Hospitality business loans for cafes, restaurants, bars and pubs

Ask a hospitality owner how the bank treated their loan application and you’ll often get a wry smile. Cafes, restaurants, bars and pubs are businesses banks love to bank, but don’t love to lend to. Margins are tight, rent and wages are high, trade swings with the weather and the season, and the industry has a high turnover of operators. Even a venue that’s full every night can be declined because of the box it sits in.

Why hospitality gets the cold shoulder

• Sector risk. Hospitality sits on many lenders’ watch lists because of failure rates.
• Leased premises. Most venues don’t own their building, so there’s no property for the bank to secure.
• Fit-outs are hard to recover. A lender can’t easily repossess and resell a custom bar or kitchen layout.
• Seasonality. Coastal, tourist and CBD venues can have sharp quiet periods.
• Tax and super. Hospitality businesses are more likely to fall behind with the ATO in a bad patch.

What alternative lenders look at instead

The bank statement is king. Hospitality businesses usually have daily card takings landing in the account, which gives a lender a clear, real-time view of trade. A specialist lender will look at:

Factor	What helps
Card takings	Steady daily deposits over 6 to 12 months
Seasonality	A full year of statements showing the pattern
Lease	Plenty of term left, with options
Owner experience	Years running or working in venues
Existing debt	No stack of daily-repayment loans
Security	Equipment, or property owned by the directors

What hospitality owners borrow for

• Fit-outs and refits. Refreshing a tired venue or fitting out a new one.
• Kitchen and bar equipment. Combi ovens, coffee machines, refrigeration, POS systems. See equipment finance.
• A second venue. Usually needs strong trading at the first one, or property security.
• Quiet-season cash flow. A line of credit to cover winter or the post-holiday slump.
• Clearing ATO debt. Getting the tax position clean before it escalates. See ATO debt.
• Buying out a partner or buying a venue. Lenders will want the sale contract and the venue’s trading history.

Fit-out funding: split it sensibly

A smart fit-out funding structure often splits the job in two. The movable equipment, such as ovens, fridges, the coffee machine and furniture, goes on equipment finance, because the lender can secure the assets. The fixed works, such as plumbing, electrical, joinery and flooring, are funded with an unsecured loan or a property-secured loan, because there’s nothing to repossess. Splitting it this way often means a bigger total approval and better terms on the equipment.

An illustrative example

A family-run Italian restaurant in Fremantle (illustrative only) had traded strongly for six years but wanted $260,000 to take over the empty shop next door and double its seating. The bank declined because of the industry and the building works involved. A specialist lender approved $110,000 of equipment finance for the new kitchen line and refrigeration, while a private lender approved a $150,000 second mortgage over the owners’ home for the building works. Both settled within a fortnight of the lease being signed.

Buying an existing venue

Buying a cafe, restaurant or pub that’s already trading is a different proposition to starting from scratch, and often an easier one to fund. The lender can look at the venue’s own history rather than relying only on yours. Expect to provide:

• The signed contract of sale and the vendor’s trading figures, ideally BAS and bank statements
• The lease, or the proposed new lease, with its remaining term and options
• Your own experience in hospitality and how you’ll run the venue
• Details of any liquor licence transfer and its timing
• What deposit you’re contributing and where it’s coming from

Lenders are wary of venues whose figures look too good to be true, or whose takings depend heavily on the outgoing owner. If the vendor is the chef everyone comes to see, have a plan for what happens when they leave. A realistic plan for the first six months reassures lenders far more than optimistic projections.

Bad credit or a bad year?

Hospitality owners often come to us after a rough patch: a lockdown hangover, a slow season, a partner leaving, or a supplier dispute that ended in a default. Many alternative lenders will look past this if recent trade is strong. Our pages on bad credit and borrowing after a loss explain how.

Get your venue funded

If your bank won’t back your cafe, restaurant, bar or pub, send us a 60-second enquiry. There’s no credit check when you first enquire, your details won’t be pushed out to a long list of lenders, and a real person who knows hospitality will call you. Please be accurate on the form about your weekly takings and how long you’ve been trading; it’s the quickest way to the right lender. See if you qualify.