Industrial Property Loan

Buying an industrial property can be a rewarding investment for the development and expansion of your business, whether you plan on using it as a base for your business or to let out. 

Either way, large-scale funding will be essential to your plans.

Investing in industrial property can be what you need to run and grow your manufacturing or other business. Having the funds to buy it can reduce your monthly outgoing when comparing against expensive renting costs. It will also create a valuable additional asset for the future of your enterprise.

A loan secured on an industrial property can be used to provide funding for a wide range of business purposes, including purchasing supply and competitor companies, expanding your existing business, finance for building more facilities, or acquiring capital assets. 

Industrial property loans are different to residential loans. Industrial property can be an investment that produces revenue if you plan on letting it out. Whatever your plans, getting the most appropriate type of finance and the most cost-effective deal to fund your industrial property purchase is essential.

Industrial property types can include:

• Warehouses and storage facilities
• Manufacturing plants
• Self-storage facilities
• Shopping centers
• Factory units
• Car parks
• Depots and bulk storage
• Automotive workshops
• Office buildings
• Distribution centres
• Flex warehousing
• Steel frame buildings
• Industrial units
• Marine facilities

What are the common forms of finance for an industrial property?

Below are just a few examples of the common forms of finance for industrial property. 

Commercial Mortgages

A commercial mortgage is one of the most common forms of finance used to buy industrial property.

If you'd like to find out more about a property portfolio and mortgage terms, Ragewell can provide all the support you need. 

How do commercial mortgages work?

Commercial mortgages operate like a residential loan or mortgage and are simply large loans secured on the property itself. Generally, commercial mortgages are for 15 years or more. As with a residential mortgage, the premises will be at risk if you cannot keep up your repayments.

There are some crucial differences between commercial mortgages and secured loans. One of the most significant is that the rates and terms for a commercial mortgage are arranged individually. 

Lenders will look at your business, your accounts and projections to ensure that and set interest rates based on the level of risk they believe it presents.

If you're looking for a commercial real estate loan, speak to Rangewell today!

How likely will I be approved for a commercial loan?

A sound business in a growing sector could expect to secure the best rates and terms, which can be substantially below most other types of business loan.

You’ll need to remember that there will be valuation costs, arrangement fees, and legal fees. These additional costs for the services of professional advisors will add substantially to the initial costs.

Because of the legal and administrative costs of setting up a commercial mortgage, it is uneconomical to borrow less than £50,00. Some lenders have a minimum of £75,000 or more, but there is no set upper limit. However, for larger loans, over £1m, we can help find lenders with bespoke terms that are suited to your requirements.

However, you will need to make a significant contribution yourself. Typical loan-to-value ratios will be a maximum of 50% of the purchase price for new businesses. Owner-occupied businesses such as offices or shops can typically get a loan-to-value of around 80%.

Commercial loans can be either fixed-rate or variable rate. You may also be able to choose between a repayment mortgage option, where you pay the capital and interest back each month, or an interest-only mortgage, where you only pay the interest.

Speak to Rangewell to get an estimate on your monthly payments, we can usually find terms to suit your needs.  It is important to note that even though they are similar to residential loans, residential loans aren't suitable for this scenario.

When are commercial mortgages used?

Commercial loans are usually divided into two categories.

Owner-occupier mortgages 

This is a form of lending used to buy the commercial property that will be used as trading premises for your business. Because an owner-occupier mortgage is a type of unique mortgage tailored for commercial property owners who have a business operating in their property, the terms will be different. To find out if this is a solution that will work for you, speak to Rangewell today. 

Commercial Investment mortgages

This is used for property that you’re planning to let out. A commercial investment mortgage is a specific kind of finance typically used to buy a commercial property which is then let to tenants. They are the commercial counterpart to residential buy-to-let mortgages and work similarly. 

To find out more about your monthly payments, speak to Rangewell today. 

Key features of taking out a commercial mortgage

A business mortgage will differ from a standard mortgage in different ways:

• There are usually no fixed rates for commercial mortgages.
• You’ll typically pay a higher rate on commercial mortgages than regular home mortgages, which is considered higher-risk to lenders.
• Commercial mortgages usually offer better interest rates than regular business loans as these require properly as collateral. 

How to apply for a commercial mortgage

The process is different to applying for residential mortgages. Hiring an expert broker will ensure you’re paired with the most suitable lender and simplify the application process. A commercial mortgage application will work similarly to taking out a regular mortgage for your home:

1. You’ll need to fill in and submit an Asset and Liability form 
2. You’ll then be asked to complete a commercial mortgage application
3. You’ll be required to provide information on your business (see below)
4. The property will then be valued
5. The lender’s solicitor will carry out all legal due diligence
6. If you’re approved, you’ll receive a mortgage offer from the bank 

Some documents you’ll need are:

• Bank statements usually covering 36 months
• Your trading figures covering the past 3 years
• ID and proof of address
• Lease and/or tenancy agreements
• You may have to produce a business plan for financial projections

To find out more about loan terms and conditions, speak to Rangewell today. 

Other types of business property finance

Although commercial mortgages are a popular form of funding for industrial property, other options exist.

Property Development Finance

Property development finance is a type of lending that experienced property developers can use to fund new building projects or to refurbish an existing property. 

They may be suitable for projects, such as converting major factory sites into units or constructing new buildings.

Different scales of lending are available, and these are designed to support projects from light renovation to ground-up new builds.

Lenders may advance up to 70% of the gross development value, with terms that can be spread over 24 months. Property development finance is usually only available to experienced developers with a portfolio of previous development projects to showcase their skills.

Bridging and Auction Finance

Bridging finance is a property finance solution often used as a short-term, temporary solution for property purchases. It works like a mortgage in that the funding is secured on the property itself, but unlike a mortgage, bridging finance carries a relatively high rate of interest.

It is best thought of as the means to bridge a funding gap until a more suitable long-term solution can be provided. However, it can help deliver large-scale funding quickly - potentially in days rather than the months required for other types of property finance.

Auction finance is a way of arranging funding in advance of an auction, like a bridging loan, it is designed to provide short-term finance. It can help you ensure that you have financing in place if you are successful at an auction. In addition, it can be valuable to help you know how much you can bid on a particular property.

Our commercial lenders will have a solution to suit your needs, get in touch today. 

Raising funds with business property finance

The process is very different from applying for residential mortgages. A loan secured on industrial property can be used to provide funding for a wide range of business purposes, including:

• Purchase of supplier and competitor companies
• Expanding your existing business
• Finance to building more facilities or acquire capital assets
• Buying adjacent land or property
• Restructure existing borrowings

Property remortgaging or refinancing could let you use a property you currently own as the security to raise cash at a preferential rate. 

Industrial property refinancing lets you access the investment you have already made in your factory, warehouse, or other property to provide the funding to use again. 

If you own the property outright, all the money you raise is yours to use in any way you wish. 

You can also refinance a property with an existing mortgage, repay your original loan, and use any surplus cash to help build your business. You regain full title to your premises when the funds are paid off.

Refinance can also be a solution if you want to get a better deal on your current business finance commitments.

You do not need to have paid off your current mortgage to arrange a new one. Your property will probably have appreciated. The chances are that you can get a better deal on your existing loan. 

Suppose you want to reduce the monthly repayments on your current mortgage, cut the demand on your cashflow, and release funds for use elsewhere in your business. In that case, refinancing your current commercial mortgage could help. You may be able to pay off an existing loan and replacing it with a new one at a lower cost.

Industrial Property Finance from Rangewell

The scale of industrial properties makes very high costs inevitable. Therefore, it is vital to have expert help to get the right funding for your needs to keep costs down.

Even saving a fraction of a percentage point can make a substantial difference to what you pay each month, while fees and penalties can further complicate the position. 

In addition, many different lenders may be prepared to offer funding. Each has its own approach to interest rates and fee arrangements, and comparing offers needs an expert eye.

At Rangewell, we use our property finance expertise to support your business – and ensure that you have the financial solutions you need.

If you're worried about your credit history, we can find help find a solution that works for you. We can also speak to you about capital repayment holidays. 

What is the lending criteria for Industrial property? 

The lending criteria is different from applying for residential loans. The main criteria are that you are a homeowner and have owned a couple of buy to let properties for a minimum of 24 months. Ideally, you should have money in the bank in the form of savings. In addition, you should be able to provide evidence of your income, whether it’s from a salary, self-employment, to rent. 

What are the general lending guidelines for professional practice mortgages

Some common lender requirements are:

• You’ll need to prove your income 
• You’ll need to confirm your spending (ingoings and outgoings)
• Detail your essential expenses 
• Provide calculations on your basic living costs
• Show what repayments and other commitments you have 
• You’ll need to check your future affordability
• Think about how you’ll pay the mortgage if you’re thinking about retiring

What fees are involved with commercial property loans?

Generally, the buyer’s fees are different from residential loans are around 6.5 - 7% of the purchase price (stamp duty, land tax, legal and survey fees, and broker fees). Once a sale to you has been confirmed through an agreement in principle, your heads of terms will be drawn up. 

What are the alternatives to a business mortgage?

Other alternatives to bank loans include invoice financing, merchant cash advance and inventory finance. Each of these can provide alternative methods if you’re looking to raise cash in your business. Even this type of loan it is similar to a residential loan, It is not possible to use residential loans in this scenario. If you're not sure which option will be best for you, speak to Rangewell today. 

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IN THE EVENT OF LOAN DEFAULT IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE