Business loans for cafés, restaurants and pubs

HomeSec lends to hospitality operators against equity in real property rather than against trading performance. From $20,000 to $5,000,000, with no financial statements, no valuation and no minimum turnover, funded in as little as 24 hours — which is why a venue with a hard month can still borrow on the strength of the security behind it.

The cash cycle you are actually borrowing against

Hospitality takes cash daily and spends it faster than almost any other industry. Wages are the largest single line and they are paid weekly or fortnightly, penalty rates included. Food suppliers work on seven to fourteen day terms. Rent is monthly and does not move when trade does. The margin between a good week and a bad one is thin enough that a fortnight of weather, roadworks outside the door or a public holiday falling the wrong way can take a venue from comfortable to short.

Then there is the seasonal shape, which differs by location more than by cuisine. A tourist-town venue makes its year in summer and carries the winter. A CBD café lives on weekday breakfast and lunch and dies in January. A function-led restaurant makes November and December and then faces a first quarter with the same fixed costs and none of the revenue. Every one of those is entirely predictable and none of them is fixable by trading harder.

Most operators also carry the cost of somebody else's decision: a fit-out amortised over a lease, equipment bought with the venue, and in many cases a debt taken on to acquire the business in the first place. Those are fixed commitments sitting on top of a revenue line that moves week to week.

What makes the phone ring

What you can offer as security

Hospitality is usually leasehold, so the business itself rarely owns real property. What the owner owns personally is the point: a home, an investment unit, land held from earlier years. A business borrowing here does not need to own anything — the security can be the director's own property, with the company as borrower and the property owner on the title signing.

Where the operator does own the freehold, whether a pub, a strip shop or a converted terrace, that is commercial security assessed to 70% of value, and the loan can be a first mortgage over it.

What we cannot lend against is goodwill, the lease, the fit-out, the liquor licence or the takings. If there is no real property behind the business anywhere in the ownership group, we are not the right lender and we will say so on the first call rather than three weeks in.

How much you can borrow

Take the property's value, multiply by 80% for residential security or 70% for commercial, and subtract what is already owing on it. What is left is roughly what is available, between $20,000 and $5,000,000. Several properties can be added together, and the borrower does not have to be the owner — companies, trusts and sole traders — including start-ups, with everyone on title signing. Up to 80% on residential and 70% on commercial. Lower on large acreage, and LVRs may reduce on properties worth less than $800,000.

Why the bank is slow here, and we are not

Banks class hospitality as high risk as a category, before they look at your particular venue. That shows up as lower lending limits, higher documentation requirements and a longer assessment, and it applies to a twenty-year-old family restaurant with a queue out the door the same as it applies to a new operator.

A serviceability assessment built on the last two years also punishes a venue for its own seasonality, because it reads a quiet quarter as a trend rather than as the shape of the business.

We do not run that test. The property and the exit carry the loan, and the trading history is context rather than the decision.

What the money is used for

• Working capital through a season. Bridging the quiet quarter with no repayments falling due while it is quiet.
• Clearing an ATO or super balance. Paid direct from settlement, which stops the interest running and removes a director penalty exposure.
• Equipment replacement. A cool room or kitchen line replaced this week rather than next month.
• Fit-out and refurbishment. Funded against property rather than against a lease that has no value to a lender.
• Buying a venue or the freehold. Commercial purchase in any name, or residential premises purchased in a company name.
• Paying out a business loan that is squeezing you. Replacing a daily or weekly direct debit facility with an open-term loan that takes nothing for six months.

From the call to the money

What it costs

Priced per file, on the property, the position, the amount and the exit. No rate is published, because a rate with "from" in front of it is the best file's number. How it is priced, and every fee that exists.

Reviewed by Catriona Anderson, General Manager