If you are in need of a mortgage on your business property, there are many different reasons why a commercial mortgage can assist you. Owning your business property is actually an investment in itself. It can also help with longer term financial needs, as you are able to select a fixed rate mortgage so that you know exactly how much will be going out each month.
A current issue, however, since the recent market crash is that the lenders are not quite so happy to allow mortgages for smaller companies. Cash to expand your company or to buy business premises is scarce and so it has become harder to agree lending with a bank or other financial institution. Whilst banks are continuing to lend billions of pounds to small businesses, it is vital that you follow these four steps to improve your chances of being approved for a commercial loan.
Put a Good Deposit Down: Lenders will be far more comfortable if you take on some of the risk related to a mortgage that can help your business to expand. Of course part of the natural work of a bank is to take on some of the risk, but it helps to be accepted if you can show that you have faith in your business by investing some of the money up front on the mortgage. It is therefore advisable to set as much money aside to put down on a mortgage as you can to give your assurance that you believe in your business’s success.
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 bank’s 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.
Write Up An Excellent Business Plan: In order to persuade the lenders that your business is worth the risk of lending to you with a commercial mortgage, it is extremely important to draw up a solid business plan, which will tell the banks about the stability of your business ventures. The lender will be very interested in the business plan and so it should contain as much information as possible including profit and loss projections for the future. You should also detail the recent business performance figures, and know your projection figures inside out so that you can easily answer any objections that the bank may have.
They will be looking for realism based on past experience. How your business has performed to date and how the market is predicted to perform in the future. Be prepared to justify and back up all predictions, sticking a finger in the air and guessing is not really a recognised method of forecasting business success.
Prove Your Company Is A Safe Bet: One way to ensure that the lender can see that you’re good with money as a company, is by offering them copies of previous bank and credit statements as they will clearly see that you always pay your creditors on time. This will make your application more favourable and although they will be able to see this information from a credit check, it may help to speed up your application.
Obtain references from people you have been in debt with before or have require to make regular payments to. This could include your current landlord and would show that your business has made regular rent payments over an extended period. Any type of loan or credit you have used as a business could be used to demonstrate that your business is a sensible, trustworthy borrower. Demonstrating this fact will make a lender more likely to part with their cash.
Be Prepared: Making a good impression on a commercial lender is important. Banks are unlikely to agree a commercial mortgage if you don’t have the answers to simple questions about your company’s finances or future plans.
Make sure that you keep a file to hand with all important information on your company, as if you’re not able to answer questions easily this may hinder your chances of obtaining a commercial mortgage, which can cause your business to suffer if you’re not able to get onto the commercial property ladder.
Howard writes for Just Commercial Mortgages the UK’s No1 site for the latest commercial mortgage rates and commercial property finance news.