Wondering how to get a loan for your pub? It’s about showcasing your skills and experience to prove you’re a capable pub owner. 

Loan Basics: 

How much can I borrow? 

• For freehold (with gaming): Up to 65% of the price. 
• Freehold (without gaming): Up to 50%. 
• Leasehold (with gaming): Up to 50% of the valuation. 
• With a guarantor: Up to 100%. 

Loan Terms: 

• Max term for principal and interest: 5 years. 
• Interest-only term: Max 3 years. 
• Loans over $5,000,000 case by case. 
• Business plan and 3 years of pub experience preferred. 

Lending Criteria Simplified: 

• Pubs seen as unique by lenders. 
• Need 1.5 to 2 times income for proposed expenses. 
• Credit history not a deal-breaker with explanations. 
• Prove your ability to run a successful business. 

Pub Valuation: 

• How banks value pubs: 
• Two valuation types: Real property and business value, Lessee’s interest value. 
• Considerations: Net gaming takings, commissions, total revenue, gross margin, and more. 

Security for the Loan: 

What can you use? 

• Mortgage over pub or lease. 
• Fixed or floating charge over pub’s assets. 
• Director’s guarantee. 
• Charge over liquor license and related licenses. 
• Consent deed between lessor/lessee and the bank. 

Smart Tips for Buying a Pub 

1. Seek Professional Advice: 

• Before diving into the pub business, get financial and legal advice. 
• Initial consultations with experts are often free, helping you avoid common pitfalls. 
• Specialists, like hospitality-focused accountants and solicitors, can optimize your business setup and safeguard your interests. 

2. Mentorship Matters: 

• Consider having a mentor with industry experience, showcasing your commitment to lenders. 
• A seasoned mentor aids in long-term success by steering you away from costly errors and guiding profit-boosting strategies. 
• Joining industry associations like the Australian Hotel Association (AHA) provides valuable support and training. 

3. Leasehold vs. Freehold: 

• Understand the implications of freehold and leasehold ownership. 
• Leasehold arrangements can offer higher returns with no property expenses upfront. 
• Your investment goals determine whether a leasehold, with potential portfolio expansion, suits your needs. 

4. Embrace Hard Work: 

• Acknowledge the demanding schedule of pub operations, from late nights to early supply deliveries. 
• Success hinges on your dedication and ability to adapt to the industry’s unique demands. 

5. Lease Duration Considerations: 

• Opt for popular 17-18 year lease terms with a purchase option for stability. 
• Shorter terms may require amortization adjustments in your budget. 
• Long leases offer establishment stability but involve rent payments over an extended period, with maintenance costs to factor in. 

6. Consult Professionals: 

• Engage a hospitality accountant to navigate lease term intricacies. 
• Seek advice from financial advisers and accountants regarding long-term financial goals tied to pub ownership. 

7. Lease Agreement Essentials: 

• Clarify lease arrangements with a solicitor’s assistance. 
• Ensure the negotiation includes inventory details and responsibilities for fixtures, fittings, and services installation. 
• Clearly define liabilities in the lease agreement, a crucial step facilitated by a business broker and solicitor collaboration. 

Freehold or Leasehold: Making the Right Pub Purchase 

Ownership Dilemma: 

• Leasehold offers higher returns but entails potential losses if the business fails. 
• Choosing between freehold and leasehold depends on your circumstances and lifestyle. 
• Basic understanding of cash flow management and a hospitable nature are essential for success. 

Benefits of Freehold: 

• Freehold provides value in the land even if the business faces challenges. 
• Ideal for those in later stages of life seeking stability without active business involvement. 

Due Diligence Checklist: 

• A buyer’s agent aids understanding, but firsthand experience with the property is crucial. 
• Key questions for current owners include accommodation availability, proximity to popular destinations, and existing licenses. 

Making an Offer: 

• Beyond price, consider sale conditions; unresolved issues can impact the decision. 
• A letter of offer or Heads of Agreement outlines intentions, acting as a preliminary contract with the deposit. 

Mitigating Risks: 

• Involving a commercial buyer’s agent or business broker helps draft agreements, providing a safety net. 
• Formal agreements with agents and vendors can temporarily remove the property from the market, allowing thorough due diligence. 
• Refundable deposits offer protection if critical conditions aren’t met. 

Renovation Considerations: 

• Whether restoring the tavern’s glory or adjusting to the location, plan for a development application. 
• Hiring professionals expedites the process, costing around $20,000 or more. 
• Budget adequately for fit-outs, including plumbing and electricity, and be mindful of potential construction delays. 

Permits and Responsibilities: 

• Promptly apply for necessary permits after property inspections. 
• Liquor licenses often rest with the bar, with the operator needing courses to be the license nominee. 
• Address potential liabilities, including damages to patrons post-departure, through community impact statements. 
• Licensing applications may take up to 8 weeks due to regulatory backlogs; plan accordingly for business commencement. 

Poker Machines and Licenses: 

• Check if poker machine licenses are attached to the leasehold; if not, apply separately. 
• Various permits, including gaming, food safety, and outdoor seating, may be necessary based on the pub’s offerings. 

Location and Competition: 

• Main road visibility is advantageous, but the pub’s offerings and atmosphere are crucial for success. 
• Understand and balance loyalty to existing patrons with strategies to attract new customers. 
• Healthy competition can create an entertainment precinct, drawing more people, while complementary businesses enhance appeal. 

Considerations for Location: 

• Check for council restrictions on noise or opening hours based on your business model. 
• Obtain vacancy rates from the landlord, commercial buyers agent, or local information centers. 

Pub Purchase Costs: 

• Affordable options exist, especially in regional areas, offering opportunities for buyers to establish new hubs. 
• Thoroughly research the area, leverage local knowledge for negotiation, and explore established real estate listings. 

Running Costs Analysis: 

• Identify operational benchmarks by comparing turnover to rent and staff wages. 
• Consider location differences (regional vs. city) in costs like wages and freight. 
• Calculate rent per person based on license capacity for better financial planning. 

Operational Guidance: 

• Leverage the Australian Hotel Association (AHA) for operational benchmarks and insights. 
• Address environmental concerns like waste management and recycling common to commercial properties. 

Safety and Accessibility: 

• Be aware of Occupational, Health, and Safety (OH&S) laws, especially regarding kitchen equipment and public safety. 
• Confirm wheelchair accessibility to avoid potential complaints under the Disability Discrimination Act 1992. 

Zoning Considerations for Pubs and Bars: 

Commercial Zones Overview: 

• Pubs and bars fall under Commercial 1 and Commercial 2 zones. 
• Commercial 1 allows taverns, hotels, and gaming premises without a planning permit, except in strip shopping centers where gaming is prohibited. Liquor license is still required. 
• Commercial 2 prohibits accommodation, except for specific cases like caretaker’s house, motel, and residential hotel, which need a permit. 
• Some zones are designated ‘dry,’ disallowing the sale of liquor. 
• Live music venues might face challenges in residential areas, and gaming venues are restricted in strip shopping zones. Consult a business broker before purchasing. 

Settlement Duration: 

• Similar to other commercial properties, settlement for a pub or bar typically takes 6 to 8 weeks. 
• Keep in mind that applying for a liquor and gaming license, which can take up to 8 weeks for approval, is part of the process. 

Seek Expert Advice: 

• If acquiring the pub leasehold, consult the landlord for guidance, as they often aim for your success and may offer a helpful handover period. 
• The Australian Hotel Association (AHA) provides comprehensive education and support for running a successful pub or bar.