Option to buy your freehold?

Option to buy your freehold?

With the major PubCos reviewing their estates, recent years have seen many tenants being given the option to buy the freehold to their business, thereby swapping rent for a mortgage and removing themselves from an onerous beer tie.

We have helped many with arranging funding and guiding them through the process to complete the purchase.

The key point for us is that in most cases the marriage of the property purchase to your existing goodwill and inventory invariably means that the business as a whole is worth more than the price you pay for the property.

We work specifically with lenders who recognise this factor and who will lend on the value of the business not just the price you pay for it. This means that subject to satisfactory valuation then you may need little or in some albeit rare cases no deposit.

This is particularly true where you have already paid a substantial premium for the goodwill .

For example:

  • Property purchase £300,000
  • Assumed value of the business as going concern £370,000
  • Maximum loan £240,000 (maximum 65% of the value of the business)
  • Current interest rates circa Bank Base + 3.5% so loan repayments on this would be around £1,420.00 per month over a 20 year term (Bank base 0.25% at the time of writing)

Financial assessment:

The lender will require 2/3 years accounts for your business to assess whether the business can meet its requirements for the servicing the loan and your own drawing requirements.

The key points here are that when considering the accounts your rent will be added back to the bottom line and they will allow an adjustment on the gross profit to reflect buying without tie.

Everyone’s situation is different so in the first instance do not hesitate to call us to discuss your proposal.

Call Michael or Roger on 01834 849797

National Association of Commercial Finance Brokers

Business Mortgage Solutions is a member of the National Association of Commercial Finance Brokers and is regulated and authorised by the Financial Conduct Authority