Mortgage for B&B

BooUp

Hi. My wife and I were thinking of setting up a B&B. Can anyone advise on what the options are for raising finance to do this please? Is it the normal 3x residential salary mortgage option, or would we have to apply for a different business type mortgage and if so, what is the norm around these on how much we could borrow etc.

Basic questions I know and as you can see we are just starting off thinking about this!

(Background: we have experience in managing hotels and pubs and could raise some capital through sale of our own house)

Thanks for your time

Flash_G_2

I would be interested in a reply for this as well....... Anyone with knowledge of B&B mortgage requirements?

koexelek

It would have to be done on a commercial mortgage, not a residential.
If you are continuing in PAYE employment as well though, that will help your case... rather than the lender just having to rely on projected income for the new venture

Flash_G_2

Sorry to hijack the thread but I hope you don't mind me asking another question or two.

If I continued working and earning £35k pa., put £100k down as a deposit and the B&B is established giving £50k profit last year.

Roughly how much would you expect that we could borrow on a commercial mortgage?

holly_hobby

This will be commercial finance, and unfortunately therefore its not as simple as salary multiples.

The lender will need a business plan from you, will want to look at the current books (if they are poor how do you intend to increase business), your experience of managing from top to bottom, ie not only the daily staff/prems management, but looking at what experience you have of financial management of a similar venture, how that panned out, how you intend to develop the business, etc....etc ...

TBH you need to sit down with either your current bank (whom already know you, and will give you a feel of whether this is a go'er of not, then you may want to speak to a commercial broker to bench mark any deal offered, or to try and secure a deal, taking into consideration the reason for decline of your current bankers).

I say approach your current bank first, as it is unlikely to initially involve an advisers fee (unlike a commerical brokers involvement), and it will give you some idea of the process and what (in general) lenders will look to validate as part of a successful application for finance for such a venture.

If you intend to retain your employed roll this may assist, but of course this will be measured against any personal commitments you intend to retain (ie primary residence mge, loans, etc, etc - as this will obv impact on the disposal income you have remaining to help support the business - which I guess is your point for raising the fact that you will retain an employed income for a separate role).

Won't be easy ... but hope this helps get the ball rolling and I of course wish you well .....

Good luck

Holly x

Flash_G_2

Thanks for the info holly, much appreciated