Buying a commercial property for your businessPublished on 23rd January 2019 2019-01-23T12:00:00+00:00 - Last update on 27th August 2019 2019-08-27T13:15:22+00:00
Whether you’re looking to acquire your first commercial trading address or to relocate elsewhere, buying business premises can be both exciting and demanding. But before you can begin planning the move, you first need to purchase the property in question. However, for many business owners, that’s where the biggest challenge lies. The UK property market has been consistently increasing in value, making commercial property more and more difficult to acquire. Yet, if you lack the necessary capital or can’t afford to deplete your savings, you could purchase property for your business using Property Finance.
Why should I consider applying for Property Finance?
With property constantly and consistently growing in value, purchasing commercial property using your own capital can be a difficult act to pull off. Even if you do possess the necessary capital, removing large amounts of capital from your personal saving can easily affect your financial stability. However, a more cost-effective way of relocating, or stabilising your business, is to apply for Property Finance. Depending on your chosen product, Property Finance gives you the means to spread out the costs involved in purchasing commercial property for your business over either a short-term or long-term agreement. Therefore, with Property Finance, you can gain the confidence necessary to take your business further, without risking your finances.
What does Property Finance offer?
What makes Property Finance such an invaluable tool to consider is the flexibility that it offers. That’s because if you’re looking to purchase a commercial property to be used exclusively by your business, you could apply for either a Commercial Mortgage or a Bridging Loan. Yet, in order to make an informed decision, it’s vital that you understand how they both work:
Commercial Mortgages are long-term agreements that enable you to spread out a commercial property purchase over the course of an agreed term, which could last up to 20 years, or possibly more. Plus, because funding is based primarily on the property you’re purchasing, there’s a set limit in regards to how much your business could borrow. However, you are required to make an upfront payment to the lender (down payment), which usually starts at 20% of the property’s purchase price. But, if you’re able to provide as much as 40% instead, you could negotiate a lower interest rate. From here, you’re required to make Fixed Monthly Repayments. However, depending on whether you’re using a Fixed or Variable Rate Mortgage, the amount of interest that your business is charged according to the trending market rate.
On the other hand, Bridging Loans are secured, short-term agreements that can last up to 12 months (but can be agreed for 18 months with an unregulated lender). They are high-interest agreements offering up to 100% Loan-to-Value (LTV) against the property you’re purchasing and often use property in your possession as collateral. However, in order to understand how Bridging Loans work, you need to treat the Principal (capital borrowed) and the interest incurred as two separate aspects of the agreement.
Principle - when it comes to the Principal, and when the agreement matures, you can choose to either use an Open Bridge or a Closed Bridge.
|Open Bridge||Closed Bridge|
|With an Open Bridge, you aren't required to fully repay the loan by a specific date. However, you are expected to completely repay the product within the prescribed term or period.||If you choose a Closed Bridge, you will be expected to fully repay the loan by a set date.|
Interest - Although this determines when you need to fully repay the agreement, you now have to decide on the interest will be dealt with. As such, with this type of lending, you have 3 options available to you: Pay Monthly, Rolled-Up Interest and Retained Interest.
|Pay Monthly||Rolled Up Interest||Retained Interest|
|You're required to make interest payments at the end of each month until the Principle o the loan has been fully repaid.||The total amount of accumulated interest is combined with the total amount of money that you borrowed and is repaid in a single amount when the agreement matures.||With this option you are borrowing the interest that would be accumulated for an agreed number of months on top of the Principle. This is retained by the lender and used as a safety net whilst you make monthly interest payments until the agreement has been fully repaid. If you haven’t used up all of the interest that was retained, or you’ve managed to fully repay the loan early, lenders may reimburse a portion of the unused interest back to your business.|
Buying a Commercial Property for your business?
Purchasing a Commercial Property for your business offers many advantages. However, the cost barrier can be a daunting obstacle to overcome if you are to rely on your own capital. Fortunately, you don’t have to. By applying for Property Finance you can buy commercial property for your business without having to deplete your personal savings in the process. All you need to do is source an agreement that’s appropriate for your business’ needs, which is where we can help.
At Rangewell, we’re an Access to Finance specialist and have mapped over 400 lenders to offer business owners an overview of more than 23,000 commercial finance products. Our services are free to use and we’ll also guide you through the entire application process. So if you’re looking to buy a commercial property for your business, or even for a commercial property refinance, apply for Property Finance today or find out more with Rangewell.
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