Long term commercial finance, in the form of a commercial mortgage, offers many small and medium sized enterprises (SMEs) the ability to invest in their business with new technology, new or refurbished premises, or increased stock levels.
In the past, it tended to be only larger organisations with a proven track record who could obtain commercial mortgages. A large number of younger/smaller businesses were unable to obtain this type of commercial finance and, as a result, many businesses have been forced to rely on expensive short term finance or left to use their owners' residential property as security.
Fortunately, this gap in the market is now being targeted by specialist commercial lenders who are willing to serve the commercial mortgage needs of SMEs and owner-managed businesses.
The problem
In the past, it has been difficult for small business borrowers, self-employed traders, and partnerships to raise commercial mortgage finance. This is because:
- Institutional lenders have focused on larger, corporate lending secured on the tenant covenant of investment properties. This sector is seen as being low risk and so has become a favourite of many traditional lenders.
- The lending criteria of many mainstream commercial lenders disqualify applicants who do not have three years' audited account, those without business plans, or those with a less than perfect credit history. As the UK workforce migrates more towards self-employment, greater flexibility is required from lenders to assess each case on its individual merits. Until recently, this flexibility has been hard to find. Similarly, in the past, the requirement for three years' accounts has been a barrier to new or young businesses.
The solution
To address these problems, a number of commercial mortgage lenders now offer commercial mortgages with some or all of the following features:
- Available to small owner managed limited companies, partnerships, and self-employed sole-traders
- Self-certification option - no need for three years' accounts
- Finance available for any purpose - no bank imposed restrictions
- Mortgage arrears, CCJs, IVAs, discharged bankruptcy all considered
- Same day indicative offers
- Completion in weeks, not months
- Transparent mortgage tracking Bank Base Rate
- Mortgage term of up to thirty years
- Advances from £50,000 up to £1.5m
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Copyright 2004 David Miles. You are welcome to reproduce this article on your website, so long as it is published "as is" (unedited) and with the author's bio paragraph (resource box) and copyright information included. In addition, all links to external websites must be left in place.
About the author: David Miles edits a number of finance websites, including TheCashClinic.com - a UK Personal Finance Portal.