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Mortgage Advisor & Director
Can you get a commercial mortgage to buy a pub?
Yes, there are many finance options for buying a pub, and a commercial mortgage is the most common.
Lenders will take into account various factors when making their decision, such as the experience of the proprietor, historical financial performance and future aspirations for the business.
At Teito, our team of experts have helped many people like you to find the best deal for their pub mortgage. As a whole of market broker, we have access to more than 100 lenders, including those who specialise in pub mortgages. If you're ready to get started, complete our simple online form and we promise to make your mortgage journey as stress-free as possible.
Who is eligible for a pub mortgage?
Prospective lenders will be interested in several factors when deciding whether to approve your application. The best chance of approval comes with engaging an experienced mortgage broker who specialises in commercial mortgages for pubs. Not only will they be able to recommend and approach the most suitable lenders and help to improve your application, but they will also be able to find the best rates, potentially saving you thousands of pounds.
Lenders will primarily be interested in your experience and track record in running a pub business. You should also be able to demonstrate you have a solid business plan that will put the establishment in the best position to succeed.
Your application will be assessed on a case by case basis, taking into account the following:
- The loan to value (LTV) ratio of the loan
- Your credit rating
- Your experience in the industry
- The affordability assessment of the loan
- Financial performance
- The location of the pub
How much deposit will I need for a pub mortgage?
As with all commercial mortgages, you can expect to contribute a larger deposit for your pub mortgage than for a residential mortgage. This is to mitigate some of the risks associated with lending to business rather than to individuals. As pubs are seen as potentially riskier than some other companies, deposit requirements tend to be between 30-45%, depending on the lender and specific circumstances.
If you can demonstrate a high level of experience and capability, the lower the deposit requirements and potentially, the more favourable the rates offered.
If you are not able to contribute a cash deposit, you may be able to secure the mortgage against another property that you own, assuming that you have sufficient equity.
You should consider this option carefully as it could mean lead to multiple repossessions if you default on mortgage repayments.
Our advisors can provide guidance and more details on this.
How much experience do I need for a pub mortgage?
Prospective lenders will be very interested in your track record.
Depending on the lender, they will typically be looking for a minimum of 2 to 3 years of industry trading history.
However, some will lend based on less experience but will offset the risk with less favourable rates and higher deposit requirements.
An experienced mortgage broker can help with this. They can recommend the most appropriate lenders based on your circumstances and level of experience in the sector. It may be that you have transferrable skills that could be accepted by a lender; your mortgage broker can advise on this.
How much can I borrow for a pub mortgage?
There is not one overriding calculation for working out how much you can borrow with a pub mortgage as each lender will have their own rules. However, they will all judge the affordability of the loan based on previous trading and projections. Some may permit you to declare additional income to improve the affordability assessment.
Can I get a pub mortgage with bad credit?
It is undoubtedly more challenging to get a pub mortgage with bad credit; however, it is not impossible.
Not all bad credit is judged equally, and prospective lenders will consider the age and severity of the credit issue when making their evaluation. Each application is assessed on a case by case basis, and even if you have been turned away by one lender, it doesn't necessarily mean you will be rejected again.
If you have a bad credit history, it can be especially beneficial to use a mortgage broker as they will be able to improve your application and recommend lenders who are more amenable to credit issues.
Other finance options for pubs
There are several alternative finance options for pubs.
Bridging loans
Bridging loans are a type of flexible, short term finance that can be arranged very quickly.
If you're buying a pub at auction, for example, bridging loans can be beneficial to ensure you have the funds within the short timeframe required.
Unlike with a mortgage, you can also get a bridging loan to buy an uninhabitable property, which could be a pub that needs refurbishment to bring it up to standard.
As you may expect with a short term finance option, the rates tend to be higher, and you will need a clear exit strategy for when the term finishes; which may be a standard mortgage.
Development Finance
If you're looking to finance a pub development project, either a build or refurbishment, development finance could be a viable option to consider.
With development finance, the funding is released in phases to align with the project, and you will only pay interest on the amount deposited so far. As with bridging finance, development finance is a short term option, and you will need to consider the future financing of the project once it is complete; which is likely to be a mortgage.
How can I learn more?
As a whole of market broker, our team have access to more than 20,000 mortgage deals, including those offered by lenders specialising in pub finance. Get started today, and we promise to make your mortgage journey as stress-free and straightforward as possible.
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Last updated 29 February 2024