Financing a pub or hotel purchase

A freehold pub is the building and land, usually leased to an operator; the buyer is a landlord and the loan is a commercial property loan on the lease. A leasehold pub is the business: the right to occupy under a lease, the liquor licence, gaming entitlements where they exist, plant and goodwill; the buyer is the operator and the loan is a business acquisition loan. A freehold going concern is both, bought together, financed as a property loan plus a business loan, with most of the debt on the property.

Trading revenue and EBITDA across bar, food, accommodation and gaming. The gaming component in particular: gaming machine entitlements are valuable, regulated and tradeable in some states, and lenders assess them carefully. The liquor licence conditions and trading hours. The lease terms if leasehold. Location and the local competition. Valuers use both income capitalisation and comparable sales, and lenders take the lower of freehold value on rent and going concern value.

Hospitality experience, ideally running a similar venue. Three years of trading financials from the vendor and a clear explanation of any changes. The licence transfer process and any conditions. A business plan for the first year. Enough equity that the LVR sits comfortably, because pubs trade on thin margins and lenders want a buffer. First-time operators buying a leasehold with no property are the hardest file in hospitality lending.

Freehold in a holding entity, often a trust or SMSF, leased to the operating company that holds the licences. This separates the property from trading risk, allows the freehold to be sold separately, and is how most bank hospitality teams expect to see it. Equipment such as kitchen, cool rooms and gaming machines is financed separately where it is not included in the going concern.