Pub bridging finance and loans

Who can borrow and what lenders look for

A pub bridge is judged more flexibly than a term mortgage on the property and the trading position, because the loan is short term and security-led, but lenders are strict on the exit. A bridge can be advanced on a pub that is closed, mid-refurbishment or trading below its potential, where a term lender would decline, which is exactly why bridging exists for the licensed trade. What a bridging lender needs is a clear charge over a saleable, financeable asset and a credible repayment route within the term. For an operator, that route is usually a refinance onto a commercial mortgage once the pub is reopened and trading at a level a term lender will support; for an investor, it can be a sale or a change of use. The lender will check the borrower's experience and the logic of the deal, including any planning angle such as an Asset of Community Value designation that can affect a future sale or change of use, but it is not underwriting years of trading accounts the way a term mortgage demands, which is what lets a bridge move at the pace a pub purchase sometimes needs. We make sure the exit is real and arranged before the bridge draws, so you are never left holding a bridge with no way out.

How much you can borrow

Bridging lenders advance up to around 70 percent loan to value, with the figure set by the valuation basis and the quality of the exit. On a closed pub the valuation often leans toward the vacant-possession value rather than a going concern, because there is no current trade, which can pull the day-one advance down even where the reopened pub will be worth more. Where the pub needs work, the loan may be sized against the current value with a further tranche released in stages for the refurbishment, or against the value once the works are complete, which is closer to a light development facility than a simple purchase bridge. Because the loan is short term and interest can be retained or rolled up, the net amount you receive at completion is the gross loan less retained interest and fees, so it pays to size the facility against what you actually need rather than the maximum available. We model the loan to value, the retained interest, any staged works tranche and the day-one net advance up front, so there are no surprises at completion and the bridge is no larger, and no dearer, than the deal requires.

Rates and costs

Bridging is priced per month, indicatively around 0.75 to 1.30 percent, because it is short-term, fast and flexible, so it is dearer than a term mortgage and should be used only for as long as you need it. Interest is usually retained or rolled up rather than paid monthly, so it does not strain cashflow during the term, which matters on a closed pub that is not yet earning. Expect a lender arrangement fee of around 1 to 2 percent, a valuation fee, legal costs for both sides, and sometimes an exit fee. The single biggest cost lever is time: a bridge held for three months costs a fraction of one held for eighteen, so lining up the term refinance early matters. We disclose our broker fee in writing, quote the all-in cost over the expected term, and never claim an exclusive tie to any lender.

Bridging, acquisition finance or development finance

Bridging is the right product when you need to move faster than a term lender can, or when the pub cannot yet be financed on a term mortgage because it is closed, mid-refurbishment or trading below the level a term lender wants to see. It is short-term money and is always meant to be repaid by something cheaper: a commercial mortgage once the pub is trading, or a sale. If the pub is already trading well and you have time, pub acquisition finance is cheaper and the right first port of call. If you are building, extending or changing the use of the building, development finance is the better structure, and where the works are heavy enough a refurbishment facility may sit between the two. The classic pub sequence is to bridge to buy or reopen quickly, refurbish, then refinance onto a long-term commercial mortgage once the pub has a trading record. The discipline that makes bridging work is planning the exit before the bridge draws, so the bridge does its job and then steps aside.