Bridging finance for pubs and bars.

Pub bridging, explained

What lenders look for in a pub.

How a pub is valued

Lenders value a pub in one of two ways. A bricks and mortar, or vacant possession, value looks at the building alone, as if it were empty, and is what most bridging lenders lend against. A trading valuation, by a RICS surveyor who specialises in licensed premises, also takes account of the business and what it earns, and only some lenders will lend against it.

A pub that has closed is usually valued on the first basis, which can be well below the price of one that is trading well. That gap is why the loan to value on a pub is often lower than on an office or a shop.

What the lender will ask about

• Whether the pub is freehold and free of tie. Tied pubs and short leaseholds are much harder to borrow against.
• Its trading accounts, if it is open, and your experience of running licensed premises, or that of the operator you will put in.
• The premises licence, and any flat or letting rooms that come with it.
• Its condition, and the works you plan with their costs, if you are refurbishing it.
• How you will repay the loan: your exit.

How pub bridging loans are repaid

• Refinancing onto a commercial mortgage once the pub is trading. Commercial mortgage lenders usually want to see trading accounts first, so allow time for them in the loan term.
• Selling the pub, as a going concern or with vacant possession.
• Converting it, for example into homes, then selling or letting them. In England a pub needs planning permission for any change of use.

Before you buy

Check whether the pub is listed as an Asset of Community Value. In England, the owner of a listed pub has to give local community groups the chance to bid before selling it, which can hold up a sale for up to six months, and lenders will take that into account. If you are buying at auction, talk to us before the auction so the finance is lined up in time.

A worked example

You agree to buy a closed freehold pub with a two-bedroom flat above it for £600,000. The lender values it with vacant possession at £600,000 and lends 60% of that: £360,000 for 12 months, with the interest retained. You put in the rest, and pay for a £40,000 refurbishment yourself, reopen within three months, and refinance onto a commercial mortgage once the pub has enough trading history.

These figures are only an illustration. The rate, fees and how much you can borrow depend on the lender and your circumstances.