How to Finance Commercial Property

How to Finance Commercial Properties

Every business owner dreams of being debt-free, minimising risk, and growing their business steadily. Although that may be the dream, the reality is that in many situations, to take advantage of an excellent opportunity or to purchase the ideal plot of land or business premises, businesses need access to finance.

What Is Commercial Finance?

Commercial Finance is a very broad term which captures most forms of lending options available to businesses. These include invoice finance, supply chain finance and commercial property finance etc.

A business can use commercial finance to purchase premises for their own use or for investment purposes.

What Types Of Commercial Property Can AW Capital Secure Finance on For Their Clients?

AW Capital works with a wide range of partners and is ideally placed to help facilitate capital to purchase commercial property. The type of properties which can be purchased via commercial finance agreements include restaurants, offices, retail outlets, nursing homes, and even factories.

How Does Commercial Property Finance Work?

With the ever-increasing cost of commercial property, very few small to medium-sized businesses are in a position to pay cash and buy a property outright. Traditionally a small business that wishes to purchase its premises will do so via a commercial property mortgage. A commercial property mortgage functions in much the same way as a traditional residential mortgage. The most significant difference is that a larger deposit will typically be required.

Generally speaking, if you are looking to purchase an owner-occupied commercial property, then a business can borrow anywhere between 70 to 75 percent of the value of the property. Alternatively, if the property is being purchased as an investment, similar levels of funding can be raised, and other factors such as the potential rental income will be taken into consideration.

A commercial mortgage will generally have repayment terms between five and twenty five years. Alternative options to a business mortgage include a short-term loan, bridging loan, or property development loan, all of which AW Finance can discuss and explore with you.

It is unusual to be able to secure a fixed-rate commercial mortgage; most of them are set at a certain percentage above the Bank of England base rate, or alternatively the LIBOR. However, it might be possible to obtain a fixed commercial mortgage rate for some or all of the term in certain situations. This is a significant benefit to the borrower, as essentially, the lender is taking on more of the rate risk. Two advantages of commercial property finance are that generally, you can obtain slightly lower rates than other types of finance, and any loan interest is tax-deductible.

If you are considering purchasing a property, then it is important to get professional advice from a company that has experience in dealing with commercial mortgages. AW Capital has helped many business owners purchase their business premises, and we look forward to helping you achieve your dreams.

Contact us today to arrange a free no obligation consultation.

How to Finance Commercial Property