Essential Documents when Applying for a Commercial Mortgage

When making a new commercial mortgage application, the application process involves underwriting your loan.

To do this, your chosen lender will require certain documents, which are used to assess the application.

Understanding the documents required allows you to be prepared, could speed up your application and even result in you securing a better deal with lower commercial mortgage rates.

While there may be some differences depending on whether you’re taking out an owner occupied commercial mortgage or commercial investment mortgage, there are common documents required for every application.

To make sure your application runs smoothly, it is a good idea to ensure your documents are on hand and ready to send over to your lender or broker when requested.

Documents that are always required

Regardless of the purpose of your commercial mortgage application, the lender will usually require certain documents from you before they can proceed. They are:

• Basic application information – Whether the lender uses an application form, or just requires the preliminary details by email, they will need to know names and basic information. This will allow them to get an understanding of the transaction and who the people behind it are. We always produce a full report on the application to give the lender a clear picture of what is required. Of course, we always look to present the application in the best light, whilst being factually correct.
• Assets, liabilities, income and expenditure (ALIE) summary – Every lender asks for details of the current position in relation to assets held, liabilities owed, income and expenditure. This allows them to understand your current cash flow and net worth positions. Although this may seem strange, the lender will ask for an ALIE for the people behind the application, even if it is made in a company name. All directors and major shareholders will usually be expected to provide one. This is designed to create a picture of the financial health of the people who are controlling the finances behind the application.
• 3-6 months’ personal bank statements – Personal bank statements are requested by almost all lenders to check basic account conduct and to double check income vs expenditure. By checking bank statements over a number of months, the lender will gain more of an understanding of your financial position.

Owner-occupied commercial mortgages

When applying for an owner-occupied business mortgage, you will usually be asked for the following:

• 2 years’ trading accounts – – Trading accounts are used to assess affordability of the new loan. Affordability calculations run deeper than just checking the net profit figure. The trading accounts show a detailed picture of the financial health of a business.
• 6 months’ business bank statements – Much like personal bank statements, business bank statements are used to check account conduct and cash flow. Bank statements are not required where a business is being purchased along with its premises.
• Details of any likely changes to your future turnover or profit – If the prospects of the business are significantly different to the current position, the lender will want to know. Likely changes are reductions in costs, increases in trade or operating methods.

Commercial investment mortgages

The documents required when arranging a commercial investment mortgage are:

• Details of the tenant and a copy of the lease – The rental income is the money that will be used to maintain the mortgage payments. As the rental income relies on the lease, the lender will be keen to fully assess the lease to ensure the income is secure. The full lease will always be required, with no pages missing.
• Details of any other investment properties – If you own any other investment properties, the lender will want the following details for each property to give them an insight into the overall health of the portfolio:
  – Address
  – Property value
  – Amount owed
  – Rental income
  – Lease length
  – Monthly mortgage payment

Saving time

Although some lenders will not require the above information on every application, they are requested on almost every application. When your application is submitted and you’re eager to have it agreed quickly, every day counts.

By supplying a full application pack to the lender, you make it much easier for them to say ‘yes’. Prepare the documents upfront and you can create a strong first impression with the lender, increasing your chances of having your application approved.

Working with ABC Finance

At ABC Finance, we’ve been arranging commercial mortgages since the year 2000, and work with the market’s leading lenders to offer our customers the best deals.

On top of finding the best rates and fees, we work to understand your borrowing requirements, what you want from a product, and how quickly you need the money.

Once we’ve found the perfect deal for you, we manage the whole application process, to ensure that your commercial property purchase or refinance can run smoothly.