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Commercial property mortgages offer valuable flexibility to landlords and those investing in commercial property for their own business use. Considering the typical cost of a property, a commercial mortgage opens up many opportunities for business expansion.
Commercial mortgages can be tailored to your needs and accessed quickly where necessary – they’re fundamental if you require lending before you’ve completed on another property sale, for example.
So what do you need to consider when applying for a business mortgage?
Lenders’ requirements vary considerably when it comes to granting commercial mortgages, but the following are typically considered when assessing an application:
Different types of commercial mortgages also exist, including those for owner-occupiers, commercial landlords, and owners of a property portfolio. Bridging loans can also help access a longer-term mortgage by providing the funds to ‘bridge the gap’ between buying and selling. Bridging loans and commercial mortgages are different, however, they are often used in conjunction with each other to allow for a smooth purchasing process.
Fees
Commercial property mortgages typically attract fees for valuing the proposed purchase, legal fees for dealing with the transaction, and lender administration fees. These all need to be factored into affordability when considering the overall purchase.
Use of the property
How you’re going to use the property dictates the type of mortgage to apply for. Owner-occupier mortgages are similar to residential home loans in that they’re paid over a long term and require an initial deposit.
If you’re investing in a property as a commercial landlord, a commercial investment property mortgage provides the correct structure. Alternatively, you may be starting or adding to a property portfolio, in which case property portfolio financing would address your specific needs.
It’s important to carefully prepare before applying for a commercial property mortgage as it can be a complex process. You’ll need to demonstrate a healthy cash flow and trading history whilst also presenting a business plan with projected cash flow, sales, and profit figures.
With so many lenders offering different terms and conditions, obtaining guidance from a business finance broker is essential to ensure you sign up for the product that best meets your needs.
A lender’s main consideration when assessing an application is the risk the borrower poses to them. Importantly, if you’re seen as a higher risk, the mortgage terms offered may be detrimental to your business in the long term.
UK Business Finance are leading business finance brokers and will guide you towards the best commercial mortgage deals taking into account your business’s specific needs. We cover the whole of the commercial mortgage market and can make the application on your behalf, if necessary. Please get in touch to find out more.
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
What are my options if I need business finance urgently?
Regardless of how closely you monitor your company’s cash flow, the nature of business means you may still need finance urgently at some point.
What is equity finance?
Equity finance is a business funding option that involves selling shares in return for investment. It’s commonly used by start-ups or early-stage company directors wishing to get their businesses off the ground and propelled towards rapid growth.
Hard asset finance v Soft asset finance
Hard asset finance and soft asset finance both offer flexible ways to purchase business assets. Whether you need a new piece of machinery to increase output or state of the art IT equipment, these types of asset finance options are invaluable in buying them affordably.
Regulated v Unregulated bridging loans – what’s the difference?
Bridging loans are finance facilities that help consumers and businesses to complete property transactions when a financial ‘gap’ needs to be bridged. Examples include a consumer purchasing a new home to live in and a business investing in commercial property.