Pub, restaurant and hotel finance in the UK today
Hospitality has been one of the hardest sectors to borrow in since 2020. Several high street banks have reduced their exposure to pubs, restaurants and hotels, and the ones still lending often apply generic property criteria that undervalue a well-run trading site. At the same time, wage, energy and duty costs have risen faster than menu prices, so lenders look harder at current margins than they did a few years ago.
The good news is that a specialist market exists. A number of lenders on our panel have dedicated hospitality and leisure teams who understand how a pub, hotel or gym is valued, and they continue to lend to operators with a clear track record and honest numbers. Our job is to put your business in front of the right ones, with a credit paper that answers their questions before they ask them.
How freehold pubs and hotels are valued
A freehold pub or hotel is valued as a trading business. A specialist surveyor estimates the fair maintainable trade the site would achieve under a reasonably efficient operator, deducts the costs of running it to reach a sustainable EBITDA, and applies a multiple that reflects the location, condition and type of site. That trading valuation is usually well above what the building would fetch empty.
Commercial mortgages on established freeholds reach up to 75% of the trading value, priced from 1% over Bank Rate depending on the product and structure, on terms of up to 25 years. Weaker trading or more specialist sites see lower loan to value. Because the valuation depends on trade, up-to-date site accounts and a believable forecast matter as much as the building itself.
Free of tie versus tied
A free-of-tie freehold gives the operator full control over supply and margin, and it is the strongest security for a lender. A tied lease or tenancy from a pub company limits both the margin and the security, so borrowing is usually smaller and often unsecured or government-backed. If you are buying a pub out of the tie, the lender will want to see the margin uplift modelled realistically.
Leasehold restaurants, bars and gyms
Leasehold operators borrow mainly on cash flow: term loans of up to 4x EBITDA, unsecured up to £2m, on terms of 1 to 10 years. Lease length, rent as a share of sales and any landlord consent needed for a charge or for works all affect what is available. The Growth Guarantee Scheme can help here, giving lenders a 70% government guarantee on loans of up to £2m per business group where there is little property security.
Funding refurbishments and site rollouts
A good refurbishment can transform a site's trade, but it costs money months before the uplift shows in the accounts. We usually arrange a term loan, from 6.5% a year or 2.5% over Bank Rate, sized to the works and any closure period, with a capital repayment holiday while the site is shut or bedding in. Kitchen equipment, furniture and fit-out are often better funded through asset finance at up to 100% of cost, keeping the term loan for the building works.
For a rollout of new restaurants, bars or gyms, lenders want evidence that the model repeats: what existing sites cost to open, how long they take to break even and what mature sites contribute. A plan built on that evidence, with sensible headroom for delays, is far more fundable than a single large number.
Buying a pub, hotel or hospitality group
We advise on hospitality transactions and run the debt process end to end: the information memorandum, the lender process, term sheets and negotiation through to completion. Acquisition finance usually combines a commercial mortgage on the freeholds with a cash-flow tranche secured on the combined trade, with total debt of up to 5x EBITDA on acquisitions. For a single site, lenders will look closely at the seller's trading figures and your plan to maintain or improve them. For a group, they will look at site-level performance and how the enlarged business will be run.
Speed matters when a good site comes to market or an operator falls into administration. Bridging finance, from 0.69% a month on terms of 1 to 24 months and up to 100% loan to value with additional security, can secure the purchase quickly and be refinanced onto a commercial mortgage once the site is trading under your ownership. Talk to us as early as possible so the funding is lined up before you make an offer.
Asset finance for kitchens, fit-out and gym equipment
Commercial kitchens, extraction, cellar cooling, dispense systems, furniture and gym equipment all have a clear working life and, in many cases, a resale market. Funding them through hire purchase or leasing, at up to 100% of the asset cost over 2 to 7 years, keeps cash and the term loan available for building works, opening stock and pre-opening wages. For a multi-site operator, a master asset finance line can be drawn site by site as each refit happens, rather than negotiating from scratch every time.
Planning for seasonality and rising costs
Lenders know hospitality trade is uneven. What they want to see is that you know it too. A monthly forecast that shows the January and February low points, quarter-day rent, VAT and annual licence costs, with the facility covering them comfortably, is far more persuasive than an annual average. Where trade is strongly seasonal, repayments can often be profiled to match, with lower payments in the quiet months and higher ones in summer or the run-up to Christmas.
Forecasts should also reflect the next National Living Wage rise, the date fixed energy contracts end and any planned menu price changes. Building those in before the lender asks shows a management team in control of its margins.
Refinancing merchant cash advances
Merchant cash advances are a common route for operators that the banks have turned away. They are fast, but the effective cost is high and the daily sweep from card takings can leave the business short at exactly the wrong time. Once the business has a steady trading record, moving the advances onto a term loan from 6.5% a year, or into a wider refinance, usually costs less and replaces an unpredictable daily deduction with a fixed monthly repayment.
What makes a hospitality deal fundable
Very few operators have all of this ready on day one. We help pull it together, present each site in the way a hospitality credit committee reads it, and manage the valuers and lawyers through to completion.
- Monthly management accounts that reconcile to the filed accounts
- Site-level profit and loss, with wet, dry and rooms split
- Current wage and energy costs reflected in the forecast
- A cash flow forecast that shows the quiet months honestly
- Clear title, lease or tenancy documents for every site
- Up-to-date HMRC, suppliers and licences