Business Property Finance
Funding solutions for commercial property
Buying business property can provide the premises you need and cut your monthly outgoings. Or it can provide a rewarding investment, for development or letting out. But a loan will probably be essential.
Business property can be the premises you need to run and grow your own business. Buying it can reduce your monthly outgoings, compared with renting, and create a valuable additional asset for the future.
But there are other reasons to buy business property. It can also provide revenue if you let out property to generate an income, as well as capital growth. But whatever your plans, getting the most appropriate type of finance, and the most cost-effective deal is essential.
A Commercial Mortgage is one of the most common forms of finance used to buy a business property.
Commercial Mortgages operate much like residential mortgages and are simply 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.
However, there are some important differences to be aware of. 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.
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 funding
There will also be valuation, arrangement and legal fees and additional costs for the services of professional advisors which will add substantially to the initial costs.
There is no set upper limit for a Commercial Mortgage. So, if your plans involve large-scale acquisitions, such as an entire retail park, it may be possible to provide the level of funding you need.
However, you will need to make a large contribution yourself. 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 loan-to-value of around 80%.
Commercial Mortgage deals can be either fixed-rate or variable rate, and 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. 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 business property finance
Although Commercial Mortgages are a popular form of funding for commercial property, several other options exist.
Property Development Finance
Property Development Finance is a type of lending that experienced property development businesses can use to fund new building projects or refurbishment of an existing property.
Different scales of lending are available, designed to support projects from light renovation to conversion, to ground-up new builds.
Lenders may advance up to 70% of the gross development value, with terms can be up to 24 months. Property Development Finance is usually only available for experienced developers who have a portfolio of previous development projects to showcase their skills.
Bridging and Auction Finance
Bridging Finance is a business property finance solution often used as a short-term solution for property purchase. 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 interest rate, which would mean mean high costs if used for a long period. It is best thought of as the means to bridge a funding gap, until a more suitable long-term solution can be provided.
Auction Finance is a way of arranging funding in advance of an auction and is much like a Bridging Loan as it is designed to provide short-term finance only. If you are successful at auction it can help to ensure that you have the funding in place first, and can also be valuable to help you know how much you can bid on a particular property.
Investing in property to let out can help you share in the growth of the property market, and can provide both income and the prospect of capital growth. Residential property, HMOs (houses in multiple occupation) and commercial property can all be funded with the appropriate financial solution.
Raising funds with business property refinance
If you currently own property, property remortgaging or refinancing could let you use it to raise cash. Commercial Property Refinancing lets you access the investment you have already made in your property to provide the funding your business needs, while keeping costs down. It works by letting you take out a new commercial mortgage on your existing property. 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 and to take advantage of rates that are exceptionally low.
Refinance can also be the solution if you want to get a better deal on your current business property finance commitments. You do not need to have paid off your current mortgage to arrange a new one. Your property will probably have appreciated in value and this means that the chances are that you can get a better deal on your existing loan. So if 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, 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.
Business Property Finance from Rangewell
All types of property involves high costs, and it is important to have expert help to get the kind of funding that is right for your business.
At Rangewell, we have the expertise you need. We use it to support your business – and ensure that you have the financial solutions you need.
Even a fraction of a percentage point can make a substantial difference to what you actually pay each month, while fees and penalties can complicate the position still further. There are many different lenders who may be prepared to offer funding. Each has their own approach to interest rates and fee arrangements, and comparing offers needs an expert eye.
At Rangewell, we know the lenders who can offer commercial property finance, and we can use our expertise to identify the deal that really is the most appropriate for you and your business plans. Our knowledge can not only help you secure the funding you need - it can save you and your business a great deal of cash.
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 business owner buy an old house for conversion into office premises
Find business property finance for a business wanting to buy its office building and depot
Help arrange finance for an industrial unit operator buy an adjacent site
Source funding to allow a landlord to build his BTL property portfolio
Arrange funding for a marine engineering business to buy a dockside property
Helping you build your profits
Fast decisions from specialist lendersLenders will look at your credit profile, the value of the asset, and your exit strategy to make a decision in the shortest possible time.
Suitable for all types of property• Residential, commercial and mixed-use development • Conversion and refurbishment • Planning gain transactions • Part built development refinance
For property professionalsProfessional developers, investors and landlords can all use finance as part of their overall funding strategy.
Designed for your businessYour business plans are the key to securing the finance you need - a sound business plan will count for a great deal.
Releasing fundsRemortgaging an existing property can provide a source of a high level of funds for your business to reinvest elsewhere.
For developersShort-term loans can provide a funding solution for development projects which can be refinanced at a higher value once work is completed.
Download Rangewell’s free and detailed guide to Property Finance
How does property finance work?
Why type of funding do you need for your project?
What are the costs?
What are the restrictions?
The downsides of property finance
Making the application
Key terms to check
A sound business is essentialFunding is secured on the future earnings of your business. A sound business, and a sound business plan for its future are vital to secure funding.
You need to provide a large depositMost lenders will expect you to put up at least 25% funding as a deposit.
You need to be be certain you can make repaymentsBusiness property lending is secured on your property. If you don’t keep up repayments, you could lose it.
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ImpartialTransparent and independent, treating all lenders equally, finding the best deals.
In-depthEvery type of finance for every type of business from the entire market - over 300 lenders.
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FreeWe make no charge of any kind when we help you find the loan you need.