Many pub and bar owners are wanting to expand their business, and this may require funding. In an ideal world, businesses would be able to finance expansion through working capital, but not every business has enough of this, so must find a source of borrowing, which could be bridging finance.
Expanding a business by taking over another pub can be costly. According to Fleurets ‘Survey of Pub Prices’ published in January 2018, freehold pub prices have risen by 14.6%, with the average freehold cost being £416,624. Leasehold prices have risen more, by 31% to an average of £51,980.
Many business owners use bank loans to finance their expansion, but obtaining a bank loan can be a slow process, and any delays could result in time-sensitive deals falling through. An increasing number of pub owners are therefore turning to bridging loans. If the business owns a pub or bar, a bridging loan is often easy to obtain as the property can be used as security against the loan. It is possible to get a loan if the business has been successfully trading for just one year.
If the business is expanding by building an extension to the existing building, a bridging loan can be used to fund the construction work.
Some borrowing sources may require equity in the business, but bridging finance lenders do not require this, they only need to be satisfied that property can act as security for the loan and that the business has a clear idea when and how the loan can be repaid.