Commercial Lending can be a minefield, so it is important to obtain specialist advice...
Commercial lending is very different to residential lending and we have contact with a number of very experienced commercial brokers.
Some properties will not be eligible for residential or buy to let mortgages, so you may need to consider a commercial loan instead.
For example, a property which has been split into flats but still on one title or a property which is part business/part residential (B&B, pub or petrol station with living quarters.)
Commercial lenders usually require a 25 to 50 percent deposit and offer terms from 1 to 40 years.
Before agreeing an application, the lender needs proof that the business has/will have sufficient funds to meet the loan repayments, which may involve you providing a business plan.
They will assess past, present and future plans of the business, which will determine the rate offered.
Rates are usually variable and more than the base rate or LIBOR. Some lenders will offer fixed rates, depending on how they judge the risk element. Unlike residential mortgages, most commercial lenders do not have preset rates, as every application is assessed on its own merits.
As commercial properties are usually far more variable than residential properties, the valuer has to visit the property and prepare a lengthy report for the lender.
Fees may start from £500 but as properties differ so much, there are no fixed prices but from a bespoke quotation is provided.
Lender's arrangement fees are usually added to the loan upon completion but some lenders may require funds to cover their work if you do not accept their offer. Therefore, you may have to pay an upfront administration/commitment fee, which is part of the arrangement fee but non-refundable.
Arrangement fees are based on the amount being borrowed and and usually 1% -2% of the loan amount for loans up to £1 million.
You need to pay both your own legal fees and those of the lender, which vary from property to property but may start around £500 for each party. If a legal company has different partners that can represent both parties, this can save money on legal fees.
Due to the complexity of commercial lending, it makes sense to use a specialist commercial broker who has the contacts and market knowledge to get you the best deal.