Owning the premises your business runs from can mean more control, no landlord and an asset that may grow in value. Property finance makes it possible. There are two products you’ll hear about most.
Commercial mortgages
A commercial mortgage is a long-term loan secured on business property, such as a shop, office, warehouse, pub or industrial unit.
Typical features
- terms commonly from 5 up to 25 years
- lenders usually lend up to around 60 to 75% of the property’s value, so you’ll need a deposit
- fixed or variable rates
- repayment or, sometimes, interest-only
Two main types:
- Owner-occupied: your business trades from the property. The lender looks mainly at your business’s profits to cover repayments.
- Commercial investment: you let the property to tenants. The lender looks mainly at the rental income and the strength of the tenants.
Bridging loans
A bridging loan is short-term finance, typically for a few months up to around 18 to 24 months. It’s used to “bridge” a gap, for example:
- buying at auction, where completion is usually required within 28 days
- buying a property that a mortgage lender won’t yet lend on, perhaps because it needs refurbishment
- completing a purchase before the sale of another property
Typical features
- quick to arrange compared with a mortgage
- interest is often “rolled up” and repaid at the end rather than monthly
- higher rates than a mortgage, charged monthly
- a clear exit plan is essential: you’ll need to show how the loan will be repaid, usually by selling the property or refinancing onto a mortgage
Development finance
For ground-up builds or major conversions, development finance releases money in stages as the work progresses, backed by the finished value of the scheme.
What you’ll need
- details of the property and the price or valuation
- your deposit and where it’s coming from
- business accounts (owner-occupied) or tenancy details (investment)
- for bridging: your exit plan
- for development: planning permission, costings and your experience
A valuation and legal work are needed on all property finance, so build those costs and timescales into your plans.
Important
If a loan is secured on property, that property could be repossessed if you don’t keep up repayments. Where a loan is secured on a home you or your family live in, different rules apply, and you should take specialist regulated advice.
Tell us about the property and your plans, and we’ll find lenders with an appetite for that type of deal.