Broker Or Bank? Commercial Loans

The commercial property marketing is constantly expanding, anyone can see that, but when it comes to commercial loans, many people are left questioning where they should turn to. There has been a substantial rise in the number of investors looking to buy commercial properties to put into Self Invested Personal Pensions.

Changes In Property Investment Funds

Property investment funds received a boost as of late last year after the Government announced plans to allow them to be included in an ISA (Individual Savings Account) wrapper.

Savers will now be able to add investments, such as property funds and funds of funds, that have previously been restricted from being included in ISA’s because the asset class did not meet the standard of eligible investments and commercial property funds are seemingly the greatest beneficiary of the rule change.

With this diversified interest in commercial property by investors, speculators, and businesses alike the role of the broker has become a more integral part of the process. Increasing numbers of mortgage brokers have branched out into non regulated markets such as the commercial loan sector.

Commercial lending is now not the preserve of the high street banks who, in the past, have not only seemed to cherry-pick but have also had a tendency to only lend to their existing business customers.

Competitive Commercial Loans

The competitive market for commercial lending has also been confirmed by the rates available. There are also many other flexible options such as rolled-up interest (No interest payments) for the first year to help with cash flow, start-up finance, business expansion finance, or even for finance on low yield investment properties.

Lenders will typically lend up to 80% loan to value but 100% is achievable with additional security. Three years of audited accounts are also now not the normal requirement as self-certification of income has also found its way into commercial lending (depending on your situation). Adverse credit clients are now considered and in the majority of cases loans approved. However, self-certification and bad credit applicants can expect a loading on the rate of typically between 1 to 4%.

A cross-section of business funding is available to retail businesses such as convenience stores, fast food outlets, specialist shops, and supermarkets. Investment properties, professional practices such as accountants, doctors, vets, and solicitors. Property development including speculative or pre-let for both commercial and residential. Offices and factories along with the health care sector including nursing homes, residential care, and special needs homes. The leisure market has also been seen as the mainstay for commercial lending over many years embracing hotels, guest houses, cafes, restaurants, wine bars, and pubs.

Although latterly pubs have often sought brewery loans as a traditional way of borrowing money in the trade often referred to as Advance of Discount (AOD) or “Write Off” loans, the interest rates seem favorable at significant discounts over the banks but barrelage discount is affected and the repayment terms are often shorter over 10 years.

Lending on the leasehold is also available up to 65% on the security property (often the applicant’s main residence). With many businesses failing in the first year and business failure rates up 13% in the first quarter of 2006 applicants must carefully consider whether they should be securing their main residence against the lease.

To calculate monthly charges use one of our many custom-built calculators. Commercial loan applications, for both single and joint applicants, are processed on our own dedicated secure server.