Why Businesses Go For A Commercial Mortgage!
Taking out a commercial mortgage can help your company in dozens of ways. As well as benefiting from capital growth in your business premises, you can also better control your cash flow by fixing your property outgoings.
However, since the credit crunch, small businesses have found it more and more difficult to be approved for commercial loans. Funds to buy company premises are scarce and it has become harder to agree a commercial loan with a bank or other business lender. So, if you are looking for a commercial mortgage, it is essential that you follow these four tips to improve your chances of being approved for a loan.
Invest your own money: Whilst banks are happy to help you expand your company, they will expect you to shoulder some of the financial risk. In order for them to lend to you, they want to see that you are also financially committed to the success of your business. So, you will be expected to commit a substantial amount of your own business capital if you expect to be agreed for a commercial mortgage.
It is not unusual for a commercial lender to require a deposit of between 30 and 50 per cent of the value of the property. You will therefore need to fund the deposit of 30 to 50 per cent. As a banks risk is reduced for every per cent of deposit you put down, they are much more likely to agree a loan if you have a large deposit.
Have a great business plan: Commercial lenders are highly unlikely to lend to you unless you have a solid and robust business plan. Any lender you approach will want to study your business plan to find out how your business has performed in the past and how you expect it to perform in the future. Make sure your business plan is comprehensive and accurate and make sure you can explain all your figures and plans to a lender.
If your business plan is inaccurate or incomplete, it will make it very difficult for a commercial lender to agree a loan. Only by being confident in your business plan will they consider advancing the funds you need.
Show that you can responsibly manage debt: One of the best ways to demonstrate that you will keep up repayments on a commercial mortgage is to show that you have responsibly managed other financial commitments. If you have made all your payments on time in the past, it is likely that you will do so again in the future.
Show any potential lender proof that you have always made your payments to loans or other commercial borrowing. Demonstrate that your rent has always been paid on time and that your company credit card payments are in order. If you can prove that you have a track record of managing debt responsibly, a commercial lender is much more likely to agree your borrowing.
Be Prepared: Making a good impression on a commercial lender is important. Banks are unlikely to agree a commercial mortgage if you do not have the answers to simple questions about your companys finances or future plans.
Consequently, it is vital that you are properly prepared when you meet your bank. If you cannot provide answers to questions about your business cash flow, profits or future plans, it is unlikely that you will be successful. As the old saying goes fail to prepare; prepare to fail.
About the Author:
Howard writes for Just Commercial Mortgages the UK's No1 site for the latest commercial mortgage rates and commercial property finance news.
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