 year repayment term, the business had a very affordable loan facility and a strong financial base to move forward from.
We are delighted that we were able to fulfil the purchaser’s dream and have allowed them an opportunity of developing a thriving business for themselves.
Business Mortgage Solutions T/A Sidney Phillips Business Mortgages, is authorised and regulated by the Financial Conduct Authority. Our Firm Reference number is 734594. Not all types of business we undertake is authorised and regulated by the Financial Conduct Authority. Sidney Phillips Business Mortgages operates as an intermediary and is not a principal lender.
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