Pub acquisition finance and pub mortgages
The commercial mortgage that funds the purchase of a freehold pub, sized on the trade the pub generates and its going-concern value rather than the bricks alone. We arrange and place the debt with the lenders that understand the licensed trade.
What is pub acquisition finance?
Pub acquisition finance is the commercial mortgage used to buy a trading pub as a going concern. It is the long-term loan that sits behind the purchase, secured by a first charge over the freehold and supported by the trade the pub produces. It is often called a pub mortgage, and it is finance to acquire a pub as a business, not simply lending against an empty building.
Lenders look at a pub as an operating asset. They examine the wet and dry split, the share of turnover from drink against food, the barrelage the pub puts through, any letting rooms or accommodation income, and whether the house is free of tie or trades under a beer tie to a pubco or brewery. They then size the loan against the fair maintainable trade, or FMT, the sustainable level of business a reasonably efficient operator would expect to run, and the EBITDA that trade produces. The valuation is carried out on a going-concern basis, reflecting the pub as a functioning business, so a well-trading free house supports more debt than its bricks-and-mortar or vacant-possession value alone would suggest.
Tenure and tie shape the deal. A freehold free house, owned outright and free to buy beer on the open market, is the cleanest case and usually attracts the keenest terms. A pub bought subject to a beer tie, or one held on a leasehold from a pubco, is underwritten differently because the tie and the rent affect the margin and the cash that services the debt. We confirm the tenure and the tie position before approaching lenders, because it changes both who will lend and on what terms.
As an illustration, and not an offer, take a freehold wet-led community free house bought for 750,000 pounds, with a going-concern valuation of around 720,000 pounds supported by a stable FMT. A lender might advance around 65 percent of the going-concern value, close to 470,000 pounds, over a 20 year term on capital and interest, leaving the buyer to find a deposit of roughly 280,000 pounds plus fees and stock. The binding test is usually whether the EBITDA covers the repayment with headroom, not the loan to value alone, so the trade does the heavy lifting.
We place these mortgages across the specialist licensed-trade and challenger lenders that back the sector, names such as OakNorth, Shawbrook, Allica Bank and Cynergy Bank, alongside the clearing banks and specialist leisure-property lenders. Whether you are an experienced multiple operator, a first-time buyer with a strong manager in place, or an investor buying a pub let to an operator, we match the deal to the lender most likely to support it.
Pub acquisition finance is the head of a family of products. Where a term lender cannot move quickly enough, bridging completes the purchase and the pub refinances onto a term mortgage afterwards. Where the pub needs work or is closed and finding its trade, refurbishment or development finance carries it to a point where a term mortgage fits. We map the route across all of them so the acquisition is funded at the right price.
- Commercial mortgage to buy a trading pub as a going concern
- Sized on fair maintainable trade and EBITDA, not just bricks and mortar
- Going-concern valuation reflecting the pub as a business
- Wet and dry split, barrelage, tie and tenure all assessed
- Open to experienced operators, first-time buyers and investors
- Placed with OakNorth, Shawbrook, Allica Bank, Cynergy Bank and the wider market
Indicative terms
- Loan sizeFrom around 150,000 pounds, no fixed ceiling on strong covenants
- Loan to valueIndicatively up to 60 to 70 percent of going-concern value
- Term15 to 25 years
- RateIndicatively from around 7 to 10 percent, or a margin over base or SONIA
- RepaymentCapital and interest, or interest-only on the right profile
- Interest coverTested on EBITDA from fair maintainable trade
- Key testsWet and dry split, barrelage, tie, tenure, operator covenant
- SecurityFirst legal charge over the freehold, debenture on the operating company
Indicative only. Terms vary by lender, scheme and borrower and are not an offer of finance.
Who it suits
- Experienced licensees buying a single pub or adding to a small estate
- First-time buyers entering the trade with a strong operator or manager in place
- Multiple operators acquiring trading free houses to grow a region
- Investors buying a freehold let to an operator on a lease
- Buyers acquiring a pub from administration or a closed-pub sale with a trading plan
Discuss pub acquisition finance
A view on fundability within one working day.
How we arrange your acquisition finance
Review and terms
We review the pub, the trading accounts, the wet and dry split, the tie and tenure position and your experience, then approach the lenders whose criteria fit and agree indicative heads of terms.
Decision in principle
We secure a decision in principle setting the loan, the rate and the conditions, so you can offer or exchange with confidence.
Valuation and due diligence
The lender instructs a going-concern valuation and works through legal and commercial due diligence, including the trade, the licence and the operating company.
Offer and completion
The formal offer is issued, the legal work and licensing transfer complete, and funds are drawn to complete the acquisition.
Who can borrow and what lenders look for
Lenders advance to operators and investors buying a pub as a trading business. They expect a credible operator covenant, which for a first-time buyer usually means relevant experience or an experienced manager and a clear business plan, and for an established licensee means a track record across existing sites. The trade matters most: lenders examine the wet and dry split, the barrelage and any food and accommodation income, the seasonality and the catchment, and how much of the turnover leans on a single demand source such as a sports crowd or a summer trade. A free house buying beer on the open market keeps more margin than a tied house paying a brewery price, so the tie position feeds straight into the affordability. For an investment purchase let to an operator, the focus shifts to the lease, the rent cover and the tenant covenant. Where the pub has living accommodation and is being bought by an individual as their only home, the case can touch the FCA regulated mortgage perimeter, and we refer that to an appropriately authorised firm. We package the case to put your strengths in front of the right lender and explain any weaknesses before they become a problem.
How much you can borrow
On a freehold acquisition, most lenders advance up to around 60 to 70 percent of the going-concern value, and the binding constraint is usually interest cover rather than loan to value. Lenders size the loan so that EBITDA from the fair maintainable trade covers the debt service with headroom. A pub running a healthy barrelage with a strong food offer and letting rooms supports more debt than a wet-led house with the same property value but thinner margins. The going-concern figure also has to be read against the vacant-possession value, the price the empty building would fetch if the trade fell away, because a wide gap between the two tells the lender how much of the value depends on the business continuing to trade, and a cautious lender will lend nearer the lower figure on a fragile trade. As an illustration only, a food-led freehold inn with letting rooms and an EBITDA of around 110,000 pounds might support a loan in the region of 600,000 to 650,000 pounds where the cover and the going-concern value both allow, while a wet-only town pub with the same building value but a slimmer profit would borrow noticeably less. We model the achievable loan from the accounts and the trade before we approach lenders, so the figure we quote is grounded in the pub's actual business.
Rates and costs
Pub commercial mortgage rates are indicatively from around 7 to 10 percent, quoted either as a fixed rate or as a margin over the Bank of England base rate or SONIA, with the exact rate set by the operator covenant, the strength and durability of the trade, the tie and tenure, the loan to value and the term. Expect a lender arrangement fee, usually around 1 to 2 percent of the loan, a valuation fee for the going-concern report, and legal costs for both sides, plus the cost of taking on the stock at completion. A free house generally prices a little keener than a tied or leasehold purchase, because the open-market beer buying protects the margin that services the debt. Our broker fee is disclosed in writing up front and we never claim an exclusive tie to any lender. We compare the total cost of the deal across the market, because the lowest headline rate is not always the cheapest facility once fees and terms are counted.
Acquisition finance, bridging or a term loan
Acquisition finance is the right product when you are buying a trading freehold pub you intend to hold and run, or let, for the long term, and you have the time a term lender needs. If you need to move faster, for an auction or a competitive private-treaty purchase, pub bridging finance completes quickly and is refinanced onto a term loan once the pub settles. If the pub is closed, tired or trading below its potential, refurbishment or development finance brings it up to the standard a term lender wants before the long-term mortgage fits. Many buyers use these in sequence: bridge to buy, refurbish or reposition, then refinance onto a long-term commercial mortgage. We map the route so you are not paying short-term money for longer than you need to.
Pub acquisition finance: common questions
Can you get a mortgage to buy a pub?
Yes. A trading pub is bought with a commercial mortgage sized on its going-concern value and the EBITDA from its fair maintainable trade, not on the building alone. Specialist licensed-trade lenders, challenger banks and the clearing banks all lend to operators and investors, and we place the debt with the lender whose criteria best fit the deal.
How much deposit do I need to buy a pub?
On a freehold going concern, lenders typically advance up to 60 to 70 percent of the going-concern value, so a buyer usually needs a deposit of around 30 to 40 percent plus fees and stock. A strong free house with a healthy wet and dry split can stretch the loan, while a fragile or seasonal trade tightens it. We model the figure from the accounts before approaching lenders.
What is fair maintainable trade and why does it matter?
Fair maintainable trade, or FMT, is the sustainable level of business a reasonably efficient operator would expect to run from the pub, ignoring any unusual highs or lows under the current owner. Lenders and valuers size both the going-concern value and the affordable loan on FMT and the EBITDA it produces, which is why the trade, not just the property, drives how much you can borrow.
Is it harder to finance a tied pub than a free house?
A free house buying beer on the open market keeps more margin and is usually the cleaner case. A tied house pays a brewery or pubco price for its beer, which trims the margin that services the debt, so lenders look harder at affordability. It does not rule the deal out, but it can affect the loan to value and the rate, and we place it with the lenders most comfortable with the tie.
How long does pub acquisition finance take to arrange?
A term commercial mortgage typically takes around eight to twelve weeks from application to completion, driven mostly by the going-concern valuation, the licensing transfer and legal due diligence. If you need to move faster, we can arrange bridging finance to complete quickly and refinance onto the term mortgage afterwards.
Discuss pub acquisition finance
Send us your scheme and we will come back with a view on fundability and likely terms within one working day.