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Unfortunately, there is no easy answer to this question.  There are so many factors that may influence the appetite of any bank when considering a lending proposal relating to a pub lease but the three key considerations are summarised as follows:

Historic Performance

The financial accounts of any business that you might consider buying will obviously have a major impact upon its value but they are equally relevant to its “lendability”.  A pub that has a history of low profits, losses or no proper financial records will be more difficult to secure borrowing against than one that can demonstrate a consistent pattern of profitability over a sustained period.

The bank will wish to see a financial forecast that demonstrates your new business’s ability to meet loan repayments and generate a realistic personal income for you, as well as leaving a comfortable margin of error.  The stronger a pub’s historic record, the easier this is to do.

Experience

In order to reassure the bank that you are able to sustain profitability (or reverse historic losses), it is very helpful to be able to demonstrate your own track record in managing a similar business.  Those who have accumulated plenty of relevant experience will attract greater support than those who are entirely new to the trade.

It is, of course, paramount that you can demonstrate a clean track record when it comes to any personal borrowing that you have.  If you’re not sure, try checking with one of the major credit reference agencies (Equifax or Experian) – it only costs £2 to obtain a copy of your file.

Security

Few banks formally recognise the value of a lease when lending due to the volatility of such values and the complex terms that can restrict their ability to recoup future losses.

Your ability to borrow is, therefore, enormously enhanced by the offer of additional security.  This may be in the form of a mortgage against your home or other personal assets but can also be provided by way of guarantee from a close friend or family member.  Marlborough’s Family Guarantee Scheme has helped many young, capable (but asset poor) managers into their first pub.

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High profile failures in the licensed property market such as the recent case of London & Edinburgh Inns have contributed towards some noticeable belt tightening amongst High Street banks when considering lending proposals in this industry.  Presenting your case to a bank in the correct manner is, therefore, all the more important and bank appetite for properly structured deals remains strong.

In answer to the original question, whilst there are no fixed formulae, it would be fair to say that a reasonably experienced operator buying a healthy pub lease and able to offer some security to the bank might be able to borrow the entire lease purchase price and, indeed, Marlborough Leisure has arranged many loans in excess of this 100% figure where further funding is required towards set up costs and/or redevelopment.

Without the benefit of alternative security (i.e. lending against the lease alone), you will need to contribute a greater cash investment towards your purchase but Marlborough frequently arranges loans of up to 65% of a lease purchase price where all the other key factors are strong.

What it really boils down to is that each case must be assessed on its own merits and you should seek to discuss your personal circumstances with your bank manager or a specialist provider such as Marlborough Leisure in order to establish a reliable guide to your own borrowing capacity.

 

 

 
   
   
   
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