Commercial Mortgage
Businesses raise finance by retaining profits for reinvestment or by obtaining a loan. Selling shares in the business is a form of loan but it results in a loss of control over the running of the business. It is sometimes better to gain finance from the bank using the property as security. This is especially true if the finance is to be used to purchase commercial property. Purchasing a new property is also advantageous as a business expansion strategy and as an asset with the potential to increase in value providing the owner with positive equity. A commercial mortgage also gives you flexibility with repayment and the ability to budget outgoings more successfully.
Commercial mortgages are typically lent at up to 80% LTV.
A commercial mortgage may also be obtainable from some lenders even if you have bad credit history, a lack of audited accounts or no proof of income. The level of risk predicted by the lender will affect the interest rate paid on the mortgage. This means that if you have a poor credit history you will most likely have to pay a higher interest rate.
Since a mortgage is one of the cheapest forms of loan it may be a wise financial decision to finance growth or even the starting of your business with a commercial mortgage. If your business is a sole trader or a limited company not listed on the stock exchange a commercial mortgage may be the best way to raise finance for expansion since you cannot advertise shares publicly.
Commercial mortgages are often used to build property for restaurants and pubs, but can also be used to fund expansion creating further office or factory space.