If setting up a pub or facing financial difficulty and in need of a refinancing; a commercial mortgage is considered the most viable option but what does the process involve?
Why a Commercial Mortgage?
As a long term financial agreement; a commercial mortgage is an ideal form of business financing that will provide a great deal of stability within an already unstable economy.
Whether taking over new or existing premises, a mortgage, remortgage or any other financial aid; the traditional pub model originally required breweries to directly supply finance however, in the face of a changing business model; external sources are now sought and as a result the commercial mortgage broker is considered the ideal source for pub financing.
For those seeking to set up or continue the success of a pub; the commercial mortgage broker offers commercial mortgage and remortgage opportunities that can ensure the following:
- Cash injection used to cover any cash flow issues
- Cash injection used to assist with any debt
- Fixed monthly payments (ideal for cash flow management and steady growth)
- Increased profit
- End result of property ownership
The Complexities of a Pub Mortgage
The type of lending available, the restrictions you face and the requirements of the lender will all be dependent upon the commercial situation.
When considering your lending capabilities and the financial options which may be made available to you, the commercial mortgage broker will often consider a range of issues surrounding the business and the lender:
- The location of the public house
- Reasons for failure, if an existing public house
- Business history/ Business predictions
- Details of income and business finance for the previous three years
- Percentage of business deposit (if required)
- Equity (Additional Security)
- Business plans
- Personal financial documentation for the past three months
- Personal industry experience
The above are considered the main issues analysed by all lenders, when determining lending capability however, the pivotal points that lenders must consider when applying for commercial finance are:
- Do you have enough experience within the industry? Have you achieved previous success that can be proven? Previous experience is crucial. As a specialist industry it is vital that a borrower prove their worth as a lending candidate.
- What is the LTV rate of the mortgage? The lower the ratio, the more desirable a candidate is for a low interest rate mortgage.
- Will the business be in a position to securely meet all repayments? Default is not uncommon in today?s market which is why business plans and projections are required to determine future, commercial capability.
A commercial mortgage broker will assist in helping you provide sufficient evidence and strong enough support, that will work towards securing your financial requirements.
The Types of Pub Mortgage
Although obtaining financial aid is continuingly difficult and banking rejection remains at a high; the commercial mortgage broker will scour a variety of specialist lenders to secure the right finance for your business.
Fixed Term- This mortgage type will ensure all payments are fixed, saving your business from facing costly changes and the effects of rising interest rates. This mortgage is considered conventional for a Public House.
Variable Rate- This mortgage offers initial lower interest rates, followed by fixed rates. As the result of changing payments and subjectivity to fluctuating rates; this specific mortgage may be considered too risky for a Public House.
Interest Only- This mortgage will allow the lender to initially pay off the interest before moving to overall mortgage payments. The risk level here again may be considered too high for a Public House however, a commercial broker will advise you of the best move to make.
Why a Mortgage Broker?
With varying lending models available; business owners may find themselves asking; why do I need a commercial mortgage broker?
As the alternative lender, the commercial mortgage broker is an intermediary working on part of a business to determine the ideal financial solution.
- Proven experience on Pub mortgages
- Can offer a potential 100% of valued sum
- Possess long term knowledge of the industry
- Access to specialist, industry specific lenders
- Assistance and support throughout the process
Where Can I Find the Right Mortgage Broker?
There are a range of specialist alternative lenders on the market however, when seeking a pub mortgage it is vital to ensure that you research your options thoroughly.
When sourcing a commercial mortgage broker for a pub, ask yourself the following:
- How experienced is the broker?
- Does the broker specialise in pub mortgages?
- Does the broker have proven success within the industry?
- Are alternative lending options available?
What to look for when seeking a pub mortgage?
As a risky industry, it is wise that when considering financial aid for a public house; you remain aware of anything and everything entailed within the process:
- Know your limits- Are you borrowing the right sum? How confident are you that your business will be in a position to return the investment?
- Compare- Have you researched the commercial mortgage broker industry and compared services?
- Loans and Fees- How much clarity do you have on the loan and the fees you will be facing?
- Risks- Do you know just what risks you are facing?
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If seeking a commercial mortgage or remortgage, just how aware are you of the process, the risks and the hurdles you may face?
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Source: http://www.charlestonfinancial.co.uk/the-pub-mortgage/
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