An Overview of the commercial mortgage

* Introduction
* Overview
* What We Need to Know
* Pros and Cons
* Repayments
* Types of Lender
* Getting a Quote
There are many reasons for buying commercial premises. For example, you may be starting or buying an existing business where the property is directly linked to the business, such as a hotel, a retail outlet or a takeaway. On the other hand, your existing business may need bigger premises to cope with expansion.

If you decide to buy premises you'll probably need to take out a commercial mortgage. Mortgages are usually for 15 years or more and the property itself is at risk if payments are not made on time.

Commercial mortgages can be used for a variety of purposes, such as:

  • the purchase of business premises
  • expansion
  • residential and commercial investment
  • property development

Most banks and building societies offer commercial mortgages, but you must satisfy the lenders' criteria. Some lenders may accept applications where there is an adverse credit history, but most require a positive personal credit rating and clear evidence that your business is creditworthy.

The lender's decision will also depend on your current business circumstances - a commercial lender will expect your business to be stable and profitable. They may ask to see your business plan and long-term financial projections, to assure themselves that your business has, and will continue to have, the ability to make repayments on the loan.

Some lenders impose restrictions on the uses of commercial premises and certain business concerns may be excluded altogether.

The terms of a commercial mortgage will depend largely on the type of business you're running and the type of premises or land you want to buy. This is a complex area and it's essential that you seek specialist advice from your solicitor and probably a chartered surveyor.


 

 

 
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Reproduced with the permission of Business Link (http://www.businesslink.gov)

The overall cost for comparison is 10.53% APR. The actual rate available will depend upon your circumstances. Ask for a personalised illustration. Early repayment charges apply. A broker fee of 1% may apply.  Your home may be repossessed if you do not keep up repayments on your mortgage.Our Financial Resources directory is available here