Rate, Term and Security: Refinancing a Pub Owner's Loans

Refinancing a pub's loans means taking each debt in turn: the loan on the hotel's freehold going concern, the loans on the gaming machines and the kitchen, and the overdraft that pays for kegs and spirits before the weekend. The freehold is the land and building, owned rather than leased. A freehold going concern is that property sold together with the trading hotel on it. This guide shows what a new lender can change on each, what the takings show, and what combining the loans does to monthly outgoings and total interest.

Is the property loan heading for an annual review, or for the end of a term your bank set when you bought the hotel on the previous licensee's accounts? Are the machines and the cool room taking more out of the account each month than the property loan is paying off? Would you like to rebuild the bistro or open up the beer garden without adding another lender to the list?

IBISWorld counts 6,853 pub, bar and nightclub businesses in Australia in 2026. In a hotel with a gaming room, the takings come from four places: the bar and bottle shop, the bistro, the machines and, where the hotel has them, the rooms upstairs. The hotel's point-of-sale and gaming systems record each line on its own. Our page on refinancing a pub or bar freehold covers the property loan by itself.

Every loan a pub carries, from the freehold down to the overdraft for stock, is one Ardent Capital Group can assist with refinancing, and we would be glad to lay them out with you.

When a pub's loans come up for refinancing

Most of a pub's borrowing is put in place when the hotel changes hands. The hotel then trades for years under its new owner, and the reasons to look at the loans again build up along the way.

A pub is commonly bought as a going concern. That means the freehold, the business, the liquor licence and, in states that have them, the gaming machine entitlements (the right to operate each machine) are valued and sold together as one trading hotel. The loan was set up on the outgoing licensee's figures. Two or three years on, the accounts show yours.

Three things tend to prompt a review of a hotel's loans:

• The property loan reaches a review or its end date. Bank terms on commercial property commonly run 10 to 15 years, against 25 to 30 at non-bank lenders.
• Equipment loans cost more than the property loan. Machines and kitchen gear sit on shorter, dearer loans.
• A refurbishment needs funding from equity in the freehold, the share of its value that is not owed to a lender.

Example: a freehold hotel's four debts

A hotel's debts are easier to weigh once the freehold, the machines, the kitchen and the stock overdraft sit side by side. These illustrative numbers show a debt mix of the kind we can assist with. The hotel is owned as a freehold going concern with a bistro, a bottle shop and a gaming room. Its current going concern valuation is $4.5M.

The hotel owes $300k on its gaming machines at an assumed 10%, with 36 months left, and repays $9,680 a month. That is almost half the property loan's monthly repayment, on a much smaller balance.

Every rate here, and the 7% used later for a refinanced property loan, is an assumption made to do the sums, not a market rate. The two equipment loans make up $450k of the $2.65M owed on term loans. Yet they take $13,557 of the $33,951 paid on those loans each month.

Lenders treat a pub as specialised security, meaning a property built and valued for one kind of trade. They commonly gear it at 50% to 65% of the going concern valuation. That gearing figure is the LVR, the loan-to-value ratio, which is the debt as a percentage of the hotel's valuation. On $4.5M that range runs from $2.25M to $2.925M. The loan on the freehold is about 49% of the valuation, and all three term loans together come to about 59%.

How a refinance changes the hotel's loans

Whichever of the hotel's loans is refinanced, the change comes through the same three settings.

• The rate. Keeping the term unchanged, a lower rate brings down both the monthly repayment and the total interest. The lender sets the rate, subject to approval.
• The term. The term is how long the loan runs. Each added year trims the repayment and adds to the interest overall, because the balance is owed for longer. It can still suit a gap with an end date, such as the months the bistro is shut for a rebuild.
• What secures it. Where property is the security, the rate is generally lower than on a loan secured by equipment or by the business alone. The property then becomes security for the debt.

Each repayment is part interest, charged on the balance still owed, and part principal, which is the portion that cuts the balance. Interest takes its largest share at the start and less as the balance falls. On the $2.2M property loan at an assumed 7.5%, the first month's interest is $13,750. That means $6,644 of the $20,394 repayment reduces what the hotel owes. A year of repayments takes about $82,500 off the balance.

Refinancing each of the pub's loans

Each of the hotel's loans was taken out for a different part of the trade: the building, the gaming room, the kitchen and cellar, and the stock.

The loan on the freehold going concern

This loan bought the hotel itself, and it is the largest debt by a long way. It is secured by the freehold and commonly by a general security agreement over the business that trades from it. A general security agreement gives a lender a claim over the business's assets, from the stock in the cellar to the tills behind the bar. A going concern valuation takes in the freehold and the business together.

A refinance can move the loan to a lender that accepts licensed venues, or change its rate and term. It can add an interest-only period while a refurbishment is under way. During that period the repayments cover only the interest, so the balance stays where it is. A refinance can also release equity up to the lender's limit on the new valuation. Equity released for a rebuild is assessed on its purpose, with builders' quotes attached.

Timing shapes which trading months a valuation covers. A valuation ordered after summer and the big sporting weekends follows a stronger run of months than one ordered mid-winter. If the freehold rate is fixed, a written break cost from the current lender comes first. A break cost is a fee for ending a fixed rate early. The more rates have fallen since the rate was fixed, the bigger it is.

The liquor licence and gaming machine entitlements

The liquor licence and any gaming entitlements are not bricks or equipment, yet they carry real weight in what the hotel is worth. They sit inside the going concern valuation. The licence records what kind of licence the hotel holds, the conditions attached and the permitted trading hours. Each one shapes what the hotel can earn.

Gaming rules are set state by state. In New South Wales, hotels and clubs hold gaming machine entitlements, and entitlements can be transferred between venues. A transfer generally means forfeiting one entitlement in every block of two or three. A hotel holding 10 or fewer entitlements may lease them to another hotel with the regulator's approval. A hotel can hold up to 30 machines.

Gaming machines, the cellar and the kitchen

The machines, the cellar and the kitchen work every trading day, and they wear out long before the building around them. The equipment loans cover the machines and gaming room signage, and the glycol beer lines and cellar cool room. Glycol lines run chilled coolant beside the beer lines, keeping the beer cold between keg and tap. The loans also cover the combi ovens, fryers and extraction canopy in the kitchen, and the glass washers and ice machines behind the bar. Each loan is secured by the equipment it paid for.

An equipment loan of this kind runs down to nil by the end of the term, unless it ends in a balloon, a lump sum left to the final repayment. A new lender can reprice these loans, reset their terms or clear that balloon. Folding these loans into the property loan lowers their rate in the example and spreads them over the freehold's 15 years. The $300k loan on the machines carries about $48k of interest over its remaining 36 months at 10%. Inside the property loan at 7.5% over 15 years, the same $300k carries about $201k.

The pub's accountant can say what effective life is used for the machines and kitchen gear. Effective life is the number of years an asset can be used to produce income, taken from the ATO's determination or worked out by the business. It is a tax figure, not a promise of how long the equipment will run. Setting it beside the term of any loan the gear would sit inside shows whether the loan would outlast it.

Refurbishments, and the pub you lease

A refurbished bistro or beer garden can change how a hotel trades, and how it is paid for depends on whether the hotel owns its building. Pub refurbishment work, from the bistro fit-out and gaming room build to beer garden decking and the accommodation bathrooms, is built into the venue. On a freehold it can be funded against the property.

In a leasehold pub the operator owns the business, the equipment and the right to trade, and leases the building from the freehold owner. The loans sit against the business and the equipment. The years left on the lease, and any renewal option, show how long the operator can trade from the building. A renewal option is a lease clause that lets the tenant extend for a further period. Refurbishment finance repaid within the lease leaves nothing owing on work that stays with the building.

The overdraft, merchant cash advances and the ATO

Pub takings arrive in a rush across the weekend, while the brewery and food suppliers are paid ahead of it. The hotel's short-term debts cover that gap. An overdraft pays the brewery and food accounts before a long weekend and is cleared as the takings come in. Rolled into a term loan, the balance goes, and so does the room to draw before the next one.

A merchant cash advance hands over a lump sum that comes back out of the hotel's card sales, or as a set debit each trading day. Its cost is a fixed dollar figure rather than a rate. It helps to compare the dollars left to repay with a term loan's interest over the same months.

An ATO payment plan pays down PAYG withholding or GST, the goods and services tax, by instalment. PAYG withholding is the tax taken out of staff pay. On most plans the general interest charge, which the ATO adds to tax paid late, keeps running on what remains. That charge stopped being deductible on 1 July 2025, while business-loan interest may still be. Your accountant confirms the hotel's own treatment.

Putting the pub's loans together

The pub's next question is whether the freehold and the two equipment loans should stay apart or be carried together.

Worked example: four ways to refinance the hotel's term loans

Each option moves the monthly repayment and the interest bill by different amounts. These options cover the three term loans, $2.65M in all, and leave the stock overdraft to one side. Each option is measured against the hotel carrying on as it is, by how far it moves the monthly repayment and the remaining interest.

Rounded, illustrative numbers. Each rate is an assumption used only for the arithmetic; none of them is a quote or a market rate. The overdraft stays in place under every option, so it is not counted. Valuation and legal fees and any break cost are left out too, as are payout figures, the sums that clear each loan on a set date.

Folding the machines and the kitchen into the property loan takes $9,385 off each month. It also adds $216k of interest, because equipment due to be paid off within three or four years is repaid over 15. Folding everything into one 25-year loan gives the lowest repayment and $1.669M more interest. Only a lower rate on the freehold alone cuts the interest bill, by $112k.

Which option suits turns on the hotel's trade, its refurbishment plans and how long the machines and kitchen gear stay in service. The choice sits with the owner. We would run the options on the hotel's payout figures and take the chosen one to lenders that accept licensed venues. These numbers carry no quote and no approval.

What the refinanced loans are secured by

A hotel can offer more than one kind of security, and each choice changes what secures the debt.

• The freehold and the business. The loan on the going concern sits against the freehold, with a general security agreement over the business. When the loans are paid out, the outgoing lender takes its PPSR registration off and the incoming lender records a new one. The PPSR is the national register of security interests in personal property. It does not cover land, buildings or fixtures to land.
• The equipment. Loans kept separate stay secured by the machines and the kitchen gear.
• The home. Offering the family home as security can bring a lower rate and a longer term. The home then secures the hotel's debts. The owner decides, weighing it against the added interest on the 25-year options in the worked example. Where the house already secures one of the hotel's loans, a refinance can aim to release it. For the mortgage on the house, see our home loans for business owners.

Hotel groups and a freehold held apart from the business

Some licensees hold the freehold in a property trust and run the hotel through an operating company. The company holds the licence and pays the trust rent. That rent shows in the accounts of both, alongside the hotel's trade. A lender generally takes guarantees from each director and financials for every entity in the group. Drawing on a background in financial planning, the Ardent Capital Group team can map how the loans sit across the group. Your accountant confirms the tax and ownership detail.

Before you apply to refinance the hotel

A hotel's year has big weekends and quiet midweeks, and when the refinance happens can decide which season the most recent statements show.

What to settle before applying, and when to look again

A few dates and documents can change what the refinance costs the hotel.

• Break costs and payout figures. It helps to ask for each loan's payout figure in writing. If breaking the fixed freehold rate costs more than the refinance would save, the numbers can be compared afresh once the fixed period is close to ending.
• The months the valuation will see. If recent statements cover a quiet winter or a closure for works, a few more months of normal trade put a full season on the record.
• Lodged BAS and tax returns. It helps to have every BAS, the business activity statement, and every tax return lodged before applying. A current ATO statement of account completes the record.

The bar, bistro, gaming and accommodation takings

A hotel earns from several rooms at once, and each one brings its own costs and its own busy nights.

• The revenue split. The point-of-sale and gaming system reports split out how much comes from the bar and bottle shop, the bistro, the gaming room and the rooms. The accounts show what each line costs to run.
• The trading year. Summer, long weekends and finals lift the bar and bistro, while winter midweeks thin out. Twelve months of statements show the cycle.
• The hotel's own cost lines. Beverage stock, state gaming machine tax on the gaming room's takings, and power for the cool rooms, cellar and kitchen sit beside the freehold repayments.
• Wages. Bar, kitchen and floor staff work under the Hospitality Industry (General) Award. Penalty rates apply on the weekends and public holidays when the hotel trades hardest.

Documents to gather

The accountant, the point-of-sale system and the licence file hold most of what is needed.

• Each loan's payout letter, with any fixed-rate break cost shown
• Two years of financials and tax returns, and current BAS
• Bank statements for every trading account, including the one cash takings are banked into
• The liquor licence with its conditions and trading hours, and the gaming entitlement details
• Point-of-sale and gaming system reports splitting bar, bottle shop, bistro, gaming and accommodation revenue
• Any beer or spirits supply agreement, and the lease if the pub is leasehold
• Statements for each owner's and guarantor's home loan, car loans and credit cards

Questions pub owners ask about refinancing

My bank has an annual review coming up. Can I start a refinance before it lands?

You can. Starting three to six months before the review date leaves time for a valuation and a comparison across lenders. The current loan keeps running until a new one settles. Our guide explains what the bank reviews and how to get the hotel ready.

Does the liquor licence need to be transferred if we change lenders?

Generally not. A refinance changes who lends to the business, not who holds the licence. Your solicitor confirms what the new lender's security documents require.

We bought on the previous licensee's figures and trade has grown since. Will the valuation show that?

A current going concern valuation is based on the earnings the hotel produces now, so it starts from your own trading record. The figure is the valuer's to set.

Some of our gaming entitlements are leased from another hotel. Does that matter?

It helps to tell the lender at the start and provide the lease of the entitlements. Its terms show which entitlements the hotel owns, which it leases and how long the leased ones stay.

If we only moved the property loan to a lower rate, what would change?

In the worked example, the $2.2M loan on the freehold moves to an assumed 7% over the same 15 years. The monthly repayment falls by $620. The interest still to pay falls by $112k, the only option in the worked example that lowers it.

Most of our takings are cash. How does a lender see them?

Through the bank statements and the point-of-sale reports. Cash that is banked shows as deposits, which can be checked against the till records. Cash that never reaches the account does not appear in the statements.

Can I refinance the freehold now and leave the equipment loans until later?

You can. Each loan can move on its own timetable. A loan on the machines with a year left has little interest remaining, and letting it run out avoids repaying it over the freehold's term.

We have a supply agreement with a brewery. Does that affect a refinance?

It can, where the agreement came with an upfront payment, a loan or equipment. It helps to read its exit and repayment terms, and include it with the documents so the lender sees it from the start.

We want to buy a second hotel. Can this refinance help with that?

Equity released from the first freehold can go toward the deposit on a second venue, subject to the valuation and the lender's assessment. The refinance and the purchase are sequenced around the licence transfer on the new venue.

Will asking about a refinance show on my credit file?

A conversation with us or a payout request does not. A formal application is recorded against the company and each director.

Talk to us about the hotel's loans

A pub's debts were taken on at different times for the freehold, the machines, the kitchen and the stock for the next big weekend. Refinancing them sets each loan against what it paid for and the way the takings come in. At Ardent Capital Group we can assist pub owners with refinancing the freehold, releasing equity for a refurbishment, consolidating equipment loans, and with pub and bar business loans for fit-outs, equipment and cash flow. When you are ready to look at refinancing the hotel, we would be glad to go through the loans with you.

Written by

Nick Chong

Managing Director, M.AppFin, Dip. Mortgage Mgmt

Nick holds a Bachelor of Agricultural Economics, a Master of Applied Finance and an Advanced Diploma in Financial Planning. He founded Ardent Capital in 2016 after more than a decade in financial planning and mortgage broking. For the past ten years he has led a team of finance specialists, mortgage advisers, brokers and credit analysts, all working to secure optimal outcomes for clients and always acting in their best interests. The team brings both a qualitative and a quantitative approach to every deal.