Give Your SME A Deserved Boost By Taking Advantage Of A Commercial Mortgage

Taking out a commercial mortgage can help your company in dozens of ways. As well as benefiting from capital growth in your business premises, you can also better control your cash flow by fixing your property outgoings.

A commercial mortgage is simply a mortgage on business premises and there are plenty of reasons why it can be a good idea. For a start it's an investment to own the property as it appreciates in value over time. You can also secure other debts against the property and raise funds for further investments and expansion.

Get a Large Deposit Together: A lender wants to see that you are committed and that you don't see yourself as a risk by putting down a good deposit on your property. And remember whatever you put on the property as a deposit will be owned by you outright from day one. So if you put down 50% of the property value you'll own 50% straight away.

It is not unusual for a commercial lender to require a deposit of between 30 and 50 per cent of the value of the property. You will therefore need to fund the deposit of 30 to 50 per cent. As a bank's risk is reduced for every per cent of deposit you put down, they are much more likely to agree a loan if you have a large deposit.

Write Up An Excellent Business Plan: In order to persuade the lenders that your business is worth the risk of lending to your with a commercial mortgage, it is extremely important to draw up a solid business plan, which will tell the banks about the stability of your business ventures. The lender will be very interested in the business plan and so it should contain as much information as possible including profit and loss projections for the future. You should also detail the recent business performance figures, and know your projection figures inside out so that you can easily answer any objections that the bank may have.

If your business plan is weak it may put you in a bad position with the lender so if you have to, invest a little money in getting professionals in to help you write it. It will be well worth the time and effort as it could be the difference between being accepted or declined for your commercial mortgage.

Show that you can responsibly manage debt: One of the best ways to demonstrate that you will keep up repayments on a commercial mortgage is to show that you have responsibly managed other financial commitments. If you have made all your payments on time in the past, it is likely that you will do so again in the future.

If you've been renting business property, then ask your landlord for a reference to confirm that you have never defaulted on rent as this will give you a stronger case. If you have a company credit card or business loan, then it would also help your application if you sent these to the lender with your application. This will show that you've never missed any payments and always paid on time.

Be Prepared: A commercial mortgage lender is not going to lend to anybody without making a few enquiries first. Whether it be about your current or past financial status, the integrity of your Directors and Shareholders or how you sit financially be prepared to answer questions about you and your business.

Don't fall into the trap of being asked a question on your company finances and not knowing the answer. Not understanding how your business is performing or its current financial status is not going to give a good impression. A lender will need confidence in you that your business is in good hands, in the hands of someone with fingers on the right buttons and in control of a prosperous destiny. In this situation you can never be too prepared. And being able to give the right answers confidently will gain the trust and confidence of any lender.


------

Timothy Frodsham writes for Just Commercial Mortgages the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.