For many businesses, there comes a time when they start thinking about purchasing their own commercial premises. However, for many of them, even if they are successful, it is not always easy. Taking a large sum of money from the business can cause cash flow problems and can have an impact on the business, which is why many prefer to use a commercial mortgage.
Commercial mortgages are generally divided into two categories:
- When the property is occupied by the owner
- When the property owner rents or leases the property to another business
For a long time, commercial property mortgages were mainly available through the high street banks, but it all changed in the last ten years as building societies and other specialist lenders have entered the market.
Unlike residential mortgage lenders, commercial mortgage lenders will asses each application on an individual basis, taking into account customers’ financial positions and circumstances.
Different commercial mortgage lenders have different lending criteria with some specialising in specific business areas. Quite often, specialist commercial mortgage lenders are more flexible in their decision making process than banks.
Commercial mortgage rates offered will reflect the risk, taking into account the company’s financial position and ability to maintain repayments, nature of the business and the property itself.
Commercial mortgage loan is normally offered for a term of 15 or 20 years.
In the majority of the cases, lenders will expect that the borrower will put down a deposit of 20%-30%, but in some cases, lenders may settle for a smaller deposit, but may increase the interest rate charged.
As with any mortgage lending, lenders will want to know quite a lot of information. Normally they will want to see three years of business accounts, cash flow forecast, business plan and personal details of business owners, including their assets and liabilities and work experience. In addition they will carry out property valuation and survey.
Many business owners find that looking for the best commercial mortgage can be very time consuming and prefer to use services of commercial mortgage broker. Commercial mortgage brokers have access to a wide range of providers and have a good knowledge of the current market.