Commercial Property

A guide to commercial mortgage finance

A commercial mortgage is a loan advanced on the basis of a commercial property offered as security against that borrowing. In the event of your defaulting on the mortgage repayments, the lender is entitled to take possession of the commercial property used to secure the loan.

To that extent, there is a similarity with residential and buy to let mortgages, but in the case of commercial mortgages, these are not regulated by the Financial Conduct Authority.

Why you may need commercial mortgage finance

Perhaps one of the obvious needs for a commercial mortgage is your quest for business premises – such as a factory, industrial warehouse, shopping complex or office block.

But existing commercial property owned by your business, and on which there is yet no other charge, may be used to raise valuable, much-needed capital by way of commercial mortgage finance. The additional finance may be used as working capital for the business, the funding required to develop new domestic or international markets, or to meet unexpected developments facing the business.

According to figures published by HM Revenue and Customs in 2015, lending for commercial mortgages has been rising steadily since 2011, with a higher rate of increase in commercial mortgages compared to residential mortgages in 2014 in particular.

In that year, commercial mortgages represented just 5.2% of all mortgages advanced, but 25.3% of all mortgages by value. The average commercial mortgage was found to be nearly £1.5 million, whilst the average residential mortgage was less than £250,000.

Types of finance available

Although the principle of a commercial mortgage is relatively simple and straight forward, it is important to recognise that any lender may be expected to take an especially keen interest in:

  • the value, nature, and state of repair of the commercial property against which any mortgage is to be advanced; and
  • the financial standing, health and prospects for growth of the business seeking the mortgage loan – since this is key to the lender’s assessment of the ability of the business to maintain mortgage repayments.

All such lending may go by the same name, but there is a huge range of commercial mortgages available – and differentiated principally by the amount borrowed, the rate of interest attached and the mortgage term.

Why use ACF?

Because of the wide range of commercial mortgage deals on offer, it might be particularly difficult to identify those that suit the needs and requirements of your individual business – especially since you are likely to be interested in those offering competitive rates of interest.

Here at ACF Direct, we have access to that wide range of different commercial mortgages and are well placed to identify competitively priced deals that meet your needs and circumstances.

To find out more, you might want to complete our brief online enquiry form or contact us by telephone or via email to discuss your particular requirements.

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