What Is Commercial Property Finance?
The term commercial property finance covers a number of products offered to business owners and property developers who want to refurbish, renovate or invest in commercial property. With a variety of options available, you can find the best product to suit your growth objectives and current financial circumstances, whether you are acting alone, as an owner of a small business or as an established limited company
When are commercial mortgages used?
A commercial mortgage generally takes over where business loans finish. Business loans up to £25,000 are unsecured, but for larger amounts lenders need security in order to reduce the risk to themselves. A business mortgage usually lasts from three to 25 years and you can usually find a 70-75% mortgage. This is a measure of loan-to-value ratio to see how much you’re borrowing in relation to how much the property is worth. If it’s an investment then the amount you can borrow will be determined by the rental income generated by the investment, but this will not exceed 65% of the purchase price. If you are buying a business which includes goodwill, stock etc then the amount available will be further reduced.
Key features of taking out a commercial mortgage
A business mortgage plan differs from a regular mortgage in the following ways:
There are usually no fixed rates for commercial mortgages
You’ll usually pay a higher interest rate on commercial mortgages compared to regular home mortgages as these are considered higher-risk to lenders
Commercial mortgages tend to offer better interest rates than regular business loans as these require property as collateral
What Countries Is Commercial Property Financing Available For
Banks in all countries will cater for commercial property financing and mortgages in their respective countries. However specialist brokers will normally cater for Tier 1 countries and cities around the world such as United Kingdom, United States, Canada, France, Belgium, Netherlands, Spain, Germany, Portugal, Italy, Denmark, Sweden, Norway, Switzerland, Plus many more European countries.
How to apply for a commercial mortgage
Hiring a specialist broker could help ensure you’re paired with the most suitable lender and make the application process more manageable. A commercial mortgage application works similarly to taking out a regular mortgage for your home:
You complete and submit the Asset and Liability form (this can usually be done online)
You’ll then be asked to complete the commercial loan application form
You’ll be required to provide information on your business (listed below)
The property is valued
All legal due diligence will be carried out by the lender’s solicitors
If approved, you’ll receive a mortgage offer by the bank
It’s a good idea to collate the necessary documents ahead of time, so your application is processed more efficiently: