A Guide To Commercial Mortgages For Pubs

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Buying a pub is a dream for a lot of people in the UK. We’re never short of enquiries from people who are looking to do just that. The good news is that whether you’re an experienced publican, or looking to get into the pub trade, we can often help.

Securing funding for a pub is a specialist area and depends on presenting the opportunity to the right lender in the right way. Presentation of the application can be the difference between success and failure. With the industry in a state of transition, this is truer now than ever.

Read on below to find out more or fill in the form to talk to an expert.

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Key Criteria Points

There are numerous factors to consider when looking to purchase a public house. But with our extensive experience of working with lenders and borrowers in this sector, we’ve got you covered.


Experience of running a pub is an important factor in the success of an application. This is especially true of applications where trading history is poor, or there are other problems with the pub. Even if you’ve never owned a pub before, experience in the industry is a massive plus for lenders, especially if you have an experienced team around you.

If you’re looking to buy a pub with no experience in the sector, then a strong history of running your own business will be a major positive. If you’ve not been involved in the pub or hospitality industry previously and you have no experience of running a business, the chances of your application being approved are slim.

Trading Performance

Trading performance is crucial to the success of the application and will be a deciding factor in which lenders will consider your application. For applications where previous accounts aren’t available, the lender will want to understand what the plan is for the new business and its likely ability to afford the repayments.

Applications for non-trading pubs or pubs without accounts will require a business plan and detailed projections. It’s important that these are available as early as possible in the application to allow the lender to make an informed decision on whether the loan is acceptable.


Where accounts are available, the lender will usually want to see at least two years trading performance through full accounts, not abbreviated.

Where the future prospects of the business are likely to change, projections and a business plan can be used to show the expected future position. If projections are to be used for a trading pub, there will need to be a good reason for the expected change in profitability, such as the cutting of ties with a brewery, or introduction of food.

Finance Terms

Although each application will be individually assessed by the lender, there are a few common criteria points across the market.

  • Interest Rates – Although rates vary from application to application, interest tends to fall between 3 – 6% per annum. The size of the loan, your credit history, the Loan to Value (LTV) requested and the strength and trading history of the business will be key factors in deciding the rate charged.
  • Arrangement Fee – On top of the interest rate charged, the lender will usually charge an arrangement fee of between 1.5-2% of the loan amount.
  • LTV – The maximum LTV offered is usually up to 70% of the going concern value (the value of the building and business value combined). It’s worth noting that this is the maximum figure and will apply only to strong applications, weaker applications will be restricted to 55 – 65% of the going concern value.

Repayment Terms

Commercial mortgage lenders will usually lend for terms of up to 20 years on a public house, although many will restrict to a maximum of 15 years. Most lenders will insist on full capital repayment, although interest only may be possible where the loan to value is low.

VAT Loans

Where a pub purchase is VAT applicable, we are usually able to provide a VAT loan for up to 100% of the VAT amount, while it is reclaimed.

Refinancing A Pub

If you already own your pub and are looking to refinance to secure better terms, or to raise additional capital, the lender will assess the application slightly differently. If the pub is owner-occupied, trading performance will be vitally important, and accounts and bank statements will be thoroughly checked.

For pubs which are let, the quality of tenant and length of lease will be key considerations. The application will then be checked against the normal rental coverage calculations for the lender.

Expanding Your Portfolio

If you’re looking to purchase a pub and already own another pub, which will continue to trade, the current pub may be used to help affordability calculations. Where trade from the current pub is resulting in excess profit, the lender may be more lenient on the affordability assessments for the purchase.

This could allow you to purchase a business that may otherwise be difficult to borrow against.

Timescales And Application Details

Subject to any delays in becoming personally licensed for the sale of alcohol, we are usually able to complete commercial mortgages for pubs in 6 – 12 weeks.

The speed of completion will depend on the complexity of the application and the availability of the information needed to assess the application fully.

Which Lenders Offer Pub Mortgages?

Funding for pubs is harder to come by than a lot of other sectors. However, there are still a number of lenders happy to consider applications. They can largely be grouped as follows:

  • High Street Banks – These will generally offer the lowest rates and are the best-known lenders. Lending through high street banks is usually handled specialists within the commercial lending team who are familiar with the inner workings of the pub trade.
  • Challenger Banks – Although many challenger banks shy away from the leisure sector, some challenger banks will still lend. These lenders will often have more flexible criteria and more lenient affordability rules. The price that is paid for this flexibility is a slighter higher interest rate to reflect the slightly higher risk taken.
  • Specialist Commercial Lenders – Some specialist commercial lenders will lend against pubs. These lenders tend to take on higher risk applications, such as those with poor accounts or adverse credit history. These lenders will usually offer a lower loan to value and will charge higher interest rates.
  • What Factors Affect the Pricing of Pub Mortgages?

    As with all types of commercial mortgage, the pricing is based around the level of risk taken on by the lender.

    To achieve the best possible pricing, you will want to give the lender as much comfort as possible around a few key points.

    Firstly, your experience of running such a business. The more detail you can provide around your background, including any successes and transferable experience from other industries if relevant, the better. They will want to know that your experience and skills suggest you are a person they should trust with their money.

    The trading history is also very important. The accounts should clearly demonstrate that the proposed mortgage is affordable. Where there are other expenses which can be shown to be non-recurring, these should be pointed out clearly.

    Your credit history will also make a big difference to the terms offered. Where you have demonstrated a clear history of managing your finances well and keeping up your payments, you will enjoy a lower rate.

    Can I Get A Commercial Mortgage if my Pub Needs Full Refurbishment?

    If you’re looking to buy or refinance a pub that will be undergoing a major refurbishment, you may find that commercial mortgage lenders are unwilling to help. Generally speaking, they do not like to lend when major works will be happening to their security.

    Where this is the case, a bridging loan may be the best option for you. Once the works are complete, you could then refinance to a commercial mortgage.

    Will I Still Qualify if I Have Bad Credit?

    We can still potentially lend if you’ve got adverse credit such as missed payments, defaults or CCJs. Some lenders may be unwilling to help. However our advisors will be able to clearly break down the options available to you given your circumstances.

    Can You Offer Other Types of Funding to Pub Owners?

    We offer a wide range of funding options for business owners to fund cash flow and business growth. Some of the more popular options for pub landlords include:

    Business loans
    Merchant cash advances
    Business revolving credit facilities
    Asset finance

    Lender’s View

    Lenders receive a lot of speculative pub purchase applications, which can shine a bad light on genuine applications. The key to success is to provide all the required information upfront and all in one go. By presenting the application efficiently and accurately from the start, you will set yourself apart from others.

    Public houses can represent very strong businesses and lenders are keen to lend for the right proposition. Excellent lending terms are out there for stand-out applications.

    Public houses can represent very strong businesses and lenders are keen to lend for the right proposition. Excellent lending terms are out there for stand-out applications.


    About The Author

    This content was produced by our Commercial Lending Director, Gary Hemming. Gary has over 15 years’ experience in financial services and specialises in bridging loans, commercial mortgages, development finance and business loans. He is widely respected in his field and regularly provides expert commentary for specialist trade publications, specialist business press as well as local and national press.

    Gary Hemming CeMAP CeFA CeRGI CSP  -  
    Commercial Lending Director

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