As a growing company, the time may have come for you to consider buying a business premise. Perhaps you have been leasing or renting a property until now, something that has suited your needs but to take your business to the next level you want to make that step of purchasing a commercial property.
Naturally, when you own a building you have complete control over the layout, fixtures, fittings but it also means you need to consider the upkeep and maintenance. If you’re purchasing a bigger building with the view of growing the business into the space, you may also have the option of sub-letting part of it until you’re ready.
Straight away there is a lot to think about, but if you want to get on the commercial property ladder, here are some of the areas to consider.
Re-locating your business to an owner-occupied building is an exciting time but it’s a good idea to do your homework before you get too far into the process. The location and physical aspects of the building will be the most important, so take your time to find the right one for your business.
Some of the areas to take into account include:
There are commercial property specialists who will help you identify what you need and source suitable buildings for you to view. This can save you a lot of time which you can spend viewing potential new properties.
They can also help with finding a good commercial lending broker who will guide you through the maze of commercial mortgages and find the right product for you.
A visit to any commercial property is really important. It’s your opportunity to check all the sale details and assess if the site will meet the needs of your business. When you find a suitable site, it’s a good idea to make a few visits, maybe at different times of the day to weigh up the access and security.
If there are tenants already occupying the building, maybe have a conversation with them. Find out as much background information as you can, how long have they been there, what do they plan to do next, have there been any issues during their time in the building.
Even before you’ve found the property you want it’s advisable to look at your funding options. There may not be enough cash in the business to fully fund the purchase which means you’ll need to look at a commercial mortgage. These work in a similar way as a residential mortgage, the difference is the property you’re purchasing must be for a commercial operation.
A commercial mortgage is available to lots of different types of businesses including sole traders, limited companies, and limited liability partnerships (LLP). They can also be used by trust and pension schemes to purchase assets.
In general, they are more expensive than a residential mortgage because of the complexity and higher risk profile. As well as purchasing the property the money can also be used to develop, redevelop the building, or as an investment that allows you to rent out the property.
Many companies purchase a commercial building as a way of investing money back into the business and depending on your situation the mortgage repayments can be tax-deductible. Lenders do operate under strict criteria and the property is secured against the loan. This means if repayments are not maintained they can repossess the building.
There is also something called a semi-commercial mortgage. These are used for buying a building where part of it is used for commercial purposes and the other is residential. A good example is a shop, pub or restaurant that includes a flat. In this situation, lenders will often ask for 2 separate entrances to the building.
Commercial mortgages are a specialist area of lending and without the right level of knowledge, the process can be time-consuming and complex. In addition to the high street banks, there are quite a few specialist lenders offering niche products. Many of these are not advertised so finding the right one for you can be a challenge. This is where a commercial mortgage broker can save you lots of time and money.
They will work with you to understand your circumstances and identify your specific needs. If your mortgage broker has access to the whole market, they can look at 100’s of products to find the right one for you. This includes all the high street and specialist lenders who will offer products exclusively through brokers that are not available directly to customers. These will include commercial mortgages designed to meet very specific or unusual requirements.
Finding the right mortgage is only the start of the process. If you’re using a broker then you’ll already have started to build a relationship. This will be invaluable when it comes to applying for your commercial mortgage because you’ll need to build a good case to ensure the lender approves your application.
This requires you to demonstrate your business is a good prospect against which to lend the money. The numbers are key to showing how you’re performing and the information needed will include your assets, turnover, cash flow, and the profit margins you operate within. If you’ve had any previous business loans, a reference from the lender demonstrates your ability to repay and will support your application.
To find out more simply download our E-book today on the Complete Guide to Commercial Mortgages.