There comes a time when owners of a B&B or Guest House decide they want to retire or just change direction. This is often a decision that is taken over a couple of years, during which time they trade their business on a limited basis and to suit their lifestyle requirements. Consequently, it may not make as much money as it used to. Whilst this might suit the owners, it makes getting a commercial mortgage more challenging for potential buyers. Challenging, but not impossible.
How do B&B lenders decide how much to lend?
Lenders require the last three years of a commercial hospitality business’s trading accounts, so they can see how it has been operated and how profitable it is. If the business has not been traded to its full potential, the lender will view it as being a marginal or non-profitable concern.
Whilst the lender may understand the reasons for the B&B or Guest House’s decline in trade, there is no guarantee for them that you, as a new operator, can improve it – regardless of your business plan. As a result, lenders examine the last three years’ trading accounts for a steer on trading profit when assessing the mortgage they can offer, in order to minimise their risk and exposure. What they lend will be a reflection of this.
What can you do?
Some lenders, although not all, will take into account a second income from one of the applicants. This means that if one of them has a job which can practically be continued whilst the trade is built up, that income can be taken into consideration. This, in turn, helps with the debt service cover.
Obviously, once the business has improved and can sustain the loan repayments on its own, a second income will not be necessary and both parties can work in the B&B or Guest House. Positioning of the loan application becomes even more important and at Stewart Hindley & Partners we have the experience and ability to work with you to get the deal across the line and you into your exciting new lifestyle.
Talk to Stewart Hindley & Partners about B&B or Guest House mortgages
If you find a business you want to buy and the turnover or profitability doesn’t look great, even if it’s making a loss, don’t immediately discount it. We are more than happy to look at the accounts for you and to see if we can raise a mortgage to help with your purchase. Get in touch and we can discuss your options.