Paul Thompson, partner at Acorn Commercial Finance, has hit back against claims of “perceived” lack of funding in the licensed trade, after property agents told the Publican’s Morning Advertiser that tenants wishing to buy the freehold of their pub may not have the ability to fund the purchase.
The agents’ comments were in response to the Liberal Democrats’ adoption of a range of policies, including the right for pub tenants to buy the freehold of their venue if it’s put up for sale at an independently assessed market value.
'Thriving' market
However, Thompson said the finance market has been improving steadily since 2010 and is now “thriving”.
“There is a misconception that finance is more difficult to come by. In fact, the challenger banks are desperate to increase lending to small businesses,” he said.
He added that the move by the political party to demand that pubs are offered to their tenants should be applauded by the industry, not criticised, as tenants are “the ideal parties” to look at purchasing the freehold of their units.
He said this was because:
- The tenant fully understands the profitability of the unit, while the pub company only has information regarding the rent, business rates and perhaps the barrelage
- The tenant can offer his/her accounts to a prospective funder and some funders will work closely with the broker to understand the future projection of the business once freehold
- A small number of lenders are keen to lend beyond normal limits to sitting tenants, including short-term funding for the VAT element of the purchase price, which can often be a significant sum and can halt the chance of purchase if it is not available
Thompson said that Acorn Commercial Finance had been funding tenants buying their freeholds for more than 15 years, and had worked with lenders to finance between 90% and 100% of purchase prices. More than 95% of clients submitted to the main lenders completed their purchases and the average mortgage amount in the past two years was 97% of purchase price, he added.