Business Mortgage Applications In Numbers
Business mortgages are usually available up to 80% of the property value. Certain industries will see this reduce, as will applicants with a history of adverse credit.
Applications are available on interest only or capital repayment. Interest only applications are usually capped at 75% loan to value (LTV).
Where a property purchase is subject to VAT, we are usually able to fund the VAT using a VAT loan. A VAT loan can be made for up to 100% of the VAT payable and is repayable when the VAT is claimed back.
Typically, a business mortgage is usually made for up to a maximum of 20 years. Some lenders will accept terms as high as 30 years, although these are few.
Certain specialist industries such as doctors and dentists are able to take out 100% commercial mortgages.
Business Mortgage Rates
Business mortgage rates vary depending on the following:-
- Loan amount
- Loan to value
- Credit history
- Financial strength of your business
Lenders price each case according to the risk of the application. As such, a business that is well-established and financially sound will find their interest rates lower than a newer or struggling company.
On top of this, a company wishing to take out a larger loan will usually see interest rates reduce if risk is not unduly high.
The industry of the company applying for finance can affect the application, with some lenders favouring certain industries. On the flip side to this, some lenders will view applications from other industries as less favourable.
The market conditions can be ever evolving and one of our advisors will be able to quickly advise you on likely figures for your industry.
Commercial mortgage rates for owner occupiers can vary greatly and start from around 2.25% and can go all the way up to 18%. Most business mortgages will cost between 2.75% and 7%. Lower risk applications will, of course, come in at the lower end of this spectrum.
Applying For A Business Mortgage
When applying for business mortgages, you usually have to provide the following:-
- Your latest 2 years trading accounts
- Asset & liability statement
- 6 months business & personal bank statements
- Proof of ID & address
Your application would follow this process:-
- Talk to one of our advisors who will discuss your business mortgage needs
- We will email you a quote detailing the interest rate, fees, and headline borrowing terms, along with a list of the documents required to submit your business mortgage application. We are usually able to send your figures within 2 hours.
- As soon as we receive the documents from you, the application form will be completed. We carefully check and prepare your application prior to submission. We write a comprehensive report to ensure that the lender fully understands your circumstances and goal. Once submitted, we usually have an update for you in 24-48 hours.
- At this point, some lenders will want to meet with you to confirm the application details and to prepare the application for credit. ABC Finance would then arrange the meeting for you at a time and place convenient to you.
- Once comfortable, the lending manager will take your application to the credit committee. These are the underwriters who sign off the application as acceptable to the lender. Once approved, the lender will issue the formal offer, subject to valuation and legal work.
- Your formal offer will be issued.
- A valuer from the lender’s panel is instructed to carry out a valuation of the property.
- Your solicitor is instructed to carry out the legal work and satisfy all conditions. They will run through the terms of the agreement and ensure you fully understand the loan. Once satisfied, you will sign the formal offer and return it to the lender. It is important that your solicitor is experienced in dealing with commercial mortgages as inexperience here can slow the process down significantly.
- Once all of this is done, the funds can be released and the loan completed.
What Is Classed As Owner-Occupied?
An owner-occupied commercial mortgage is when the ultimate owner of the company and the owner of the property is the same person.
If a property is owned by an individual, who is also the shareholder of the business, the application would be considered owner occupied. Although they are a different legal entity, the lender will take a common sense approach and treat the property and individual as the same entity.
This means that low business mortgage rates are available even when you rent the property to your own Ltd company. This is also true when the property is owned by a different Ltd company, or a pension fund – as long as the ultimate owner of both is the same person.
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Business mortgages are available for properties with a residential element to them. These are known as mixed-use properties and could be either let or occupied by the owner of the business.
Where the occupier of the residential element is the borrower, this could make the application regulated. Regulated business mortgages may be subject to different criteria and will not be available through all lenders.
Some lenders will insist on the applicant switching their business banking to them as a condition of a new business mortgage. This is common, although some lenders will be more lenient than others.
If moving your business banking is likely to cause an issue, it’s important that your advisor is made aware upfront. An experienced business mortgage broker will be able present solutions to you without the need to switch your banking services.
The Next Steps…
To read more about your business mortgage options, read our full guide to commercial mortgages, which is regularly updated. Our commercial mortgage calculator page will allow you to work out likely costs and gives more information on rates, fees and charges.
To get a personalised quote based on your circumstances, enquire online now. Alternatively, call us on 01922 620008.