The Top 10 Advantages a Commercial Mortgage Gives Your Business

Commercial Mortgages give business owners and investors the ability to buy their own offices, factories and warehouses, growing their businesses and giving them a solid foundation. That is one general advantage; below we've listed a few more specific advantages of commercial mortgages.

1. You Own The Business Property: Obviously the property you buy to house your business is a significant asset for you business. Even through recession, the British property market usually finds that over the long term property prices are always rising, so you are looking at a healthy profit on the property after a decade or two.

2. Commercial Mortgage Repayments Are Tax Deductable: The whole mortgage payment is not deductable, only the interest on the mortgage payment is. HMRC classes the interest as an allowable expense which boosts the balance sheet when the tax returns are due.

3. Cut out the middle man: When renting a commercial property, the rent you pay is subject to regular reviews (normally conducted annually, and in theory, in line with inflation). At this time, your rent payments always go up and could increase significantly, making it difficult for you to budget. The commercial mortgage offers you more stable payment terms by cutting out the middle man. This means it is easier to manage your out goings..

4. Interest Rates Are Lower Than Other Commercial Lending Types: It's not just to fund buying a property that make commercial mortgages attractive, many business will take one to consolidate other loans they or the business have as the interest rate is much lower on a commercial mortgage than it would be on a commercial bank loan, credit card or business overdraft.

5.Make sure you are the landlord not the tenant: IF you decide to buy commercial premises, you might buy property that is too large for your overall needs. Whilst you can use the premises to expand into in the future, it also offers potential space for sub-letting in the short term. This is a useful way of generating extra income to help pay the mortgage. This is something that you will need the permission of the mortgage lender for.

6. Fewer cash flow headaches: When you take out a commercial mortgage, the repayment plans will normally cover a number of years before they are re-evaluated. This gives some degree of certainty in terms of the repayments required. This allows you to concentrate on profit and loss rather than worrying about a volatile cash flow.

7. You are in control: Instead of raising a loan by selling a percentage of your business or property to an investor, you retain complete ownership if you have a commercial mortgage. A private investor would demand a share of any increase in the property value whilst a bank or mortgage lender is only entitled to an interest return on the mortgage. You retain the benefits of ownership of an asset that is likely to grow in value.

8. Allows you to retain your capital: Whilst a commercial mortgage will require you to commit a deposit (typically 30-40 per cent), you are able to borrow the remaining funds to complete the purchase. This means that you can retain some cash in your company's coffers and you don't have to sink all of your available money into the property itself.

9. Control over the asset: If you lease a property, you are constrained in a number of ways to what you can do with the property, it never belongs to you. You might need to get permission to alter the layout, or to redecorate or to change usage. If you take out a commercial mortgage, however, it gives you the rights to the property, meaning you can make changes to it without having to seek a landlord's permission, within planning permission regulations, of course.

10. Save Money: You might be paying interest on the mortgage, but overall you will most likely be saving money compared to renting a property. Even after rent rises and mortgage interest rates, a commercial mortgage comes in at a lower rate than rent would, a landlord is looking to make a profit and cover his expenses in a shorter time. A mortgage is repaying the loan over a long term period so has as much interest in setting a lower monthly payment rate, if your business does not prosper the lender won't get its money back.

As you can see, the advantages are broad in scope and commercial mortgages save more money than they lose compared to the alternatives.


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