Mortgage for a Pub/Bar?

MrChills · #1 Posted **Mar 2, 2016, 11:44 PM**

This is certainly a different thread, but I figured someone on here would have the answer.

I am possibly looking into purchasing a small pub, and assumed it would be easy enough given I am in good standings with several residential mortgages and the sale price is extremely low. However upon contacting multiple mortgage companies they all say that they don't provide mortgages on a pub/bar.

Does anyone here know of a mortgage company that would do that or other possible lending institutions.

Many thanks

SignalHillHiker · #2 Posted **Mar 2, 2016, 11:47 PM**

I don't - but perhaps your municipal Board of Trade may have some recommendations.

Marty_Mcfly · #3 Posted **Mar 3, 2016, 1:36 AM**

Also check possible agencies that may fund "risker" business ventures; I understand why banks and whatnot may not fund pubs/bars. I was enthused about Futurprenue Canada, however I recently heard that they don't provide loans for restaurants/bars.

lio45 · #4 Posted **Mar 3, 2016, 2:20 AM**

If I were you, I would inform the Seller that given the fact that it's virtually impossible to finance a bar, they will have to accept to carry a significant portion of the price.

Or else they can keep it and wait forever until they find someone who has enough cash to buy it outright yet doesn't have better things to do with their time than running a bar. Any of the two is easy enough to find, but the two together, that's not common.

1ajs · #5 Posted **Mar 3, 2016, 3:38 AM**

hunt around for a buisnes loan not a mortgage inles ur buying a building as well

your asking thr wrong question and they will say no as it makes u sound stupid and niave ask the right one and u will the right answers lots to research lots bdc a good place to start for liture and ur look trade board as mention above

Kitchissippi · #6 Posted **Mar 4, 2016, 8:44 PM**

A pub if it in a leased property isn't a hard asset that you could take a mortgage on. What you are looking for is a business loan, and banks would be looking for a collateral asset of equal value. if you have enough equity built up in your real estate holdings, the easiest way is to convert a regular mortgage into a more flexible equity line of credit that allows you to take money out. Usually you only have to pay the monthly interest, the principal is optional and you can pay that down as fast or slow as you want. You can write-off the interest payments as a business expense 100%, so if your pub has good cash flow it shouldn't be too bad with today's interest rates. However, you are basically risking your house.

lio45 · #7 Posted **Mar 4, 2016, 8:51 PM**

I was assuming he isn't currently sitting on a significant amount of equity in his residence (or any of his other residential properties -- he mentions he has a few) that can be readily tapped at ~2.5% interest. I am pretty sure I am right. Or else his (lack of) business sense worries me.

Before bothering with the paperwork for a business loan application (and trust me, that chicken is FAR from hatched at this point) I would definitely discuss a private Seller mortgage with the Seller. Doesn't cost anything, and you have a very compelling argument -- generally speaking, no one with all the cash will want to run this pub, and no one wanting the pub will have all the cash, and it's not an asset that can be financed.

If they disagree with you, they can keep it and see if they'll find another cash buyer... when they don't, they will likely contact you back, because you're still a pretty solvent and credible buyer, basically the next best thing to a cash buyer. AND they get to "play bank" earning their proceeds slowly (which might be advantageous for tax brackets) at a really interesting interest rate (up for negociation between you and them, but I suppose you can go up to the high single digits without problem).

Coldrsx · #8 Posted **Feb 4, 2021, 4:09 AM**

If you can't buy it with cash, don't buy it is what I was always told.

Same risk level as a motorcycle.

lio45 · #9 Posted **Feb 4, 2021, 5:17 AM**

Quote:

Originally Posted by Coldrsx

If you can't buy it with cash, don't buy it is what I was always told.

Same risk level as a motorcycle.

That's got to be near the top of the worst advice ever given. Harnessing leverage is pretty damn essential in business if you want to accomplish anything.

Coldrsx · #10 Posted **Feb 4, 2021, 5:25 AM**

Quote:

Originally Posted by lio45

That's got to be near the top of the worst advice ever given. Harnessing leverage is pretty damn essential in business if you want to accomplish anything.

Having had what, three friends try and fail with pubs, it is perhaps more for you to choose your own fate, but tis not bad advice.

Capital is capital and you don't want to tie that up if you can spare it for operational needs, but and again, pound foolish and penny wise.