By Konrad Szymanski Humberstones Director

- Last updated on GMT

Related tags Real estate

At Humberstones we have a sister company called Humberstones Financial Services (HFS) that provides finance for the purchase of pubs. Traditionally...

At Humberstones we have a sister company called

Humberstones Financial Services (HFS) that provides finance for the purchase of pubs.

Traditionally banks wanted three years' good-trading

accounts for any business, and clients to have a degree of experience in the licensed trade. They were also reluctant to go over 70% of going-concern value. The actual value of the property was not always considered in the equation, which is a bit mad really, as all of us are fairly besotted with bricks and mortar when it comes to our own properties.

This meant that as a valuer, when assessing the market value of a freehold pub, you always had to take account of its trade, which meant that in certain cases the property was worth more as a house - if it was possible to get it de-licensed.

While this may be fine for the run-of-the-mill deal, it doesn't offer any scope for the genuine entrepreneur or the good operator to borrow a high percentage of the purchase price. Quite often those who were well experienced in the trade working for someone else would struggle to buy a freehold because they were short of capital. Others would have liked to keep back some to improve the property and develop the business, but were restricted as banks required high deposits. It also meant that the value of a freehold pub with poor or limited accounts was restricted even if it had a high bricks value or genuine potential.

That has not been the case recently, however, as HFS have been able to secure a high percentage of funding on a number of pubs with low turnovers to people that have every intention of growing the trade.

For example, to name but a few, they have recently raised 85% on a £365,000 pub purchase with no accounts, 85% on a closed-down freehold freehouse and 80% on a freehold inn at £695,000 where the purchaser had no experience.

All of this bodes well for a strong market that has not been in the least bit affected by recent interest hikes. The reason for this is that any buyer of a freehold commercial property will always allow for a potential rise in interest rates and will build this in to his projections.

Related topics Property law

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