Fish and chip shop finance for ranges, refits and purchases

A chip shop turns cheap and expensive ingredients into a high-volume, short-wait product, and its margin is exposed to a few costs it cannot control. Cod and haddock are bought largely from northern waters, and quota cuts in the Barents Sea in recent years have pushed prices up sharply. Frying oil or beef dripping, potatoes, packaging and energy all move independently of takings. A shop that has raised prices in step with these costs, and kept its customers, is a stronger case than one whose turnover has held up while margin has quietly shrunk.

Trade peaks on Fridays, in school holidays and, for coastal shops, through summer, with Lent a busy period in many areas. Hot takeaway food is standard-rated for VAT, unlike most cold food, which HMRC sets out in its guidance on catering and takeaway food. That makes VAT a larger share of takings than many owners expect, and a large quarterly bill after a strong summer is a common reason shops look for short-term funding.

• Replacing the frying range. Usually the biggest single purchase, built to order, with a lead time to plan around. Many owners schedule the swap for a planned closure week.
• Switching fuel. Moving between gas and electric ranges changes running costs and may need a supply upgrade.
• Extraction and odour control, often required by planning conditions or after neighbour complaints.
• Refits of the counter, seating area and frontage, or adding a restaurant section.
• Buying a shop as a going concern, or opening a second site.
• Seasonal and tax cash flow for stock, wages and the VAT bill.

Lenders fund on declared figures. If a seller says takings are higher than the accounts show, that difference does not count, and a purchase priced on it will not borrow well. Before agreeing a price, check:

• Two years of accounts that agree with the business bank statements and card terminal reports
• The age, fuel type and service history of the range, and whether it is owned or still on finance
• Lease length, rent review dates and the permitted use: in England, hot food takeaways sit outside the main use classes, so a shop with that consent is worth more than one without it
• A late night refreshment licence, if the shop serves hot food after 11pm
• The food hygiene rating and recent inspection reports
• Staff who transfer with the business, and any planning conditions on extraction or opening hours

A leasehold shop is usually funded with a business loan or acquisition finance; a freehold needs a commercial mortgage. Where a flat above would become the buyer's home, that part of the borrowing may fall under residential mortgage rules, which are outside what we arrange. Our guide on whether to take a loan to buy a business covers the wider decision.

Fixed repayments set in a strong summer can bite in a wet February, so test them against your quietest month. Stacking a merchant cash advance on top of a loan and a lease can take more of each week's takings than the shop can spare. Borrowing of £25,000 or less by sole traders and small partnerships can be regulated consumer credit, which brings additional protections. Before borrowing, consider whether a range supplier offers its own payment plan, whether a refurbished range would do, and whether HMRC Time to Pay suits a VAT bill better than a loan. Mobile fryers trading from a van or trailer should see our page on food truck finance.