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Commercial property finance helps business owners to invest in property, whether for commercial use or to add to a property portfolio. Given the considerable capital required to buy property outright, commercial property finance will probably be the only option for this type of investment.
Commercial mortgages and bridging loans are two main forms of commercial property finance, so how do these products work?
Commercial mortgages are similar to residential mortgages in that a commercial mortgage provider offers to lend a percentage of the property’s value. The shortfall is paid by way of a deposit, which is typically larger than a deposit on a residential property.
Monthly instalments are made over a fixed mortgage term and the lender places a legal charge over the property to secure their money. This document sets out the terms under which the money has been released, and is signed by the borrower and registered against the property at Land Registry.
Owner-occupier commercial mortgage
This type of mortgage is used to purchase a property that will be used by the business making the application. Owner-occupier commercial mortgages typically require a deposit of around 75 per cent of the property’s value.
Commercial investment property mortgage
This is suitable for businesses intending to rent out a property for business use, rather than using the property as their own commercial base.
Property portfolio mortgage
Property portfolio finance is a single mortgage account for buy-to-let investors that covers a portfolio of properties.
A commercial bridging loan is a short-term finance facility that usually lasts between three and six months. It can be used to purchase a property when speed is of the essence as the money can be released quickly but the applicant must present a clear plan for how they will repay.
Bridging finance might be used when a commercial landlord sells their property but needs to complete quickly. If the tenant company wants to buy the property, for example, it may need to apply for commercial bridging finance to secure the deal whilst a mortgage is arranged.
Bridging loans may also facilitate the purchase of commercial property at auction, or for property investors to bridge the gap between buying a property for their portfolio when a sale to release the funds has yet to complete.
Eligibility criteria vary widely between commercial property financiers, but some criteria typically apply across the board. These include:
Even though lending criteria differs between mortgage lenders we know the requirements of all UK lenders and can ensure that you are matched with the most suitable one for your business. Legal fees, valuation fees, and arrangement fees also need to be considered when applying.
Applying for commercial property finance can be a complex process. The terms and interest rates offered by lenders are a direct representation of how risky they perceive the lending to be so it is imperative to present your business in the best light.
UK Business Finance can do just that. We take the time to understand your needs and ensure that all criteria are met prior to applying. Please get in touch with our expert team to find out more.
Further Reading
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
What can company finance be used for?
Business finance can be used for a multitude of purposes within a company, from boosting general cash flow to funding development projects and buying stock. Its flexibility and adaptability to an individual business’s needs make it ideal whatever stage of business you’re at.
Management buy-in financing options
If you’re considering being part of a management buy-in (MBI) or you’ve decided to sell your own business to an incoming management team, there are several ways in which the transaction can be financed.
Can I get business finance if my company is insolvent?
If your company is insolvent, it’s vital to stop trading straight away and obtain assistance from a licensed insolvency practitioner. The insolvency practitioner’s role at this point is to assess your company’s financial situation so that they can provide guidance on whether additional finance is appropriate.
Can’t pay company bridging loan – what are my options?
A bridging loan is a form of short-term finance that lasts for up to 12 months. It provides vital funding between transactions when a company purchases one property before the sale of another has been completed.