Bad Credit Commercial Mortgages

How much can I borrow?

What is the minimum and maximum loan size?

We’re able to offer business mortgages to borrowers with bad credit from £25,000 with no maximum loan size.

What is the maximum loan to value?

Commercial mortgages are available up to a maximum of 75% loan to value (LTV). This means that you’re able to borrow up to 75% of the property value, with the remainder funded through a deposit.

Depending on the amount and type of bad credit that you have, some lenders may restrict the loan to value to reduce their risk. This is usually handled on a case by case basis.

How is affordability calculated?

For owner-occupied commercial mortgages, the key figure in calculating affordability is EBITDA.

EBITDA stands for earnings before interest, tax, depreciation and amortisation. This figure, which is calculated by taking your net profit and adding back each of those figures is then used to check that the loan is affordable.

When purchasing a property as a business that was previously renting, we will also be able to add back your rent payments, where they will cease on completion of the mortgage.

For commercial investment mortgages, affordability is usually calculated as a percentage of the rental income.

For example, a lender may insist that the annual rent is a minimum of 145% of the annual mortgage payments.

What rates and fees will I pay?

What interest rate can I expect to pay?

If you’ve suffered some adverse credit, but overall you have a solid credit profile, then you may be able to borrow from a high street lender and access low interest rates. Commercial mortgage rates from high street lenders tend to sit at between 5-6.5% per year.

If you fall outside of this due to bad credit, there are a number of lenders who may consider your application. These lenders tend to charge higher rates and may increase rates for higher loan to value applications.

You can usually expect to pay somewhere between 6.5-8.5% when borrowing from these lenders

How can I reduce the rate that I pay?

The best ways to reduce the rate that you pay are by repaying any unsatisfied adverse credit and by increasing your deposit.

Both of these things reduce the perceived risk to the lender and will usually allow you to access lower commercial mortgage rates.

Are there any other fees to consider?

Yes, on top of the interest charged, you will also encounter a number of fees when taking out a new commercial mortgage. The main ones are as follows:

Lender arrangement fee – this fee is charged by the lender for setting up the loan. It is usually charged when the application process completes (when the lender releases the funds) and is usually between 0.75-2.5% of the total loan amount. In most cases this fee can be added to the loan.

Valuation fee – this fee is charged during the application process and is used to pay a chartered surveyor to undertake a full survey of the security property. Once completed, they will produce a report on the property and provide a valuation of it.

Legal fees – when taking out a commercial mortgage, you are usually responsible for both your own, and the lenders legal expenses. You will be charged fees by both your own and the lenders solicitors to ensure the loan is set up correctly.

How to get a bad credit business mortgage

There is no single correct way to go about this, as the correct approach will depend on your circumstances. We cover the main points below.

Should I use a broker or approach a lender directly?

This is a matter of personal preference, but when working with a broker, you may be able to secure a better deal.

Some lenders in the commercial mortgage market can only be accessed through a broker, so should you choose not to use one, you would not be able to use that lender.

In some cases, they may not offer the best deal anyway, meaning it doesn’t matter, but you won’t know this without engaging with a broker.

What should I look for in a broker?

The difference between brokers can be vast, not least in the charges that you’ll face for using their service.

Many brokers charge fees for arranging commercial mortgages, often 1-1.5% of the loan amount.

We don’t charge broker fees for loans over £100,000, which can represent big savings for our clients.

What information will I have to provide?

During the application process, the lender will require the following:

• Proof of ID and address proof
• 2 years accounts for owner occupied lending
• A copy of the lease for commercial investment applications
• 3 months business and personal bank statements