Finding the best deal

We take a llok at how to find the best the deal for you when financing your pub venture.

Talk to anyone in the licensed property business these days and they will tell you that banks and other lenders are happily throwing money at anyone who expresses an interest in buying a pub.

But the amount that you are actually able to borrow and how much you will pay for it can vary enormously.

Paul Thompson at broker Acorn Commercial Finance specialises in finding individuals the best possible deal.

"A lot depends on how much experience you have got," he explained. "Someone new to the trade, for instance, can expect to borrow only 60 to 70 per cent of the price of a freehouse while an experienced publican should get 75 to 80 per cent.

"Where it is a tenant or lessee buying the freehold of their pub, because they already have the goodwill and are only buying the bricks and mortar the figure can rise to 90 per cent, and in a couple of recent cases we have got the licensee a loan of more than 100 per cent of what they are paying.

"Interest rates will vary too. We have in excess of 200 lenders on our books, from banks to brewers, and rates can vary from only one per cent above the basic to horrendous levels."

Thompson describes his role not as a lender but as a "deal-maker". "We find ways of making things happen," he said.

"There are so many lenders out there, and even different branches of the same bank can vary on what they offer."

A deal may be a combination of loans and Thompson often goes to a brewer to top up a loan from a bank. Brewery loans usually involve a tie where the licensee is contracted to buy a certain amount of beer from the company and the amount bought might also determine the discount. Increasingly, though, Thompson is finding that brewers will offer small loans and offer the full freetrade discount whatever the barrelage.

So how do you go about getting the best deal?​

If you are new to the trade you will need to demonstrate a genuine commitment to your chosen vocation. This not only means getting a qualification - the British Institute of Innkeeping's National Licensee's Certificate is really the basic minimum - but putting some practical experience under your belt.

Standing behind a bar and pulling a few pints isn't enough, however. "The best thing is to spend some time helping a friend run a pub - and to volunteer for all the mucky jobs," advised Thompson. "You should show that you're serious."

You might have heard a lot of talk about business plans. But for Thompson "a business plan is not as important as you would think. It's not worth spending £1,000 getting one done," he said. "The best things is simply to get your own thoughts down on paper about what you intend to do with the business.

"It's worth talking to the locals and find out what they think could be done with the pub. That's better than getting a specialist to produce a demographic study. Pubs are not a scientific business in that way."

If you do have trade experience and you can show you have made a success of it in the past, all the better. Lenders like pub managers as well as tenants and lessees, though you will still have to find a substantial deposit on a manager's salary. If you dream of owning your own pub, the trick is to start salting away some cash from the beginning of your career.

Ideally, Thompson believes you should think about finances before you set your heart on a particular pub.

"A broker will work with you from the early stages to get a clear picture of the kind of business you want so you can go to an agent with the exact details. Then they have to chance of bringing the pub to you rather than you having to chase up and down the country looking at properties."

Before you choose a broker, though, you should make sure of their credentials. As you can imagine, when it comes to lending money there are plenty of unscrupulous operators about. Most reputable firms are a member of the National Association of Commercial Finance Brokers.