Why pub owners need business loans
Running a pub can be a real juggle. Your fixed costs have to be paid regardless of how quiet or busy you are, but business can be affected by anything from the weather to the success or failure of your local sports team.
You need to be prepared and have enough inventory laid in for the busiest of nights, but you could end up with all your precious cash tied up in stock and no money available to pay fixed costs such as your rent or mortgage, insurance, licencing fees, tax and wages for your staff. That’s why many publicans rely on business loans to help boost working capital and keep the cash – and the drinks– flowing freely.
If you’re looking for new ways to bring more people into your pub you could use a business loan to finance entertainment or events (such as big screens, live bands, trivia nights, karaoke, craft beer clubs), or to buy in attractions like pokies or Keno. You could also use it upgrade your bar or kitchen, try out new brands or hire a new chef to spice up your menu.
A business loan could also help you to hire extra staff and buy in more stock, so you can take full advantage of busy periods like the Christmas party season or major sporting events.
What are the requirements for getting a business loan?
Getting a business loan can be easier than you think.
While you can still expect to be knocked back by the big banks unless you have a solid trading history, a top-rate credit rating and collateral to offer, there are plenty of alternative lenders out there willing to offer business loans to pubs.
Each lender will have their own criteria when it comes to things like credit rating, how long you’ve been in business, and how high your turnover is. If you’re higher risk (e.g. if your credit score is low) you may still be able to get a business loan, although you can expect to pay a higher rate of interest to compensate for that risk.
The most important factor ALL lenders will look at is your capacity.
Lenders need to know that you will have enough cash – after all your expenses – to cover your loan repayments.
How to apply for a business loan
If you are applying to an alternative lender for a business loan, the process is usually quick and easy:
1Create a business case to check how much you can afford to borrow.
2Prepare your supporting documents – expect to be asked for:
3Choose your lender and loan product – be sure to shop around, because costs, terms and conditions vary. Be sure to find out about hidden fees and compare all the costs of each product, not just the interest or factor rate.
4Complete a simple online application form and upload your supporting documents. Most lenders will respond within days or even hours. Some will even give an on-the-spot decision.
Grow your pubSee if you qualify
What options are available to pubs?
There are several types of small business loans you could consider, to support or grow your publicans.
Unsecured small business loan
A short-term option, unsecured business loans are usually for between 3 months and 2 years.
You can use the funds for any purpose, such as stock. Many lenders will let you set a repayment schedule to suit your trading patterns.
A specific-purpose business loan secured on the equipment you are buying.
The term will often be tied to the lifespan of the equipment. You will not be able to sell or upgrade the equipment until you have repaid the equipment finance.
There are several types of business car finance you can use to buy your work vehicles, including car loans, hire purchasing and leasing.
While your work vehicles are under finance you will not be able to sell or upgrade them.
Business line of credit
A business line of credit is similar to an overdraft facility, giving you access to cash up to an agreed limit, often with the right to draw, repay and redraw funds as you need them.
You only pay interest on what you borrow, but there are often set up and admin fees.
Business credit card
Business credit cards are great for covering day-to-day expenses and making purchases, but unless you clear the balance each month the cost can be extremely high.
Before entering in to any business loan agreement, be sure to seek professional advice. It’s also important to ensure you understand all of the costs (including all fees). You can get a head start by using our business loan calculator.