An Introduction to Commercial Mortgages - Our Guide
Wesley Ranger • 16 July 2020
If you’ve been meaning to start a business or are looking at scaling your operations to the next level, you may have considered moving to a new commercial property.
Whether you don’t have a property or the current one you’re working with is no longer adequate to suit your needs, the possibility of moving over to a new property is one that will come up sooner or later. Despite the need to move to a better commercial property as your business scales, the problem is that you may not have the cash to buy one outright.
Thankfully, there’s one convenient, easy, and comfortable way to get the needed funding without bending over backwards: Commercial mortgages.
An introduction to commercial mortgage
In recent years, the idea of taking out a commercial mortgage has become a popular conversation for UK business owners because of how well it solves the problem of sourcing cash.
This loan option is best defined as a form of financial assistance that is typically secured by a business against commercial property or land for its operations. Similar to the standard functioning or operational flow or residential mortgage, commercial mortgages follow an application, approval, granting, and repayment process that is similar to that of a residential mortgage.
With this loan, you can finance different projects or cost components related to your places of operations, such as business development plants or land development procurement!
How does it work?
As mentioned, commercial property mortgages work in the same way that residential property ones do, except that they have some tweaks catered to the intricacies of the former’s process.
Generally, these property mortgages work on a standard 3 to 25-year repayment term that can be availed of when purchasing property, unlocking equity and renting properties out to other businesses. In most cases, the loan also entails using a property as collateral against a loan as a form of security from potential payment delinquency or neglect of responsibilities.
In terms of coverage, the standard plan can cover up to 70 per cent of a property’s total value and offer varying interest rates depending on which lender you go to. Aside from the integral components, however, some loan terms may be more favourable than others, which make it important to shop around for alternatives that best suit your needs.
On matters of eligibility
As much as we can talk about commercial property financing and how advantageous it is, it’s vital to first verify whether or not you’re eligible enough to seek this form of assistance. Despite the differences that exist between lenders, there’s a list of baseline qualifications that you have to meet before taking a loan out from any service provider:
- You must be able to provide a clear record of financial reports from the past three months and additional business bank statements
- You need to provide clear proof of your business certification and personal identity
- You must show clear, transparent plans for how the principal amount will be used (as laid out in a proposal)
- You need to possess a good credit history
- You must provide a detailed set of documents that indicate your business’s assets, liabilities, income, and expenditure
Conclusion
If you’re looking to expand your business and scale its operations effectively, then it’s clear that the next big move you need to make is commercial property investment. With the help of a commercial mortgage, you won’t have to use your savings when making an investment, and you can have an enjoyable payment experience that’s catered to your capabilities!
We’re a lender in the UK that offers commercial mortgages, mortgage brokerage, and development financing services. Give us a call today to learn more about our flexible lending plans!
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