By providing business owners with the needed capital, pub loans can support both expansion and renovation, enabling upgrades and customer base growth, or even greater brand presence in the market with the acquisition of new premises.

There are many avenues that business owners can pursue to help them maintain a competitive name in the food and beverage industry, so below we’ll cover all our ideas regarding what loan types are best suited to achieving long term success as a pub owner.

Business Expansion:

Expanding any business will tend to require a considerable amount of financial investment, especially if you are aiming for a new property, however by choosing the right loan type, and doing your due diligence to find the best lender, you can achieve these goals without draining your existing cash reserves, and hopefully, with the right strategy, ensure that your brand continues to grow sustainably.

• Commercial Mortgages: Commercial mortgages secured on your property can provide you with the capital necessary to expand your premises, bringing with it the potential to host larger customer events, or even develop specialised areas for things like private dining and family occasions. Because mortgage rates are some of the lowest on the market, it again means there is less disruption on daily finances compared to other loan types, and you can plan your finances around the loan repayments reliably.
• Development Loans: Development loans are another option that are more based around short to medium term requirements, and, similarly to mortgages, can provide pub owners with the funding they need to make structural changes or new improvements to their premises. Anything from outdoor garden areas to structural extensions will fall within the grounds of a development loan, so be sure to detail your intentions well in your business plan should you intend to apply and undertake a large scale project.
• Equipment Financing: New equipment for either the kitchen or behind the bar can be extremely costly, and can come with the problem of disrupted finances, especially in the case of an emergency breakdown, so loans specialised for equipment can be extremely supportive for pub owners. It will allow you to spread the costs of your new equipment over an agreed upon period, too, and should help keep your cash flow steady as less of your own funds will go towards it, keeping you on track towards growth.

Business Renovation:

• Renovation Loans: It is not unusual for wear and tear to occur over years of trading, and that is where specialised loans designed to fund both interior and exterior refurbishments can become very valuable. New decor and updated fixtures, along with new bar layouts or front of house revamps are not unusual when a pub is renovated, and if done correctly, you will be able to attract new customers with an overall improved experience at your establishment. Beyond just cosmetic changes on your premises, renovations may also include more important structural issues, whether that involves your electrics or plumbing, renovation funding can help you maintain a fully functioning, attractive place for business.
• Bridging Loans: Bridging loans are short term facilities that are used to pay for something when you are short of funds, and are used to bridge the gap between that purchase and your access to a longer term facility, whereby you can repay your bridging loan and continue using the long term loan. A financial bridge can be extremely useful if you have an emergency situation that needs resolving, or if you find yourself short on finances while you are waiting for a loan to arrive in your bank account.
• Crowdfunding: Many pubs that are not part of a larger franchise, or have a very loyal community, may find that seeking local crowdfunding can also be a great way to expand business. With a well planned crowdfunding campaign you can easily raise awareness of your intentions or struggles, and can find patrons who want to help you either revitalise your property, or simply launch new products, be it food or drink. Crowdfunding comes with the bonus that your repayment to the community who contributed will be the service that you provide through their money, and can be another way to build up a loyal customer base.

As usual, to help you find the best possible loan for your needs, we strongly advise that you discuss your options with either your accountant or financial manager, as they should have a wealth of knowledge in your field and can guide you towards the right decision. If you do choose to take on a loan to improve your premises and complete the planned works, it is normally a safe assumption to make that your long term revenue will increase, and your business will increase its competitiveness in the food and beverage industry.

If you are a pub owner who is seeking finance, you should first define the exact purpose of the loan, and consider your repayment capabilities. You will then need to consider any necessary collateral, and then the criteria of the lender you choose to approach for funding, with the aim of making an informed decision based on your financial goals.

If you are a pub owner currently thinking about using finance to achieve growth, we’ll make a deeper analysis of these points with the aim of explaining their importance to prospective borrowers, though with that said, if you are considering a loan, first speak to your accountant or financial advisor as they will have a wealth of invaluable knowledge in your sector and can help you come to an informed decision.

Assess Your Financial Needs:

As we touched on before, the most important thing you need to be clear about is exactly what the purpose of your loan is, and while this may sound like an obvious point, when it comes to something like addressing cash flow, things can get a little more nuanced, and you’ll need to know what loan type can best help best. With cash flow issues, there are facilities such as merchant cash advances, or business lines of credit that would be more suitable, rather than taking out a lump sum like a term loan which wouldn’t address your issues in the long term. For short term projects like a room renovation or extension on your property, then facilities like term loans are suitable, or perhaps even a remortgage.

With the type of loan you choose will also come the factor of your repayment capabilities, and this can also be affected by how much you choose to take out on the loan. Speaking to your accountant is highly advisable here, as they should have a complete picture of your finances and will be able to accurately estimate how much you can safely borrow. If it is a substantial sum of funds that you need, it is very likely that collateral will be required, for example in the case of a remortgage you will secure your property against the funds, and you will need to consider the long term implications of how you utilise your available assets.

Consider Your Creditworthiness:

Regardless of the industry, when it comes to securing a loan, your credit score and history will always be a big weighing factor, and though a higher risk score doesn’t mean you won’t be able to secure funding, it will have an effect on things like your interest rates. For businesses in the UK, credit scores run between 0 – 100, with higher scores indicating less risk to the prospective lender, and will typically see more favourable terms being offered to you. This is why it’s important to review your credit reports way in advance of applying for a loan, as you can correct any possible errors, but more importantly, look for areas where your score can be improved.

When considering your creditworthiness overall, you will also be considering your financial stability and revenue consistency, as they typically all go hand in hand, and are also important indicators for lenders to determine exactly how trustworthy you will be when it comes to repaying their loan. Good indicators revolve around demonstrating a positive cash flow, and that your operations are profitable, which may seem counterintuitive if you are actively seeking a loan for cash flow, but most lenders will understand that if you have a history of success, your current needs to improve cash flow are temporary. Presenting strong financial statements and proving that you are achieving overall growth will help reassure them that their investments are secure.

Choose the Right Type of Loan for Your Needs:

Because of the number of different loan types available that can each serve a different purpose in helping you expand and grow as a business, you will need to do your due diligence, and we once again iterate the importance of speaking to your financial advisor as they should have a wealth of knowledge in your industry to help you with this. Even if you are doing a simple renovation project and think a term loan like those we offer at Nucleus will be suitable, there are still further nuances, such as lender criteria, and again your advisor can help you find the best lender for your needs.

Interest rates and repayment terms will typically be the most important factors when it comes to choosing the right lender for you, with long term loans offering lower rates than their shorter counterparts. If you need funds quickly, you will find that online lenders like Nucleus, who can turn around an application in just a few hours and have the funds in your bank account within the same day may be the best option, however for a long term mortgage, sifting through the traditional banks and finding out their rates will likely be your best route. When you do choose, be aware that selecting the right lender with the right loan terms can save you large sums of money over time and will certainly save you a lot of financial stress.

Collateral and Security:

For large financing options and secured business loans collateral will be important, and that could come in the form of property, equipment, or any other valuable assets you have, both through the business or yourself. The value of this collateral can, similarly to your credit worthiness, make a considerable difference to the terms of your loan as it will reduce the lender’s risk should you end up struggling to pay off the debt. For these reasons it can be a good idea to keep a record of all your assets and their values, then if there comes a time when you need to use them you will know exactly what they are worth and their useability.

By thoroughly examining each of these key considerations before you choose to pursue a pub loan you will be able to determine what is best for your business, but also what is the most sensible. Preparing well, and taking the time to understand the weight of each of these factors will also improve both your chances of a successful loan application, as you can demonstrate to your prospective lender that you are familiar with the criteria, and should ensure the right financial support your business needs for its continued success.

There are many documents that you will need to produce if you are considering applying for a pub loan, and having them on hand when it comes time will help to smooth out your application process. Documents will tend to vary between lenders and loan types, however there are still some universal papers that you can expect to present, from basic proof of ID to logs of your collateral.

The Basics:

When it comes to the loan application process, lenders will want to know who you are and some information about your business, as these will initially be all that determines your eligibility as a prospective borrower, and it gives your lender the opportunity to ensure they aren’t wasting their time. Let’s take a look at these basics:

• Personal identification: First lenders will request a way to verify your identity, and any form of recognised ID will be acceptable, whether that’s a passport, driving licence or national ID card. Once your lender can confirm that you are legally able to borrow they will proceed to your business. To avoid delays you should also ensure that your IDs are current and valid, and in almost all cases, you will likely need to either scan or make photocopies of them and be able to pass them on as requested by your prospective lender.
• Business registration documents: As far as your business goes, having the documentation to provide both your pub’s legal standing and also its trading will again confirm your legality to borrow. A certificate of incorporation and your licence to trade will be amongst the most important of these papers, as they confirm you have the rights to trade and necessary approvals to sell your products. Once again, having these documents ready with multiple copies will help speed up your application process.

Financial Statements:

Financial statements will always be important for lenders to scrutinise when a prospective borrower applies for a loan, and while there are the typical documents you can expect to provide, which we will discuss below, it can be worth speaking to your accountant or financial advisor if there are any details you don’t understand or feel may additionally need to be produced.

• Bank statements: A majority of lenders will request the last 3 to 6 months of your bank statements to see what your cash flow and revenue consistency looks like, and it also gives them an idea of much debt you could potentially take on without struggling financially. Documents should also be up to date and free from errors that may otherwise cause a prospective lender to doubt their legitimacy.
• Profit and Loss (P&L) statements: Your P&L papers are another important financial document that prove how well your pub has performed over a previous set period, and that is typically within the last year. P&L statements effectively provide a detailed breakdown of key metrics such as your revenue and expenses, as well as your net profit, and demonstrate how financially stable you are to your lender. Be detailed and accurate with your P&L statements, as a well organised and transparent set of figures will go a long way towards getting your application approved.
• Balance sheet: Your balance sheet will also give prospective borrowers a picture of your assets, liabilities, and equity, and again is another way to demonstrate the financial health of your business. Be sure to regularly update and review your balance sheet, because the more accurate it is, the easier your lender will be able to understand what your assets and liabilities are.

Your Business Plan:

The importance of a business plan will vary from lender to lender, and the type of loan that you are interested in acquiring, however regardless of how important your prospective lender deems it, it can still be useful going forward to have a thorough plan written, as it can be used as a guiding map once you have acquired your funds. Depending on the loan’s intentions, details like market analysis and revenue projections can help to convey to your lender how their money will be suitable for your business, and it is why you should also have a clear outline as to exactly how you intend to use your loan.

Detailing financial forecasts and your growth strategies, as well as revenue projections and an exit strategy will give a transparent financial picture of how your loan is going to be integrated into your running costs, and prove how you intend to achieve growth with it. As with all your other documents, ensure that your numbers are realistic, and prove to your lender that your goals are achievable as it will build trust with them and should improve the likelihood of your approval.

Collateral Records:

For pub owners looking to apply for a secured loan you will need to provide your collateral documentation and should include things like property appraisals and an assets list. These are used to verify the value of your assets and are important for lenders because it helps to establish how secure their loan will be if granted. For businesses of all kinds, that is why it’s important to keep equipment receipts and proof of maintenance history, as well as a log of any other collateral.

For pub owners, from the moment you start your business, it can be useful to start keeping a history of all of your finances, assets, and any other relevant records that will come in handy when the time comes to apply for a loan. It is worth reiterating on the importance of keeping your records accurate and thorough, as this will help your prospective lender and speed up the application process, increasing your chances of securing your loan and pushing your business forward to success.

Both independent pubs and pub chains can typically gain access to the same types of loan programs, however it will depend on their specific needs which can be very different that will determine exactly what loan program is more suited to them.

Independent pubs are often smaller operations compared to large scale pub chains that are more likely to seek larger loans to continue their expansion. Often, independent pubs will also have their own established communities where they have been run for decades, and may only need smaller sums of cash to keep their premises in operation. Below we’ll take a closer look at the different loan programs and explain how each could be utilised most effectively for different purposes.

Independent Pubs:

• Community Funds: If you are a pub owner who has been established for a long time, there is a high probability that you can use the good faith of loyal customers and local supporters to gather funding for a project, whether that is expanding your service range, or making minor improvements to the grounds. There is also the option of selling shares in your business to local patrons, whereby you’d develop a larger sense of community and responsibility, helping to keep your pub running at its best.
• Small Business Loans: Small business and microloans are tailored to the smaller scale of independent businesses, and typically offer more flexible terms, which, if a large sum of cash isn’t needed for your pub, you may want to consider. They can help you get through short term cash flow challenges, or help with any minor works that you are considering.
• Government Grants and Local Authority Funding: Independent pubs may also qualify for government grants or local authority funding that is specifically designed for supporting small pubs and community hubs, and are worth exploring via the government website or through your local council if you are struggling to find financial support.

 Pub Chains:

• Franchise Funding: Pub chains who operate under a franchise model can find access to specialised franchise funding programs that are designed to support the specific needs of your franchise, and will include anything from purchasing a franchise to operate under, marketing support for your chosen franchise, and initial inventory purchase to get your operation underway. Depending on the brand strength of your franchise, you may also find better loan terms due to the lowered risk of lenders investing in an established brand.
• Commercial Loans: Commercial loans in the form of mortgages and remortgages will be the most useful loan type an expanding pub chain can utilise, as you can use them specifically for acquiring new property, or expanding and improving existing ones. Commercial mortgage terms typically run for up to 30 years and tend to have the most favourable terms on the market, with more established brands again most likely to secure the best loan conditions.

Whether your pub is independently run, or is part of a large chain and franchise, you will be able to find a loan program that is best suited to meet your unique needs. We recommend that you speak to your financial advisor or accountant before you take further steps towards pursuing a loan option, as they will be able to guide you in finding the correct one to help you achieve continued growth.