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About Commercial Finance
A commercial mortgage is similar to a residential mortgage, except the security is normally a commercial building or other business property such as a shop, office or warehouse rather than a residential property. In addition, commercial mortgages are typically taken on by businesses instead of individual borrowers. The borrower may be a partnership, incorporated business, or limited company, so assessment of the creditworthiness of the business can be more complicated than is the case with residential mortgages.
Unlike residential loans, commercial mortgages are bespoke loans. This means the rate and terms offered by a lender will vary from client to client or property to property and will depend on the property offered as security and the experience and financial status of the applicants. It is therefore important that you work with an adviser like Connect, who have the experience to present your application to a commercial lender to obtain you the best possible terms.
Whilst it is considered by many, that commercial lenders will consider only pure commercial property like shops or warehouses, some will also consider Buy to Let property investments. Commercial lenders can be particularly beneficial if you are looking to raise finance for more complex Buy to Let investments such as multi-occupancy property, semi commercial property, developments and applications from companies.
When evaluating the lender options available for your property purchase, Connect Mortgages have access to the whole of the market and will also consider where it is appropriate for you to use a commercial lender to achieve your funding requirements.
The main types of commercial loan:
This is a commercial loan taken on a property that you wish to purchase as an investment. This could be for example an office block that you then let to individual businesses. This also includes Buy to Let investment properties. To qualify for this type of loan from a commercial lender, you will normally need to demonstrate experience and the investment return needs to be capable, with a good margin, to meet the monthly loan payments.
Business Owner occupied
This is a commercial loan on a property such as an office or a shop that you run your own business from. You will normally need to have experience in running the business or a similar business type. Whether it is your own business currently or a business you are purchasing, the business will need to demonstrate that it is making sufficient profits to meet the monthly loan payments.
This is finance specifically designed to cover the period of a development. This could be anything from the redevelopment of a house into 4 flats or the build of 20 new houses on a development plot of land. This type of project is specialist and the lenders are keen to see the borrower has sufficient experience or is working with an experienced team.
They will also want to understand the costs of the build, the timeframe and the end value, referred to as the GDV (Gross Development value) Funding is often released in stages as the development progresses, and is paid back either by the sale or refinance of the property.
Bridging or short term loans
Bridging loans are versatile short term loans that can be used for a number of finance requirements such as investing in business opportunities, buying a property at auction, property conversions and renovations and seizing investment opportunities.
Medium term bridge style loans for up to 5 years are now available. They tend to be priced slightly cheaper than standard bridging but more expensive than mainstream loans. They are used to provide time for the owner to make any arrangements they need with their finance or property to enable them to meet the mainstream lenders criteria.
One example is a start up business without any accounts history wanting to purchase their own business premises. The medium bridge lender will provide a loan for the purchase of the premises and once the business has been trading for 3 years, they will then meet the qualifying criteria to refinance to a mainstream commercial lender.
If you would like more information on how we can help you secure commercial property finance please contact us.
If you would like to find out what mortgage options are available to you please call one of our experienced mortgage advisers on 01708 676111, or send us a message using the form below.