If the vendor has taken the decision to Opt To Tax and you are running a VAT registered business, you may be able to reclaim the VAT – but you should discuss this with an expert advisor.
Commercial Property Finance: Buying premises for your business or investment
Buying your business premises or buying for investment - we can help you find the Commercial Property Finance deal that's right for youSpeak to one of our experts020 3318 2613
Large scale borrowing
- Terms up to 20 years
- £50,000 – No Maximum
- Rates from 2% over base rate
- Individual arrangements tailored to your circumstances
Designed around your needs
- Repayments geared to your turnover
- Adverse Credit – no problem
- No Income Proof Required
- Repayment and interest only available
- Refinance existing property
- Up to 80% Loan to Value available
- Purchase land, premises or investment property
- Commercial, Residential and Land
Talk to Rangewell – the business finance experts
The right property finance can be the key to a profitable business. We know every property lender in the market and use our contacts to help you find the deal that's right for you.
At Rangewell we recognise your professional status, and we work harder to find you better solutions - which can include 100% finance for many of your needs.
Commercial property can be more than simply necessity for your business, it can be a rewarding investment.
Buying the right commercial property can provide premises for your business, which can reduce your outgoings and create a valuable additional asset for your business.
It can also be a way of buying into the property market to that you can let out to generate an income, as well as capital growth.
As with residential property, location is of prime importance. You will also need to consider how the property will be used, and whether there are any restrictions on the uses it can be put to.
The usage classes for property are:
- A1 shops
- A2 financial and professional services
- A3 restaurants and cafés
- A4 drinking establishments
- A5 takeaways
- B1 business
- B2 industrial
- B8 storage or distribution
- C1 hotels
- C2 residential institutions
- C2A secure residential institution
- C3 homes
- C4 houses in multiple occupation
- D1 non-residential institutions
- D2 assembly and leisure
If you intend to redevelop the building or alter its intended use, you may require planning permission.
Buying property with a Commercial Mortgage
A Commercial Mortgage is one of the most common forms of finance used to buy a commercial property. These operate much like a residential mortgage, with a large loan secured on the property itself.
Generally, Commercial Mortgages are for 15 years or more and, as with a residential mortgage, the premises will be at risk if you are unable to keep up your repayments
Unlike a residential mortgage, the rates for a Commercial Mortgage are arranged on an individual basis. Lenders will look at your business, your accounts and projections to ensure that it has a future and set interest rates based on the level of risk they believe it presents.
There will be valuation, arrangement and legal fees to consider. There can also be additional costs associated with a Commercial Mortgage for the services of professional advisors.
How much can you borrow?
Because of the legal and administrative costs, it is uneconomic to borrow less than £50,000 with a Commercial Mortgage, and some lenders have a minimum of £75,000 or more, but there is no set upper limit.
Typical loan-to-value ratios for a new business with no trading history will be a maximum of 50% of the purchase price. Owner-occupied businesses such as offices or shops can normally get a maximum loan-to-value of around 80%.
Commercial Mortgages can be used for three purposes:
Commercial Mortgages for owner-occupiers allow a company to purchase the premises where it operates to buy new premises to move into.
Commercial Mortgages can be used to fund the purchase of residential property to be let out. This approach is commonly used by professional landlords as well as buy to let limited companies to help build a property portfolio.
Commercial Mortgages can also fund commercial buy to lets, so you could, for example, buy a warehouse and let it out to another business.
Repaying the mortgage
Commercial Mortgage deals are either fixed-rate or variable rate. Fixed rate deals are usually between two and five years. On the other hand, taking a variable rate mortgage will allow you to benefit from any reductions in the base rate, but will also mean repayments may increase if the base rate increases.
You may also be able to choose 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 back each month. If you choose this option, the lender will seek evidence of an appropriate investment policy that will cover the outstanding capital at the end of the loan term.
Other types of Commercial Property Finance
Although Commercial Mortgages are a popular form of funding for commercial property, several other solutions exist which can provide solutions for particular purposes.
Property Development Finance
Property Development Finance usually in the form of a short-term loan that can be used for the development of a new building project, or refurbishment of an existing property.
Lenders may advance up to 70% of the gross development value, and terms can be up to 24 months.
Find out more about Property Development Finance here.
Bridging Finance is a short-term finance solution used by property developers and investors, which provides a quick way to finance the purchase of a property. The lender will take First Charge on your property, and will seek an exit once the loan has come to term.
Find out more about Bridging Finance here.
Auction Finance is a way of arranging funding in advance of an auction. It can help you know how much you can bid on a particular property.
Find out more about Auction Finance here.
Commercial property solutions from Rangewell
Commercial property involves high costs, and it is important to have expert help to get the kind of funding that will help you reduce your outgoings.
It lets us use our property finance expertise to support your business – and ensure that you have the financial solutions you need.
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
REAL EXAMPLES OF WHAT WE CAN DO
Help a first time landlord buy an old school for conversion into commercial units
Find the most competitive funding for a business wanting to buy its offices
Find finance for an industrial unit operator buy an adjacent site to expand
Source funding to allow a landlord to build his property portfolio
Arrange funding for a transport company to buy a regional depot
Discover our range of finances
Every type of finance for every type of business
Our goal is very simple - to help businesses find the right type of finance as quickly, transparently and painlessly as possible.
Helping you build your profits
Buy a property for your businessCommercial mortgages can you buy your current business premises, or new premises to move into – and secure a valuable asset.
Buy an investment propertyCommercial mortgages can help you purchase a property to be let out – helping professional landlords and buy-to-let companies to build up a property portfolio.
Buy at auctionBuying a commercial property at auction depends on having access to a large reserve of cash. Auction finance is designed to help.
Short-term and long-term fundingMany deals are based on short-term finance with a bridging loan to allow them to be progressed fast - and then refinanced with a commercial mortgage to reduce costs for the long-term.
Build a property portfolioCommercial mortgages can be the simple way to build a property portfolio, for residential or commercial buy to let or for development.
Gain an appreciating asset for your businessBuying your own premises can be a valuable asset for your business which could offer the prospect of capital growth.
Download Rangewell’s free and detailed guide to Commercial Property Finance
What types of funding are available for commercial property?
How do commercial mortgages differ from residential mortgages
How can refinance free up funds?
What are the costs?
What are the restrictions?
The downsides and how to avoid them
Paperwork you need to provide with your application
Key terms to check
Can refinancing a commercial mortgage help businesses with cash flow?
Do all lenders have to be authorised and regulated by the Financial Conduct Authority?
Is a bridging loan classed as short term business finance?
Must my business have a registered office in England/be registered in England to qualify for a business mortgage?
What interest rate can I expect with property development finance?
What about commercial owner-occupied/residential mortgages or buy to let mortgages?
Am I able to refinance an existing commercial mortgage?
Download this free resource on financing a commercial property
Download your Rangewell Business e-Book
Available in ePub, mobi and .pdf format
Interest rates on Commercial Property Funding are set on an individual basis and may be higher than a residential mortgage. Legal and other costs may also be higher.
Although you may be able to fix interest rates for an initial period, the rates will be variable over the longer term. This means that your monthly outgoings could increase in the future.
Any property used as security, which may include your home, may be repossessed if you do not keep up repayments on your mortgage.
Frequently asked questions
Have A Question?
As a general rule, selling of commercial property is exempt from VAT, which means you do not have to pay VAT on the purchase price - unless the vendor has taken the decision to Opt To Tax.
A commercial property solicitor will take care of all aspects of the legal side of a property sale or purchase, to ensure that you have full title and the vendor recieves payment.