Bridging finance for restaurants.

Restaurant bridging, explained

What lenders look for in a restaurant.

Run by you, or let to a tenant

Lenders look at a restaurant in one of two ways. If you run it yourself, they look at its trading accounts and your experience, and value it as a trading business or as an empty building. If it is let to a restaurant operator, they look at the lease and the tenant instead, much as they would for a shop. A restaurant let on a long lease to an established operator usually gets better terms than one you run yourself.

What the lender will ask about

• Whether it is freehold or held on a long lease. Bridging is secured on the property, so a restaurant business on a short lease usually can't be borrowed against.
• Its trading accounts, or the lease, rent and tenant if it is let.
• Its licences, such as the premises licence for serving alcohol.
• The cost of any refit you plan.
• How you will repay the loan: your exit.

Planning and use class

In England, restaurants and cafés fall within Class E, the same use class as shops and offices, so a building can often change between those uses without planning permission. Hot food takeaways, pubs and bars are outside Class E, and need planning permission to change to or from another use.

How restaurant bridging loans are repaid

• Refinancing onto a commercial mortgage once the restaurant is trading well or let.
• Selling the property, with or without the business.
• Converting the upper floors, or the whole building, into flats, which needs planning permission.

A worked example

You run a restaurant in a building you rent, and your landlord offers to sell you the freehold for £500,000 if you can complete within six weeks. The lender values it at £500,000 and lends 65% of that: £325,000 for 12 months, with the interest retained. You put in the rest, then refinance onto a commercial mortgage.

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