Banks holding back pub property recovery

Bank demands for 45 per cent deposits are continuing to prevent a recovery in the pub property market, according to a leading pub property agent.

Mark Grieg, managing director of London-based Paramount Investments criticised what he called the continued reluctance of banks to lend to potential pub buyers, saying that businesses are still "paying the price for the banks' recklessness in the years prior to the crisis of 2008".

Greig said: "There is a lot of interest in pubs because of the flexibility they offer in terms of planning. But when it comes to finding the cash for a 45 per cent deposit, few people have that kind of money lying around.

"The banks will start lending money sooner or later, but until they do, the recovery in the pub sector will be held back."

However research carried out by the Federation of Small Businesses (FSB) shows that access to credit from the banks has improved and that the issue now is the cost of finance. It says in April 2009 22 per cent of requests for credit were accepted. That rose to 28 per cent in August 2009.

A spokeswoman said: "Interest rates are at a historic low and so the banks really have no excuse not to lend and at low rates. But banks are still hiking up their charges on overdrafts and loans."

Established operators are finding it easier to access funding. Tony Brookes who owns the nine-strong Head of Steam pub company secured part of the £1.15m funds for new pub, the Central Hotel, from the Royal Bank of Scotland.

"If you have a good credit rating, a good trading history and are seen as low risk then banks are open for business," he said.