How to apply for a Commercial Mortgage?

By David Harrison
Content writer
Last update: 22 November 20181 minute read
How to apply for a Commercial Mortgage?

Table of Contents

Like many UK-based businesses, you need to be where your customers are. Whether you run a commercial garage, luxury hotel, gourmet restaurant or a string of buy-to-let properties, location can make all the difference to your bottom line. As real estate increases in value, getting your business on the property ladder can seem a daunting task. However, if your aim is to own your premises or grow your business across the UK, a Commercial Mortgage could be the right choice for you. A Commercial Mortgage can help fund property purchases and redevelopment projects, or even simply release equity. So if you’re eager to take the next step in your business’ journey, here’s what you need to know when applying for a Commercial Mortgage.

  • Will I need to offer security?
  • Do I still need a deposit?
  • Will Commercial Mortgage lenders check my credit profile?
  • Are there any additional fees?

Will I need to offer security for a Commercial Mortgage?

Yes. Commercial Mortgage lenders will require you to offer security against the loan, in the form of land or property, but this could be the same property you’re purchasing or refinancing. For lenders, this is an essential requirement since it means that if your business becomes unable to honour its commitments, and default on the repayments, the lender can repossess the property which was put up as security to recoup their losses.

Are you looking to move your business to a more desirable location? Or, are you looking open multiple branches across the UK? Apply for a Commercial Mortgage today, or find out more about how your business could benefit!

Will I still need a deposit, even when applying for a Commercial Mortgage?

Yes. Lenders will require you to cover a portion of the property’s total purchase price or equity, which usually starts from 20%. So, in this case, you’ll be applying for a mortgage covering the remaining 80%. However, lenders typically favour larger deposits, in the region of 40%. So if you are able to put down a bigger deposit, lenders may be able to offer lower interest rates.

Will lenders need to review my business’ credit profile?

Before offering your business finance, lenders will want to check your credit profile, as well as any relevant documents, including business plans, profit and loss statements, audited trading accounts covering at least 2 years, business and personal bank statements, asset and liability statements, growth projections and credit status. The more information you provide, the more confidence lenders will have in your business’ commitment to repaying the agreement on time. If there’s anything that they should know about, even if it’s negative, you must be upfront. If lenders spot anything that you never told them about, it could damage your chances of getting accepted.

In addition, lenders will also look at whether your business has outstanding CCJ’s, existing financial obligations, accelerated payment notices (APNs) or a reliable history of paying off debt. Although lenders typically have a range of interest rates available, the rate that your business may be offered will depend on your credit score – so the weaker your score, the more interest you’ll be required to pay, and vice versa. If you have concerns regarding your Credit Score and wish to know more about how you can rectify any outstanding issues, you can read more on the topic here.

Are there any additional costs that I need to be aware of when applying for a Commercial Mortgage?

As well as putting down a deposit, you may also need to pay additional fees to the lender. Although these can vary between Commercial Mortgage lenders, these usually include arrangement fees, valuation fees and legal fees, and should be detailed inside your mortgage illustration document. You may also incur a variety of fees throughout the agreement, depending on your circumstances, such as early repayment fees (redemption penalty), missed payment penalties and exit fees. In order to ascertain the total cost of the agreement, you need to be aware of these potential costs. If you need further clarification, you can ask lenders to explain all of their charges before entering any agreements.

Interested in applying for a Commercial Mortgage?

Purchasing your business premises could prove invaluable, not only by freeing you from the hassle of leasing your offices, but also in giving you an appreciating asset. However, gathering the necessary cash can prove challenging, especially if you’re thinking about using your own capital. So rather than put your finances under pressure, you could explore what alternative solutions are available. Whether you’re looking to acquire your first formal business address or you’re looking expand into new markets, you could apply for a commercial mortgage. But, with so many commercial mortgage lenders to choose from, thanks in part to the alternative finance industry, finding the right lender for your individual needs can be frustrating. By using our expert knowledge, you can find the most suitable product for your needs. So if you’re looking to help purchase land and property or even release equity, apply for a Commercial Mortgage today, or find out more with Rangewell.

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