What Commercial Mortgage Lenders Need

Commercial mortgages are typically available for loans of £20,000 or more. However, more often than not the  loan amount will be over £200,000, so lenders are naturally keen to ensure that you’re business is financially stable and that you’ve done your research before they enter into any agreement with you.

A commercial mortgage lender’s main considerations are simple:

  • That your business will repay the loan in full, including any associated interest premium charged.
  • That the business premises you wish to purchase will be worth more than the outstanding loan, should you default on your agreement.

When considering purchasing property for your business, we recommend that you set an upper threshold based on what your company can realistically afford to repay every month. As you research available properties you may be tempted to over borrow, but this should be avoided at all costs. Over borrowing will gradually worsen your business cashflow, possibly hampering growth or worse.

Likewise, once you have found a realistic property, ensure that you do not over estimate the value of it. In most cases a lender will instruct a valuation or survey on the premises you wish to purchase. The outcome of which should be useful for both your business and the lender. Take time to read the survey results and check whether you need to negotiate on the price of the property, based on whether any unexpected maintenance or building work needs to be completed in the near future.

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Assessing you business’ financial position

As part of the application process, a commercial mortgage broker or lender will ask you for numerous performance indicators of your business. Amongst other items, these typically include:

  • 2 to 3 years of audited business accounts, if available.
  • Indicators for the current financial years’ performance
  • A business plan, outlining details for the next 12 to 36 months
  • Bank statements from your respective business bank
  • Various forms of identification for each director or owner

Instances where you are planning to purchase both a business and associated premises, you may also need to provide additional documentation, for example:

  • Detail regarding why the company is up for sale
  • Revenue and / or profit projections for 12 to 36 months
  • Information regarding the existing owners

And finally… don’t forget that a lender will need a deposit! Commercial mortgage lenders will usually request a deposit of between 15% and 20%. This may vary depending on your credit status or industry sector.

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