Banks still slow to lend to pubs, say agents

20-May-2014 - Last updated on 25-Jun-2024 at 09:54 GMT

Christie Finance director Chris Field: 'We are regularly approached by clients who have been turned down by their own bank'

Banks still perceive the pub sector as “a risky bet” when it comes to lending and will only consider issuing loans if applications meet stringent criteria, according to property agents.

The warning comes after recent research by alternative finance company Fleximize showed that 65% of small and medium enterprises (SMEs) believe banks should be forced to pass on to alternative lenders details of SMEs they have rejected for funding.

'Window dressing'

Everard Cole managing director Tom Nichols said there was no lack of purchasers for pub properties, but the main obstacle to any sale was lack of funding.

“We have seen some of the high-street banks nervously re-enter the leisure sector with targets to lend to SMEs, but the process is habitually slow and laborious and does little to change our view that this is merely window dressing,” he told the Publican’s Morning Advertiser.

“Most banks were badly burnt in the crash being over exposed to commercial property and still perceive the pub sector, in particular, as a risky bet.”

He added that businesses that have historic trading figures often obtain better interest rates and up to 100% loan to value (LTV), compared to 50% LTV for those that are closed and have no trading accounts.

'Selective'

Chris Field, director of Christie Finance, said a considerable number of loan applications from viable SMEs were being declined by the high-street banks because the application “fails to meet ‘criteria’ or is outside of ‘bank policy guidelines’”. He said this was despite the fact there were often some “real positive factors” to the deal that were not considered.

“At Christie Finance we are regularly approached by clients who have been turned down by their own bank, despite a long-standing relationship,” he said. “But often, we secure the solution elsewhere.

“While the majority of bankers will always quote ‘our doors are open for business’ the reality is that they are selective and may quote they are ‘lending responsibly and cautiously’. Commonly, lending managers refuse to challenge ‘policy’ and seem to concentrate on the negatives and why they can’t lend.”