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Commercial Mortgages Explained

Commercial Mortgages are probably still one of the hardest business finance product to obtain. The following article explains why you can longer rely on the value of the property to obtain funding.

 Gone are the days when you could get funding at 70-80% of the valuation without having to go through the in and outs of a ducks whats it. Nowadays it is all best of serviceability,cash flow and the quality of the tenant. By tenant we mean the business that is in situ and who ultimately will be paying the mortgage. The tenant could be the owner of the property or the lessee if the owner is sub leasing.

 In the current economic climate commercial mortage lenders will only lend up to 70% providing serviceability is undoubted. If not they will lend up to a max of 70% but do some calculations based on profitability. We have seen many instances where a property has been valued at £1.0m plus however the  serviceability has been an issue and funding was only achievable at 40% of the value.

Commercial mortgage lending is no different from any other type of lending. There will always be slight variations throughout the market. In addition different banks blow hot and cold in terms of their appetite for different sectors and industries. Different banks and commercial mortgage lenders do things is slightly different ways and as such it is worth speaking with a commercial mortgage broker who knows the market inside out. In addition they  can collate all the right information that the different lenders require saving you valuable time and money.

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