Commercial property mortgages

Traditionally, business owners have bought their commercial property through their own bank like Barclays, Nat west, HSBC or Lloyds TSB.  Loan to value amounts were around 50% to 60%, without the need for additional security. 

Business owners did have to sign away their own family homes for many commercial mortgages in the form of a second charge, offering the lender additional security. 

Full accounts, were required and scrutinised so the bank were sure that the business could afford the borrowing. 

A few years ago, more specialist lenders saw the strength in the commercial property market and were able to offer mortgages at more favourable rates and terms that many banks could, or were willing to do. 

70% loan to value became common place and some lenders were willing to go to as much as 85% without additional security, and sometimes without accounts and proofs of income, and were open minded about a certain amount of adverse credit in the form of CCJ’s and defaults.

Since the credit crunch and the property price crash in the United States, coupled with a slight drop in confidence in the UK commercial property market, lenders have become much fussier about what loan to value and property types they are willing to do. 

Buy to let borrowing still exists at rates near to normal mortgage rates at around 85%, but many lenders will now only consider 70% loan to value on many commercial properties, and while they do still offer products that are “Self Cert” or “Self Certification of income”, they are now requiring much more proof of people’s income and accounts.

Some of the higher risk lenders build in high redemption penalties and tie ins so this compensates them for the money they loose with the inevitable number of re possessions. 

Typical rates for different types of property include, your own residential property around Bank of England base rate, or slightly less for deals with tie ins, Commercial mortgages around Bank of England base rate +2%, and adverse, short term and self cert commercial property borrowing around 10% and as much as 12%.

Small Business Funding

When a business would like to purchase an asset like a van, car, piece of plant or machinery, it is often possible to finance these purchases. 

Deposits can be raised by helping a business with its cash flow using invoice discounting or invoice factoring to release cash against unpaid invoices outstanding.

If the business owner has a long term relationship with his bank, they will often help out the business with an overdraft with reasonable terms. 

Its difficult to get large loans without business owners signing away their family homes, to offer the bank security.