Commercial Property Finance Loans?

Commercial Property Finance - Platinum Global Bridging Finance

Commercial Property Finance – Platinum Global Bridging Finance

Commercial Property Finance lending is any loan secured on commercial property that is looking for financing or refinancing. The property can be either owner-occupied or for investment purposes. It can also be known simply as a commercial mortgage for commercial premises. These types of mortgages are available in many countries but mostly we have access to many commercial mortgage lenders in the UK and Europe that are happy to offer commercial lending.

Our lenders are mainly non-bank institutional lenders that draw their funding requirements from large pension and investment funds, We also have commercial banks and private investors that are happy to fund commercial projects.

Most commercial finance funding used to be provided by traditional high street commercial mortgage lenders but their liking for this type of lending has diminished dramatically since the start of the lending crisis in 2007 and 2008.

Commercial property prices had a bigger downturn than residential properties and as a result, there are fewer bank lenders in the marketplace. The high street lenders have now been replaced by challenger banks and non-bank lenders who are obtaining their financing requirements from insurance funds, investment funds and pension funds.

The return on lending offers investors a guaranteed return so the market has exploded in recent years with large institutions happy to lend their clients funds, this is because of the security they provide against commercial properties. We work with active commercial real estate lenders throughout the UK and Europe from the bank and non-bank lending panels.

Key Considerations for Financing Commercial Property

When looking into the available options of commercial property finance in the UK, it is crucial to understand the key considerations that can greatly impact your investment decisions. We can help navigate you through the intricate world of securing funds for your commercial property ventures. From loan types and interest rates to personal guarantees and loan-to-value ratios, every aspect requires careful scrutiny to ensure a successful financial journey.

As you embark on your commercial property financing journey, remember that having a strong business plan is essential. This foundational document not only serves as a roadmap for your venture but also plays a pivotal role in convincing lenders of the viability and potential for success of your commercial property investment. Whether you are looking to purchase, refinance, or develop commercial property, a well-thought-out business plan will be your prime asset in attracting financing and setting your investment on a path to growth and profitability.

Types of Commercial Property Loans Available

When considering financing commercial real estate, UK investors have several types of loans available to suit their needs. One of the most common options is a traditional commercial mortgage, which offers fixed or variable rates and terms tailored to the specific property being financed. This type of loan is ideal for investors looking to purchase office buildings, retail spaces, or industrial properties as it provides long-term financing with competitive interest rates.

Another popular choice for financing commercial real estate in the UK is a bridge loan. Bridge loans are short-term loans that can help investors bridge the gap between buying a new property and selling an existing one. This type of financing is ideal for investors looking to acquire properties quickly or take advantage of time-sensitive investment opportunities. Bridge loans typically have higher interest rates but offer flexibility and speedy approval processes, making them a practical option for UK investors looking to secure financing for commercial properties.

Factors to Consider When Choosing a Lender

When it comes to choosing a lender for commercial property financing, there are several key factors to consider that can impact your overall borrowing experience and the success of your investment. One important aspect to evaluate is the lender’s experience and track record in the UK market. Working with a lender who has a strong understanding of the local market dynamics, regulations, and trends can provide valuable insights and ensure a smoother lending process.

Additionally, it is crucial to assess the lender’s loan products and terms to find the best fit for your specific needs. Consider the interest rates offered, repayment schedules, loan-to-value ratios, and any additional fees or charges that may apply. Finding a lender that offers competitive rates and flexible terms can help you secure financing that aligns with your investment goals. As you navigate the commercial property finance landscape in the UK market, conducting thorough research and due diligence on potential lenders will be key to making informed decisions and achieving your property investment objectives.

The Importance of a Strong Business Plan

When researching into commercial property financing in the UK, one of the crucial aspects that can significantly impact your success is having a robust business plan. As an essential roadmap for your investment venture, a strong business plan not only outlines your objectives and strategies but also demonstrates your competency and commitment to potential lenders. By showcasing a comprehensive understanding of your objectives, target market, financial projections, and risk management strategies, you can instill confidence in lenders regarding the viability and potential profitability of your commercial property investment. A well-crafted business plan acts as a blueprint for your financial success, guiding you through the complexities of obtaining financing and ensuring that you are well-prepared to navigate the competitive landscape of commercial property financing in the UK. Underlining the importance of aligning your goals and objectives with sound financial planning, a strong business plan can serve as a persuasive tool that sets you apart from other investors and positions you as a reliable borrower in the eyes of lenders.

Commercial Property Financing in the UK also highlights the necessity of tailoring your business plan to showcase a thorough understanding of the local market dynamics, regulatory environment, and industry trends. By conducting market research and incorporating this knowledge into your business plan, you can demonstrate to lenders that you have a well-informed strategy that mitigates potential risks and capitalizes on emerging opportunities. Moreover, a strong business plan provides you with a structured approach to managing your investment, enabling you to anticipate challenges, adapt to changing market conditions, and ultimately achieve long-term success in the competitive landscape of commercial property financing in the UK. By presenting a detailed and well-researched business plan, you can enhance your credibility as a prudent investor and increase your chances of securing financing for your commercial property venture.

Understanding Loan-to-Value Ratios in Commercial Property Finance

Commercial property financing is a complex landscape that requires a keen understanding of loan-to-value ratios. The ratio is a critical factor that lenders consider when determining the risk of providing a loan for a commercial property. In recent years, there have been notable innovations and trends shaping the UK commercial property finance sector, influencing how loan-to-value ratios are assessed and applied in lending decisions.

As the commercial property market evolves, so do the practices surrounding loan-to-value ratios. Understanding these ratios is essential for both borrowers and lenders to navigate the changing landscape of UK commercial property finance successfully. With technological advancements and changing market dynamics, staying informed about the latest trends and innovations in loan-to-value ratios is crucial for securing financing for commercial properties in today’s competitive market.

The Role of Personal Guarantees in Securing Financing

Personal guarantees play a crucial role in the process of securing financing for commercial properties. When lenders require a personal guarantee, they are seeking assurance that the borrower will uphold their financial obligations. By providing a personal guarantee, the borrower commits their personal assets as collateral in the event of default. This added layer of security gives lenders greater confidence in the transaction and can result in more favorable loan terms for the borrower. Understanding the implications of personal guarantees is essential for investors seeking to finance their commercial property ventures.

Furthermore, personal guarantees serve as a demonstration of commitment from the borrower towards the success of the commercial property venture. Lenders view personal guarantees as a sign of the borrower’s willingness to take responsibility for the loan repayment, even if the business itself faces challenges. In the context of UK commercial property finance, lenders often require personal guarantees as a way to mitigate risk and ensure that borrowers have a vested interest in the success of the investment. Investors should carefully weigh the implications of providing a personal guarantee and seek professional advice to navigate the complexities of securing financing for commercial properties.

The Impact of Interest Rates on Commercial Property Loans

Interest rates play a crucial role in shaping the landscape of commercial property loans. As part of managing risks in commercial property finance, it is essential for borrowers to keep a close eye on interest rate movements. Fluctuations in interest rates can significantly impact the cost of borrowing, ultimately affecting the overall profitability of a commercial property investment. This sensitivity underscores the importance of conducting thorough research and analysis before committing to a loan, ensuring that borrowers are well-prepared to navigate the potential changes in interest rates.

Within the framework of  commercial loans borrowers must maintain a keen awareness of how interest rates can influence their financing decisions. Whether opting for a fixed-rate loan to secure predictability or choosing a variable-rate loan to capitalize on market shifts, understanding the nuances of interest rates is paramount. By staying informed about prevailing interest rate trends and consulting with financial experts, borrowers can position themselves strategically in the commercial property market and make well-informed financing choices.

How to Improve Your Credit Score for Better Financing Options

Improving your credit score is crucial when seeking better financing options for commercial property investments. Real challenges may arise if your credit history is less than ideal, as lenders often rely on this information to assess your reliability as a borrower. By taking proactive steps to boost your credit score, you can overcome hurdles in UK commercial property finance. Start by ensuring all your existing debts are paid on time and in full, as late or missed payments can have a negative impact on your credit rating. Additionally, carefully review your credit report for any errors and work towards rectifying them promptly to improve your overall creditworthiness.

Another effective way to enhance your credit score is by maintaining a low credit utilization ratio, which refers to the amount of credit you are using compared to the total available credit. Keeping this ratio below 30% demonstrates responsible credit management and can positively influence your credit score. It’s also advisable to avoid opening multiple new credit accounts within a short period, as this can signal potential financial instability to lenders. By diligently managing your credit and addressing any outstanding issues, you can significantly increase your chances of securing better financing options for your commercial property endeavors.

The Difference Between Fixed Rate and Variable Rate Loans

Fixed rate loans offer borrowers the stability of knowing exactly how much they will pay each month throughout the loan term. The interest rate remains constant, providing predictability for budgeting purposes. On the other hand, variable rate loans are tied to an index, such as the prime rate, and can fluctuate over time. While initial rates on variable loans might be lower than fixed rates, they can increase or decrease with market conditions, potentially impacting monthly payments.

For investors looking to expand their commercial property holdings, understanding the difference between fixed and variable rate loans is crucial. Choosing the right type of loan can significantly impact the long-term financial success of a real estate investment portfolio. By recognizing the benefits and drawbacks of each option, investors can make informed decisions when seeking financing for acquiring or refinancing properties and it necessitates a thorough understanding of these loan structures to make strategic financial choices.

Negotiating Loan Terms and Conditions

When it comes to negotiating loan terms and conditions for commercial property financing in the UK, finding the right balance between sustainability and profitability is crucial. Lenders will assess the long-term viability of the investment and the potential for returns, so it’s essential to showcase a solid business plan that demonstrates financial stability and growth prospects. Emphasizing the sustainability of the project while highlighting its profitability potential can help in negotiating favorable loan terms that align with your goals.

Moreover, understanding the lender’s requirements and risk tolerance is key to successful negotiations. By demonstrating a clear understanding of the terms and conditions that work for both parties, you can build trust and credibility in the eyes of the lender. Being proactive in addressing potential concerns and offering solutions that mitigate risks can lead to more flexible loan terms that cater to your specific needs. Remember, negotiating loan terms and conditions is a collaborative process that requires open communication and a willingness to find common ground for a mutually beneficial agreement.

The Importance of Due Diligence in Commercial Property Finance

Due diligence plays a critical role in commercial property finance, allowing investors and lenders to thoroughly assess the risks and potential of a property before committing to a financial arrangement. From conducting property inspections and valuations to reviewing legal documents and financial records, due diligence provides a comprehensive understanding of the property’s condition and market value. This meticulous process helps mitigate risks and ensures that all parties involved make well-informed decisions based on accurate information.

Moreover, due diligence serves as a safeguard against potential pitfalls that may arise during the property acquisition or financing process. By identifying any red flags or discrepancies early on, investors can address issues proactively and negotiate better terms with lenders. Additionally, thorough due diligence minimizes the likelihood of surprises after the transaction has been completed, leading to a more transparent and secure commercial property investment.

Common Mistakes to Avoid When Applying for Commercial Property Loans

Inadequate Research: Lack of thorough research about different commercial property loan options and lenders can lead to making uninformed decisions. It is crucial to compare interest rates, terms, and requirements from multiple sources to ensure the best fit for your financing needs. Skipping this step may result in higher costs or unfavorable terms that could impact your property investment profitability.

Overestimating Borrowing Capacity: Overestimating how much you can borrow for a commercial property loan can be a common pitfall. It is essential to realistically assess your financial situation and borrowing capacity based on factors such as income, credit score, and existing debts. By accurately evaluating your financial position, you can avoid the risk of overextending yourself and potentially facing challenges with loan repayment in the future.

How to Calculate Debt-Service Coverage Ratio

To determine the debt-service coverage ratio (DSCR) of a commercial property loan, you’ll need to calculate the property’s net operating income (NOI) and divide it by the annual debt service. The formula for calculating DSCR is straightforward: DSCR = Net Operating Income / Annual Debt Service. The net operating income is the income generated by the property after deducting operating expenses, excluding debt service, and income taxes. Annual debt service is the total amount of principal and interest payments due on the loan in a year. By plugging these figures into the formula, you can assess the property’s ability to cover its debt obligations. A DSCR of 1 or higher indicates that the property’s NOI is sufficient to cover its debt payments, while a DSCR below 1 suggests a potential default risk.

When analyzing the debt-service coverage ratio for commercial property financing, lenders typically look for a DSCR of 1.2 or higher to ensure that the property generates enough income to comfortably meet its debt obligations. A higher DSCR ratio indicates a lower default risk and greater financial stability. Lenders use the DSCR as a key indicator of the property’s ability to generate enough cash flow to pay back the loan. By calculating the DSCR accurately and ensuring it meets lenders’ requirements, borrowers can improve their chances of securing financing for their commercial property investments.

The Role of Appraisals in Securing Commercial Property Financing

Appraisals play a crucial role in the process of securing financing for commercial properties. Lenders heavily rely on these appraisals to determine the market value of the property being used as collateral for the loan. An appraisal provides an independent and professional evaluation of the property’s worth, considering factors such as location, size, condition, and recent sales of comparable properties in the area. This valuation helps lenders assess the level of risk associated with the loan and ensures that the property’s value aligns with the amount being borrowed.

Additionally, appraisals help borrowers understand the true value of the property they are financing, offering valuable insights that can influence their decision-making process. By obtaining an appraisal, borrowers can gain a clearer picture of their investment and make informed choices regarding the financing options available to them. Overall, the appraisal serves as a critical step in the financing process, providing both lenders and borrowers with essential information to make sound financial decisions.

The Benefits of Working with a Commercial Mortgage Broker

Commercial mortgage brokers can greatly simplify the loan application process for borrowers seeking financing for commercial properties. These professionals have extensive knowledge of the market and can help match borrowers with the right lenders based on their specific needs and financial situation. By leveraging their network of lenders, commercial mortgage brokers can often secure more favorable terms and interest rates for their clients compared to what borrowers could secure on their own.

Moreover, working with a commercial mortgage broker can save borrowers valuable time and effort. Instead of having to research and contact multiple lenders individually, borrowers can rely on the expertise of a broker to streamline the loan application process. Brokers can also provide guidance on preparing necessary documentation and navigating the intricacies of commercial property financing, making the entire process more efficient and effective for borrowers.

The Application Process for Commercial Property Loans

When applying for commercial property loans, it is essential to have all necessary documentation in order. Lenders typically require documents such as financial statements, tax returns, profit and loss statements, business plans, and property information. It is crucial to gather and organize these documents beforehand to streamline the application process and present yourself as a well-prepared and reliable borrower. Failing to provide all the required documentation can cause delays and even result in rejection of your loan application.

In addition to documentation, it is important to be prepared for a thorough evaluation of your financial situation. Lenders will assess factors such as your credit score, debt-to-income ratio, and cash flow projections to determine your ability to repay the loan. It is essential to be transparent about your financial standing and provide accurate information to the lender. Being proactive in addressing any potential red flags can increase your chances of securing financing for your commercial property investment.

Understanding Loan Amortization and Repayment Schedules

Loan amortization and repayment schedules are critical components of commercial property financing. Amortization refers to the process of spreading out loan payments over time. This involves a fixed repayment schedule that includes both principal and interest. Lenders use amortization schedules to calculate how much of each loan payment goes towards reducing the principal balance and how much goes towards paying interest. Understanding these schedules is essential for borrowers to manage their loan obligations effectively and make informed financial decisions.

Repayment schedules outline the specific dates and amounts due for loan repayments. These schedules are typically set in advance, providing borrowers with a clear timeline for meeting their financial obligations. It is crucial for borrowers to adhere to these schedules to avoid defaulting on the loan. Failure to make timely payments according to the repayment schedule can result in penalties, fees, and damage to the borrower’s credit score. Therefore, borrowers must closely monitor and follow the repayment schedule to maintain a positive financial standing and fulfill their obligations to the lender.

Risks Associated with Commercial Property Financing

Commercial property financing comes with inherent risks that potential investors and business owners need to carefully navigate. Market volatility, economic downturns, and unexpected changes in property values can all pose significant threats to the success of a commercial real estate investment. Moreover, fluctuations in interest rates can impact the cost of borrowing, potentially leading to higher expenses and financial strain for borrowers. It is essential for those involved in commercial property financing to stay informed about market trends and be prepared to adjust their strategies accordingly to mitigate these risks.

In addition to external factors, there are also internal risks to consider when it comes to commercial property financing. Poor property management, tenant vacancies, and insufficient cash flow can all jeopardize the financial stability of a commercial property investment. Furthermore, failing to conduct thorough due diligence and overlooking potential red flags during the financing process can result in costly mistakes that may impact the long-term profitability of the investment. Investors and borrowers must be proactive in identifying and addressing these risks to ensure the success and sustainability of their commercial property endeavors.

How Economic Conditions Can Impact Commercial Property Finance

In times of economic downturn, commercial property finance can face increased challenges. Uncertainty in the market can lead to lenders tightening their lending criteria, making it harder for businesses to secure loans for property investments. Moreover, a shrinking economy may reduce the demand for commercial spaces, leading to lower rental yields and potential vacancies. This can, in turn, impact the cash flow of the property and the ability of the business to meet its loan obligations.

Conversely, during periods of economic growth, commercial property finance may experience a surge in demand. Low interest rates and favorable economic conditions can make investing in commercial real estate more attractive to businesses looking to expand. However, rapid economic growth can also lead to overvaluation of properties, increasing the risk of a market correction in the future. It is crucial for businesses to assess the long-term sustainability of their investments and consider the potential impact of economic fluctuations on their commercial property finance decisions.

How do economic conditions impact commercial property finance?

Economic conditions, such as interest rates, inflation, and market trends, can impact commercial property finance by affecting borrowing costs, property values, and the availability of financing options.

What are some common mistakes to avoid when applying for commercial property loans?

Common mistakes to avoid include not having a strong business plan, failing to do proper due diligence on the property and lender, not improving your credit score, and not understanding loan terms and conditions.

What is the role of personal guarantees in securing commercial property financing?

Personal guarantees are often required by lenders to provide additional security for the loan. This means that the borrower is personally responsible for repaying the loan if the business is unable to do so.

How can I improve my credit score for better financing options?

You can improve your credit score by paying your bills on time, reducing your debt, and monitoring your credit report for any errors. Additionally, avoiding opening new lines of credit can also help improve your credit score.

What is the difference between fixed rate and variable rate loans for commercial property?

Fixed rate loans have a set interest rate for the entire term of the loan, while variable rate loans have an interest rate that can fluctuate based on market conditions. Fixed rate loans provide more stability, while variable rate loans can offer lower initial rates but come with more risk.

How do I navigate the application process for commercial property loans?

To navigate the application process, you should gather all necessary documents, such as financial statements and tax returns, research potential lenders, and carefully review loan terms and conditions before signing any agreements.

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    Commercial Property Loans – CASE CRITERIA

    Our clients tend to not fit the standard high street and investment bank lending criteria requiring vanilla commercial mortgage financing products. Due to the high debt-to-income servicing ratios required by standard lenders, we work with non-bank commercial lenders that offer alternative financing options but make up for this by offering higher interest rates. Our lenders will consider not only the property rental income but will allow external income such as business income to service the commercial mortgage debt. This frees up valuable capital by allowing clients to obtain a higher loan to value and consider acquisitions or refinancing options on commercial properties that would normally be out of reach.

    Commercial Property Finance Countries We Lend In:

    • Jurisdictions:  United Kingdom, Ireland, France, Germany, Austria, Belgium, Netherlands, Switzerland, Spain, Portugal, Italy, Norway, Denmark, Sweden and Finland.
    • Asset Classes:  office, logistics, industrial, PRS / multi-family, senior and assisted living, retail, PBSA, self-storage and hospitality
    • Lending Situations: Distressed purchases with fast turnaround, Opportunistic recapitalizations, Purchase, Renovation and Sale, Capital improvement, Lease-up, Redevelopment and adaptive reuse, Construction and development
    • Whole Loans –          min. ticket size of £ / € 1m and max ticket size of £ / € 500m up to 80% LTV
    • Mezzanine Loans – min. ticket size of £ / € 1m and max ticket size of £ / € 500m up to 80% LTV
    • Bridging Loans –     min. ticket size of £ / € 1m and max ticket size of £ / €500m up to 80% LTV
    • Senior Loans –          min. ticket size of £ / € 1m and max ticket size of £ / €500m up to 80% LTV
    • Pricing for whole loans is L / E + 350 – 650 bps
    • Pricing for mezz loans is 650 bps +
    • 2 – 7 year terms available
    • Can consider investment and capex as well as ground-up construction opportunities
    • Turnaround times can be as quick as 6 to 8 weeks

    What Types Of Commercial Financing Can Our Lenders Offer?

    • Acquisition
    • Refinance
    • Bridge Financing
    • Debt Acquisitions
    • Whole Loans
    • Mezzanine Financing
    • Senior Financing

    Commercial Situations Our Lender’s Finance

    • Distressed purchases with fast turnaround
    • Opportunistic recapitalizations
    • Purchase, renovation and sale
    • Capital improvement
    • Lease-up
    • Redevelopment and adaptive reuse
    • Construction and development

    What Commercial Properties Can Your Lenders Finance?

    • Office Blocks
    • Student Accommodation
    • Retail – retail stores, shopping centres, shops
    • Industrial – warehouses, factories
    • Leisure – hotels, pubs, restaurants, cafes, sports facilities
    • Healthcare – medical centres, hospitals, nursing homes
    • Logistics
    • Residential
    • Strategic Land

    What Locations Can Our Commercial Funders Lend In

    • United Kingdom
    • Ireland
    • United States
    • Canada
    • Austria
    • Belgium
    • Netherlands
    • France
    • Spain
    • Germany
    • Portugal
    • Italy
    • Denmark
    • Sweden
    • Norway
    • Finland
    • Switzerland
    • Europe
    • Poland
    • Plus many more European countries

    What are the Key Features of our Commercial Finance

    • Commercial property loan interest rates start from 5% to 12% per annum
    • Typically LTV of up to 75% to 80% loan to value
    • Options with no Exit Fees
    • 1 Year to 7 Year terms
    • Options with no Personal Guarantees.
    • Commercial Loan sizes ranging from EUR1m up to EUR500m
    • Full UK Coverage. (For Europe, Asia and the United States terms will differ slightly)
    • Valuation and Surveyor fees case by case.

    Commercial finance lending usually falls into two categories:

    Owner Occupied: this is where an individual owns the property in which they have commercial interest. This can be a shop, factory or garage. The owner repays the loan through the profitable return of their business and as such the business owns the property and they or a number of shareholders will own the business.

    Buyer Investment:  this is where the individual owns the property as an investment but does not run the commercial element of it. This can be an office block that local businesses lease from the owner or a building offering residential flats. The individual simply receives revenue from the property as rental/lease payments.

    What can Commercial Finance Lending Be Used For?

    A Commercial loan can be used for a wide variety of reasons. One example would be if you wanted to purchase a commercial property and you wanted to convert it into a residential property i.e. an office block into a set of apartments then you could get commercial finance secured against the property to either fund the purchase and/or the conversion. If the property is already owned, you could get commercial lending just to fund the conversion. Commercial finance loans are used for numerous reasons such as: releasing equity for debt consolidation, business cash flow injection, building improvements or purchasing more new commercial properties as part of a business.

    What fees are involved?

    Arrangement fees: Arrangement fees are typically added to the loan after the loan is approved but some lenders may request the arrangement fees earlier to cover their work in case you don’t accept their offer. Arrangement fees are usually 1% -2% of the loan amount for loans up to £1 million for a commercial property mortgage.

    Valuation Fees: A valuer will visit the property and write a report to the lender. Commercial valuations can start at around £500 for a simple case, the fees are based on an individualized quotation payable to the lender after an initial indicative offer has been accepted.

    Legal Fees: You’ll need to pay both your own legal fees as well as the lender’s which can start at around £500 for each party.

    Broker fees:  A broker gives you advice specific to your situation and real estate and presents your case to the lenders. Their service is usually charged at up to 1% of the loan value.

    Eligibility and Criteria For Commercial Property Finance

    In order for you to qualify for a commercial mortgage, you’ll need to pass the lender’s eligibility checks which usually include:

    • The cash flow and any debts you may owe to assess the financial health of your company
    • Your businesses’ projected income to determine whether you can cover the cost of the loan
    • Your ability to pay the deposit which can range from 20% to 40% of the loan
    • Rental income may also be taken into account as this will have an effect on your business’s cash flow
    • General income, credit and assets

    What information do I need to provide for Commercial Finance Lending?

    • Applicant company name & Ltd Company number.
    • Full property address.
    • Sales and Purchase agreement
    • Personal or Directors & significant shareholders CV’s or Biographies.
    • Copy of the tenancy agreement.
    • Rental income proof
    • Detailed build costs for renovations or conversions
    • Schedule of proposed works
    • Details of the professional team (contractor, architect, structural engineer, CDM coordinator etc).
    • Procurement Method ( Design & Build or Construction Management?).

    If you are in the world of business, then it is likely that you have heard the words “commercial finance” uttered once or twice. But despite it being common jargon within the industry, it can still conjure up uncertainty for some business owners, unaware of the options available to them.

    So firstly, a simple definition. Commercial finance is the term given to a huge range of business finance products that include both short and long-term solutions, offered by a provider external to the business.

    Why May A Company Look For Commercial Finance Lending

    A business might seek interest-only commercial mortgage finance if they have reached a point where growth is imminent. Sometimes there is an obstacle in the way of attaining necessary growth – and that obstacle is funding.

    Commercial finance ensures that businesses, regardless of size, can thrive and hit their targets, rather than miss out purely because they have to wait to generate enough cash to re-invest for themselves. Commercial finance is essentially a way of providing working capital for businesses.

    Better access to commercial finance has paved the way for small and medium-sized enterprises (SMEs) to flourish.

    Recently the commercial finance landscape has expanded, whereas once there were just banks, alternative finance providers have businesses more options than ever before. 25% of small-scale businesses have their loan applications rejected by banks but these new alternatives give fast access to businesses that would otherwise have to go without.

    It means there are better options for everyone out there, whether that means you are a business owner wanting to achieve growth or a customer looking to shop around within a specific market.

    Who Can Access Commercial Property Finance?

    The answer to this is pretty straightforward. Anyone who owns a business can make an application for a commercial mortgage either direct to the lender or using a commercial mortgage broker.

    Criteria vary from provider to provider but ordinarily, you will need to show business bank statements, management accounts and director information. With some alternative finance providers, there is less rigidity in their criteria but a lot of online lenders use algorithms that can mean their assessment criteria are almost as black and white as the banks. There are also solutions available for businesses with adverse credit or start-ups who traditionally have struggled the most to find finance.

    What Commercial Finance Options Are There?

    There are numerous commercial finance options available to businesses, but what exactly are they?

    Short-term commercial finance:

    – Trade credit
    – Business credit cards

    Medium-term commercial finance:

    – Crowdfunding
    – Bridging finance Business loans

    Long-term commercial finance:

    – Asset-based lending
    – Invoice factoring
    – Invoice discounting
    – Overdrafts
    – Commercial mortgages

    Which Commercial Property Finance Option Should You Choose?

    There is never a one shoe fits all option in life and that is certainly the case when it comes to commercial financing or locating a commercial mortgage for businesses.

    Taking out external finance for your business is not something you should decide on a whim. It is important to put the time and effort into getting funding that suits you and your business best. Finding finance should be treated like any other business partnership, do the appropriate due diligence, look around and make comparisons on all the options available to you.

    Once you have done your research and got to know the market, if you are still unsure, talk to an alternative business finance provider to learn more.

    There are various factors that you will need to consider before moving ahead with a commercial finance application. You will need to think about the following:

    – Why do you need finance, to begin with?
    – What industry do you operate in?
    – The term: how long do you want the loan to last?
    – How big is your business?
    – How much money will you need to achieve what you have in mind?
    – What is your risk profile?
    – How much can you realistically afford to repay each month?

    Once you have seriously contemplated all of these things, you will then understand where your business stands and the type of finance you require should become evident. But again, if you still are not completely sure, get in touch with the experts as this is exactly what they are there for.

    Next, you will need to decide whether you want to take either the debt financing route like real estate financing, or whether equity financing is the better option for you.

    Equity finance involves surrendering a share of your business to an individual or institution in exchange they get a share of your business in return for their investment.

    Debt finance comes from a bank or commercial finance company. You will have to pay the loan back, usually with added interest. The majority of commercial finance that is available these days will come in the form of debt financing which means adding a liability to your balance sheet.

    You should also bare in mind the price of the commercial mortgage by comparing commercial property mortgage rates as they can fluctuate considerably between banks and non-bank lenders so it’s wise to stay abreast of where rates are.

    So now that you know what is what in the commercial finance world, all that is left to do is weigh up the pros and cons.

    The Pros And Cons Of Commercial Property Finance

    Starting with the negatives, some business owners prefer to avoid external commercial finance because they do not want to take on extra debt. Similarly, with equity finance, businesses are reluctant to surrender any control or ownership of their business, particularly as if the business is successful the equity will most likely be worth much more than the original loan amount.

    However, if you can get past the stigma attached to borrowing for your business, commercial property lending can fund growth opportunities and help you to achieve your goals. You can use either the sales ledger or tangible assets as security or to leverage your loan. When you consider the fact that approximately 60% of SMEs are uncertain about their potential to finance lasting growth, commercial finance is a pretty attractive option for SMEs.

    Borrowing money can also help businesses tackle late payments and help to even out cash flow and balance the books. Almost all businesses have times in the month or year when they experience cash flow peaks and troughs, navigating these can be much easier with a funding partner in place. For example, invoice finance is a fantastic way for businesses to access cash that is tied up in unpaid invoices. For many businesses, this is a great and viable option. They often have to provide their customers with credit terms that extend beyond those they are given by their suppliers and invoice finance helps to smooth this gap in cash flow.

    In industries with costly equipment set-up costs or where lots of machinery or technology upgrades are required, commercial finance can allow businesses to spread the cost of purchasing over many months. Replacing equipment or getting urgently needed repairs done is often not a choice but a necessity for businesses and commercial finance can help to ease the burden.

    Ultimately, you need to ensure that you find commercial property lending finance that fits your business. Different products suit different business life cycle stages and the most important thing to remember is that being proactive, rather than reactive is always best, especially when it comes to finances.

    Finding finance before you need it means you can look at the whole picture objectively and select a finance strategy that works for you and your business in its entirety.

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    Platinum Global Bridging Finance is a distinguished high-net-worth finance broker. We specialize in providing tailored financial solutions, including Property Bridging Finance, Development Finance, Lombard Loans, Single Stock Loans, Margin Stock Loan and Commercial Property Finance tailored to meet the diverse needs of our clientele seeking robust financial lending solutions.

    Commercial Property Finance May 8, 2024