Where To Find The Money
Options AvailableThe options you have available to fund your pub will depend on what money you have, what you are able to raise by selling some of your assets, and what you can borrow from a lender. Before going ahead, you should seek professional financial advice in order to fully understand the implications.
Using Your Own Money
You need to establish how much money you personally have available to acquire your pub. The exercise in Chapter 1, and discussions with your financial adviser or accountant will clarify what funds you have at your disposal. This may be capital you have readily available, such as bank or building society deposits, or assets that could be sold to raise further money, such as shares etc. A good financial adviser or accountant will discuss the options that you have available, together with their
implications. How best to use your cash, and what tax issues may arise, are important questions that need to be answered.
The next step is to decide whether to limit your investment to the capital that you personally have available, or to borrow additional funds to acquire your pub.
Borrowing Money
Borrowing money provides you with more capital and therefore widens the choice of pub that is open to you. The downside to this is the added risk and cost to your business. The additional burden of a loan needs very careful consideration. You need to be certain that the business can carry the extra costs involved and to be able to repay the loan.
Lenders have diverse views on the pub business. Dependent on the type of pub operation being considered, some may not be willing to lend you money at all. Those who are willing to lend you money will set limits to the amount of loan, requiring you to make up the balance of any ingoing or purchasing costs.
People with no experience of operating a pub will be considered a greater risk by lenders, than experienced operators. As a consequence, the terms of a loan may be less attractive than for experienced publicans. The performance of the pub is important too, and will be taken into account, together with the applicant’s experience. An experienced publican with an excellent track record, who wants to borrow money for a highly profitable business, will give the lender maximum confidence. An inexperienced person with no track record, who wants to purchase a poorly performing pub, will inspire much less confidence.
Choosing A Lender
There is a wide range of lenders today. They include the traditional lenders, such as banks, to more specialist lenders who deal with particular types of business.
Your financial adviser or accountant can advise you on which lenders to approach and can help you prepare your case. They will be able to advise you on costs and any specific requirements that a lender will be looking for. A number of specialist, pub finance brokers also provide this type of service. A broker will charge a fee for their work, normally based on a percentage of the loan. If looking at this option, choose a reputable, well-established company.
Annual Percentage Rate (Apr)
The Annual Percentage Rate or APR of a loan, takes into account other charges you have to pay, not just the interest on the amount you have borrowed. The APR allows you to compare different loan offers. A lower APR means the loan costs you less than one with a higher APR.
Other things to consider are:
- whether there are any penalties for paying the loan back early;
- whether the interest rate is fixed or variable;
- whether there are any other costs not included in the APR calculation of the loan.
You also need to know how much your monthly payments will be, to ensure that you can afford the payments, and budget for them.
The APR that you are offered on a loan will depend on your credit rating and other lender criteria. Be aware that APRs quoted on advertisements may not necessarily be offered to you. Higher rates may apply to your particular circumstances.