Commercial Loans: Borrowing that means business

A commercial loan is a form of lending that business owners can use to address short-term capital needs. The amount borrowed can be used to acquire new business equipment, build a new space, or pay operational costs and other expenditures.

What is a commercial loan?

Commercial mortgages will take over where a business loan finishes. Typically, business loans of up to £25,000 are unsecured. For more significant amounts, lenders will require security to reduce the risk to themselves. 

A business mortgage will usually last anywhere from 3 - 25 years, and you'll usually be able to find a 70-75% mortgage. The measure of the loan-to-value ratio will depend on how much you borrow in relation to how much the property is worth. If it's an investment, then the amount you can borrow will be determined by the rental income it generates, but this usually won't exceed 65% of the purchase price. If you're buying a business that includes goodwill, the amount might be further reduced.

What are the benefits of commercial loans?

Here are just a few reasons you might want to take out a commercial mortgage loan.

• The interest on commercial mortgages is tax-deductable
• If your property does appreciate, your capital will increase
• You'll be able to rent out the property to make an extra income

How do commercial loans work?

Commercial mortgage loans, which are also known as business mortgages, allow business owners to buy a property or a piece of land for their business. It works similarly to a residential mortgage, so the money is borrowed from high street banks and is repaid in monthly instalments, along with interest.

What are the costs of commercial loans?

The following costs are involved in commercial mortgage loans:

• Arrangement fees: These are added to the loan when the loan is approved, but some will request the fees to be covered earlier if you decide not to accept their offer. Arrangement fees are around 1 - 2%. 
• Valuation fees: A valuer will visit the property and then give feedback to the lender. Commercial valuations will start at around £500, but costs are based on individual circumstances, which will be payable once the offer has been accepted. 
• Legal fees: You'll need to pay both your own legal fees and the lenders' fees, starting at around £500.

How long does it take to secure a loan?

The length of time to complete a commercial mortgage will differ drastically between lenders and individual circumstances. However, the average turnaround will be 8 to 10 weeks.

Types of commercial loans

Mortgage loans can be divided into two categories.

• Owner-occupied mortgages: This will be used to buy premises that will be used for trading for your business. 
• Commercial investment mortgages: This will be used for properties you're planning on letting out.

Most commercial mortgages are paid at a variable rate. However, fixed-rate mortgages are available for amounts under £500,000, and the lender will take the rate risk for themselves. 

If you need working capital to deal with a cash flow shortfall or want to invest in growth, we can help you find the most cost-effective solution from options that include:

Unsecured Business Lending

Need a smaller sum - from £1000 to up to £250,000 fast?

Unsecured lending can provide smaller loans without you needing to put up security or collateral. New online lenders can often provide fast decisions on unsecured loans, sometimes allowing you to have the funds in your bank on the same day that you apply.

Secured Business Lending

If you need a larger loan, from £10,000 upwards, a low cost secured business loan may be the solution. This can involve putting up assets such as property or even your home as security, which the lender may seize if you don't keep up repayments. A Secured Loan can help you spread repayments over longer periods. They often also have lower interest rates than Unsecured Loans.

Asset Funding

If you want to bring in business assets like equipment or vehicles, Asset Funding can often provide the most cost-effective way to spread the costs of leasing the equipment or buying it outright. The loan is secured on the asset itself, reducing the risk to the lender, and hence the interest rates they will charge you.

At Rangewell, we can find asset funding solutions for used as well as new equipment - and we can frequently undercut the finance deals offered by dealers and suppliers.

Why you need Rangewell to arrange the loan your business needs

Not all types of lending are may be suitable for all needs and circumstances. Getting things wrong, with the wrong type of loan or the wrong lender, could mean that you pay a great deal more than you need.

At Rangewell, we cover the entire UK business lending market, from high street banks and the new generation of challenger banks to specialist, niche providers.

We know the most appropriate lenders for different types of lending, and those who will be most appropriate for your business sector. We have personal contacts that can often let us secure finance quickly, and have access to products that are not available on the open market.

It means we can help you find the most appropriate lenders and the most competitive deal whatever kind of commercial funding you need. We can offer flexible terms to suit your needs.

Why you should call us

Whatever your financial needs, finding and setting up the solution your business needs is a major responsibility, and it makes sense to get unbiased expert support.

At Rangewell our experts can help you with every aspect of planning and arranging your loan, as well as finding the most suitable lenders.

We can discuss your objectives, and help find answers scaled to fit your turnover and your other obligations. When you call us, we can explain the options – and help you find the most cost-effective solution.

To find out business finance for buying your next business premises, speak to Rangewell we can arrange loan terms to suit your business needs.