Commercial Finance

Advantages of Commercial Property Finance for Getting a Mortgage

What is the Importance of Commercial Finance for borrowers?

Commercial finance refers to a wide range of financing products designed to develop businesses. In other words, commercial property finance enables businesses to achieve their goals by investing in assets, attracting new staff, and having a steady flow of cash.

Bank mortgages and buy to let mortgages are among the most well-known UK commercial finance methods. Commercial finance is much larger than normal mortgages and comes with different terms. These mortgages usually have higher interest rates and shorter periods, so the monthly instalments of these mortgages are high. Because lenders believe that commercial borrowers’ risk is high, they consider higher interest rates for commercial finance applicants.

What Are the Types of Commercial Finance?

Commercial finance has different types and is designed and offered according to the specific needs of businesses and at different stages of their development. Many commercial property finance products are similar to individual financing products but are designed and offered for businesses.

  • Commercial Mortgages – Commercial finance is suitable for borrowers who need financial resources for shops, restaurants, hotels, offices, purpose-built student accommodation or other businesses.
  • Development Finance – Investors and business owners who need financial resources to develop the facilities of their properties or complete the structure.
  • Short-term mortgages (bridging) – Borrowers of these mortgages need financial resources in a short period and need mortgages to fill the gap between their financial resources.

However, choosing the best option from the wide range of commercial finance is complex and energy-consuming. Mortgage amount, loan-to-value ratio, interest rate, required deposit and mortgage period offer different products and conditions to the borrowers. For this purpose, it is better to use a commercial finance broker to compare the various options available.

What are the advantages of Commercial Finance?

Commercial finance has very different terms for collateral and underwriting and rates and repayment terms. Compared to personal mortgages, commercial finance does not have the possibility of securities, so lenders usually have to keep many of these mortgages after they are issued.

As a result, lenders are far more risk-averse when issuing commercial finance, with lower credit ratings and higher deposits. In many cases, insurance companies do not cover mortgage repayments, so borrowers’ income and lenders’ interest rates will usually be stricter. However, these mortgages have several benefits for business owners, including:

  1. There are many options available to borrowers

    – Commercial finance comes in many forms and options. This range includes repayment terms, interest rates, and various payment schedules tailored to the borrowers’ business plan and budget.

  2. Flexible repayment terms

    – Lenders typically offer flexible repayment terms for commercial finance instalments. Therefore, borrowers can choose the option according to their budget and business flow. This feature is very useful for borrowers who do not have a continuous and monthly source of income and reduces the risk of non-timely repayment of the mortgage for lenders.

  3. Lower interest rates

    – Although interest rates in the market are different, interest rates in commercial finance are lower due to market competitiveness.

  4. Faster access to finance

    – Commercial finance generally has less paperwork.

  5. Shorter application processes

    – The commercial finance process usually takes less time.

  6. Special Benefits for small business owners

    – Lenders provide the right conditions for small business commercial finance.

  7. Mortgage Repayment Schemes

    – Unlike residential mortgages, commercial finance terms typically range from five years (or less) to 20 years, and the payback period is often longer than the duration of residential mortgages.

  8. No need for private mortgage insurance

    – For commercial finance borrowers, usually, Lenders do not consider private mortgage insurance, which saves much money for borrowers.

  9. Maintaining business ownership

    – When property owners rent their business, they are always at risk of losing it because they do not own it. Although they will be responsible for the monthly payment of the mortgage upon getting commercial finance, these payments will be less than the cost of rent in the long run, while in the long run, they will also acquire ownership of the property in question.

  10. Since the borrowers will eventually own the building, their salary will increase with each mortgage.

    Borrowers will also get significant capital gains when buying a commercial property. Also, since property prices are always rising in the long run, buying property for a business can be a good way to achieve capital growth over a long period.

  11. Long-term budgeting

    With business mortgages, business owners can plan their future expenses based on a fixed monthly payment.

  12. More control

    Business owners can use commercial finance to consolidate their past debts, creating new investment opportunities. Investors also use commercial finance to buy new equipment and expand their business.

How Can a Commercial Finance Broker Help a Borrower in Getting a Mortgage?

Brokers who specialise in commercial finance can help borrowers get mortgages at reasonable rates and with acceptable requirements. An experienced broker reviews and evaluates all the required documentation and negotiates with various lenders before submitting a mortgage application to commercial finance borrowers.

Over the years, SWG Mortgages’ commercial finance advisors have established strong relationships with key lenders and are well acquainted with the criteria and options of each lender. SWG Mortgages specialist advisors liaise with a network of lenders to assist borrowers in identifying and analysing needs and financial conditions to find the most appropriate commercial finance method to develop the borrowers’ business.

SWG Mortgages specialist advisors with extensive knowledge and experience in commercial finance compare with the products on the market. We will help borrowers choose the best option for their needs and conditions.

SWG Mortgages

An experienced mortgage broker will assess the borrowers' financial capabilities, and they can show the real income of the borrowers to the lenders. A specialist mortgage broker can introduce the best lender to the borrowers by using the financial profile according to the business situation.

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