Commercial loans are similar to residential mortgages aside from the fact that they are secured over a commercial building or perhaps another type of business premises, such as a retail unit. As such, these types of mortgages are treated differently to a residential mortgage, as this is essentially a business transaction.
The criteria for this type of lending can vary significantly from lender to lender and so it can be a challenging task to establish the best lender for you specific requirements.
There are two main types of commercial mortgage...
Commercial mortgages can facilitate the purchase of a new property for your business, or to raise funds against an existing property within your business. This type of commercial mortgage is called "owner occupier" as you will be running your business from the premises you mortgaging.
A non-owner occupier or an investment property loan is where a commercial mortgage is secured on a property which you plan to let out to another business. Again this can either be a new investment property purchase or raising funds against an existing property that you already own.
So what are the benefits?
Purchasing a commercial property provides your business with a major asset which is likely to increase in value over a period of time. The monthly repayments on a commercial mortgage are often similar to the rent your business had been paying and so there may be no need to budget for additional costs, furthermore the interest on a commercial mortgage is tax deductible!
The purchase of an investment property may provide you with surplus income over and above the monthly cost of the mortgage, via the rental you charge. Additionally the rental from the tenants is repaying the loan and so not only do you now own an increasing asset but the debt is reducing, with potentially no input from you.
If your business already owns a property, or you have an existing investment property, a commercial mortgage could be put in place to raise funds for various reasons such as consolidation of debts, the purchase of equipment for your business or simply to boost your cash flow in a difficult time.
Who can provide a commercial mortgage?
High street banks provide the majority of commercial lending in the UK, however specialist commercial lenders or privately funded loans can provide more bespoke facilities to those who may not quite fit within the often strict criteria of the major banks.
With so many choices it is important that all avenues are considered to ensure you get the best rate, as these can vary wildly from one lender to the next. The terms of the loan also need to be to your liking before you agree to anything. This is a big financial commitment and you need to make sure that you understand everything about it before you sign on the dotted line.
Most commercial mortgages are not regulated by the FCA.
How can we help?
Over the years our consultants have built up close relationships with commercial lending managers at the major high street banks as well as the more bespoke lenders. These relationships are essential in successfully achieving the best proposals for our clients as credit policy is more complex with this type of lending compared with residential mortgages. The lending managers know exactly how to present a case to their credit departments and so their assistance is pivotal and can be the difference in getting the right decision.
Our consultants will take the time to understand your business and its lending needs before discussing your circumstances with the appropriate lending managers. We will often present your case to numerous lenders, comparing the terms offered to ensure you obtain the absolute best deal.