A Quick Guide To Commercial Mortgages

Companies looking to purchase their own premises or embark on substantial development projects could benefit from commercial mortgages as a form of business finance. Expanding or moving your business can be beneficial to your success and commercial mortgage providers might be able to offer the assistance you need when it comes to funding this progression. The question is, what exactly are commercial mortgages and how can they benefit you? Find out, below.

What Is A Commercial Mortgage?

A commercial mortgage is a loan designed to assist businesses in the purchasing or development of property or property-related projects. They tend to be amounts of £25,000 or more dependent on what you and your business need and are repaid over longer periods than most other types of business loans, usually up to 25 years.

They are generally used for:

  • The purchase of new or further business premises
  • The development of owner-occupied business
  • Securing land for development ventures
  • Creating or adding to a buy-to-let portfolio

Mortgages are secured against property, so it’s important to meet payments to avoid risking the loss and repossession of the investment.

What Do I Need To Apply?

Applying for commercial mortgages can differ from lender to lender, as do the rates they charge the features that they offer. You’ll need to supply your lender with a number of different financial documents including accounts, tax returns, projected figures and performance predictions, director and partner profiles and financial details in some cases, bank statements and asset statements. You could also need to provide a substantial level of asset security beyond just the funding for your property, particularly if you are utilising the loan for a development rather than the purchase of a premises.

What Are The Benefits?

Commercial mortgages come with plenty of benefits that are worth considering before you even start to apply. There are a number of different loans available for redevelopment projects, but when choosing a commercial mortgage, you are gaining a number of benefits that you may not have considered.

A commercial mortgage can provide access to your very own property where you won’t be working at the discretion of the Landlord or property owner. Rent is going up, so by applying for funding to purchase your own property, you are securing a place for your business in a competitive and saturated market.

You’ll also be given the opportunity to release equity in the future, thus creating another form of funding for your business that you could tap into when it’s needed most. The value of your property is likely to increase over time and by owning a property through a commercial mortgage, you could release capital in the future for investment, growth, new equipment, trading opportunities and the payment of other business debts.

Are There Any Limitations?

As with all things in business, there are limitations to utilising a commercial mortgage that you may want to consider. The main thing you truly need to consider is whether you are ready to commit to a long-term monetary payment plan. Depending on the amount that you borrow, you could be paying off your commercial mortgage for 25 years or more and it’s impossible to predict whether your business will continue to perform as well as it has been this far into the future.

Bad or adverse credit history can also have an effect on the loans available to you. While some commercial mortgage lenders will focus on your recent credit and their own affordability checks, not all will, so you may be at risk of rejection. You may be accepted, but this could be at the expense of higher interest rates or a shorter repayment period to help reduce risk for the lender.

Commercial mortgages are an increasingly popular way of securing business funding for those looking to purchase, expand and develop their very own business premises. With long term payments and the possibility of releasing equity on the investments you make with your mortgage, it could work out to be a valuable move for you and your business now and in the future.