Top tips for raising finance
Licensees with a keen eye for a deal could be tempted by some of the property on the market at the moment.
After all, one man's run-down leasehold is another man's goldmine.
But with the banks tightening their lending belts, finding finance is becoming tougher. Here we give you some top tips on getting your finances in order and securing a loan for a purchase…Work out what you can afford
Paul Thompson at Acorn Commercial Finance says that many buyers make the mistake of going for pubs which are not unaffordable. He adds: "100 per cent funding does not exist in the commercial world so work out your assets and liabilities first and then talk to a professional broker who is a specialist in the licensed trade."
And Chris Heard, director of Marlborough Leisure, urges would-be buyers to make a detailed list of assets and resources. "This should include cash, equity in a property, investments, life policies and any articles and possessions which could be sold to realise cash," he says.
Narrow down the type of business you want
Work out whether you want a traditional pub, a food-led operation, town/city centre or rural pub, letting accommodation, a leasehold or freehold, your preferred location and whether you want a fully developed business or one with potential, says Heard.
"Speak with a specialist licensed trade financial advisor who can guide you, taking into account your experience in the trade (or lack of it), the price range you should be looking at and the amount it would be both possible and prudent to borrow," he adds.
Thompson advises prospective buyers to view pubs with "your head as well as your heart".
"Assess the accounts closely; is the business really worth what they are asking for?" he says. "Ask yourself whether your skills and personality will fit the business."
Budget, budget, budget!
Heard says: "Prepare a detailed cashflow forecast on a monthly basis. Take into account seasonal trading variations, capital expenditure, unexpected contingencies, realistic gross profit margins, employment costs and, most importantly, your personal spending requirements." Ensure you get the best deal on your money
"Loans should always be over the longest possible term (to give a lower repayment) and be flexible on overpayments," says Thompson. "Your broker can advise not only on this but get a higher loan-to-value ratio than a high street bank.Protect your credit status
"Credit agencies now have an incredibly sophisticated system of recording each and every credit transaction in your day-to-day life," Heard says. "It is therefore essential that all mortgage and loan repayments are made on time and in full, and monthly credit and store card payments made on time and for, at the very least, the minimum specified amount.
"It will also be necessary to produce at least six months of 'clean' bank statements. "All lenders scrutinise this information extremely closely."
Keep things in review
The best deal today might be bettered in a couple of years' time, the best deal two years ago might be bettered now, says Thompson.
"Is business going well? Maybe it's a good time to review your rates," he says. "This is especially the case for those businesses with adverse credit loan schemes."
