Asset finance leasing - XL Business finance
  XL Business Finance Blog » commercial mortgages

Posts Tagged ‘commercial mortgages’

Commercial Mortgages Explained

Monday, February 7th, 2011

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.

Need a Commercial Mortgage?

Tuesday, May 18th, 2010

We have been approached recently by a number of businesses requiring a commercial mortgage. The advantage of using XL Business Finance is that we have people working for us that have been in very senior commercial positions within banks and know exactly what the banks are looking for in terms of  information and types of deals. These businesses recognize that we can add value to the negotiations and dealing with one point of contact saves valuable time and resources. A Finance Director or Managing Director doesn’t need to waste time having interviews with several different finance companies when  they can pass over the responsibility to someone that knows exactly what the banks will do and what they are looking for in terms of property and clientele.

The problem with the commercial mortgage market is that there is still not enough liquidity within the banks. They are still being very picky and choosy as to what they will do. As with any lender some are more aggressive than others and they all have a slightly different way of looking at things. Therefore any marginal deals that would have been done before the recession may struggle to get through. In addition it is no longer good enough to have a very loan advance compared with the value of the property. Commercial mortgages are at the moment still difficult to obtain with a low loan to value if the rest of deal doesn’t stack. Serviceability must be proven and ideally the tenant must be of a good quality.

As an independent we know exactly who will do what and be able to find you the most appropriate finance company. This service will not cost you a fortune as for easy cases we will take a fee off the finance company. If the deal is more complex we might take an up front fee however the cost of this fee will hopefully be outweighed by the benefit of us arranging the commercial mortgage.

Commercial Mortages UK

Monday, March 29th, 2010

In the current environment of banks being difficult in terms of providing new funding it might be worth mentioning another reason why a business should use another invoice discounting company other than their own bank particularly where a commercial mortgage is involved.

When a bank has got too much of a handle of a businesses finances and their is a requirement for additional funding, due to the overall exposure it might be difficult to obtain the required additional working capital. In extreme cases the banks may view this as a signal that the business is in difficulty and pull in some investigative accountants. In our opinion all banks are interested in is covering their own position and have little desire to help a business trade thorough any difficulties.

Unfortunately it is not straight forward to switch from one invoice discounting company to another invoice discounting company when a commercial mortgage is involved. One would think that a commercial mortgage is a stand alone facility which really it should be. However as soon as invoice discounting is taken out a all assets debenture will be registered against the business which will also include the property as well as plant and machinery

We have seen a few instances where the bank have in principle agreed to let the invoice discounting business go but in reality it has taken months and months to do the transfer because of  the incumbent bank wont realise the book debt from the debenture. In reality a deed of priority will be required in complicated cases however these can take forever and a day and as we know dealing with the banks legal departments can be like pulling teeth,

The best way forward is always to keep different finance products separate from different finance products and as such you will never find yourself in the mercy of one bank.

Asset Finance in an MBO

Monday, March 1st, 2010

Amongst all the turmoil of the last eighteen months we are still seeing one or two opportunities to fund management buyouts.  This makes a change from the business going bust and new directors and shareholders  buying  the business off the administrator. In terms of providing funding there are fewer options than there were before the credit crunch however asset finance is becoming more and more prominent as a option to top up other types of funding.

Once upon a time you could go to many high street business banks and obtain a cash flow lend against the turnover and the profitability of the business. The amount that could be borrowed bore no resemblance to the individual assets of the business, mainly buildings , debtor book and plant and machinery. It was once possible to obtain funding much higher than the total worth of all these assets. These sorts of loans are virtually impossible to come by nowadays because many of the banks have had their fingers burnt as business have failed during the recession leaving the banks highly exposed.

Nowadays it would appear that traditional asset based lending would be the way forward. A commercial mortgage, factoring and invoice discounting and a bit of asset refinance to top up the facilities. If the vendor requires any more cash than it is usually done by way of deferredpayments. However asset finance and asset refinance is playing a more and more important part of the MBO process. It is important that an asset finance specialist can provide the best possible options for refinancing your kit. There are various finance companies that specialise in engineering , printing and commercial vehicles and they use their own experiences and supplier network to value equipment . There are also a number of general funders that use professional valuers to obtain valuations for refinancing purposes. At XL Business Finance we use our knowledge and experience to make sure the best possible option is provided for your business.

Business Financing for a new start business

Sunday, January 17th, 2010

There are so many business financing options available for a new start business.  Nearly all the banks can offer a plethora of funding options however which ones are best suited for a new start business.

At XL Business Finance we have been helping many new start businesses for over 10 years and our experience and expertise ensure that a business is provided with the very best business finance options.

Understandably many new starts are drawn to their banks whom can potentially offer  equipment and asset finance, commercial mortgages, overdrafts as well as  factoring and invoice discounting facilities.

It is tempting to go with the bank who are offering a packaged deal however in doing so you might be storing up future difficulties when it comes to obtaining further credit in the future. Banks are very good at giving it to you with one hand and then taking it away with another. For example, we have seen many instances whereby the bank will offer a small overdraft facility in order to win the factoring business. All that happens is that the customer ends up with reduced limits on the factoring facility to counterbalance the overdraft.

In addition we have seen these initial overdrafts being completely withdrawn after a relatively short period of time. The business would have had far better cash flow if they had gone with a more flexible factoring company .

It may also be that a bank will offer you finance to purchase some assets or equipment. They mat take additional security to provide the funding. These deals may seem very attractive in terms of the interest costs however these assets may just as well be financed via a third party leasing company. A little further down the line you find yourself asking the bank for some fundeing  for something which can’t be leased but the bank are fully exposed.

We would recommend that if  third party finance is available at the start then this should be seriously considered so you don’t have all your eggs in one basket.

Business Finance from asset based lenders

Saturday, January 9th, 2010

Business Finance covers a great number  of financial products many of which can be provided by independent finance companies as opposed to bank based lending. We would suggest that organising business finance has a great deal of benefits when using independentbased lenders. In the current economic climate it is advisable to spread as many types of lending with as many different lenders as possible. Never has it been more prudent not to have all your eggs in one basket. Fundng from asset based lenders is still relatively abundant therefore in theory it should be easier to be less reliant of the banks.

At XL Business Finance we would recommended that if possible you should only use your bank as a clearing facility. An invoice discounting or factoring facility is preferable to a bank overdraft. Invoice finance grows with the business  whereas a overdraft which is repayable on demand will often be fixed at a set amount which depends on the level of security available. An overdraft amount is nearly always never enough.

Also there is absolutely no reason why you should need to have a commercial mortgage with your own bank. There are a number of specialist commercial mortgage institutions offering excellent deals. keep your commercial mortgage separate from your own bank to prevent the bank having too much control, on your businesses finances.

Equipment finance by way of hire purchase and leasing can easily be arranged via third party leasing companies. Again using a different finance company will prevent having too many eggs in one basket.

XL Business Finance has been helping many businesses for over 10 years to obtain the most flexible and competitive funding available in the market place. We understand how to structure a proposal and what information the finance companies require resulting in a very high conversion of our applications.

Commercial Mortgage Finance

Saturday, January 2nd, 2010

Gone are the days when it was easy to get a mortgage just based on the value of the property. Until the credit crunch there were a number of commercial mortage companies offering funding of up to 80% of the valuation of the property. It was dead easy. It was just like getting a self certificated personal mortgage ( and by the way they have all gone from the market as well).

In addition banks were fairly relaxed when it came to advancing money against a commercial property. Has anyone tried to get a commercial mortgage at the moment. It is virtually impossible. At XL Business Finance we have over 10 years experience in helping businesses with obtaining commercial mortgages.

The problem with getting finance at the moment is that the finance companies are not interest in the value of the property. Because truth be known no one really knows how much property is worth in the current economic climate. The financial institutions are all into debt serviceability and the quality of the tenant.

Different finance companies will have different criteria when it comes to debt serviceability and knowing which one is best for your particular requirement is best left to a proper commercial finance broker.  If anyone knows one be sure to let me know ( ha ha!).

Seriously though we have access to some of the best commercial mortgage brokers in the market. The best ones are the ones that generally have worked in the banks for 20 years, have decided that there are other options than working in a Bank for the rest of their lives, have a personality and can generally speak your language. The fact they have worked in a bank is a good thing because they know how to wade through all the dotting of the i’s and crossing of the t’s.

And we know who they are!!!!!!

Obtaining a Commercial Mortagage in a Prepack

Tuesday, August 4th, 2009

Obtaining a commercial mortgage in a prepack could be an opportunity to purchase your own business premises for a significantly reduced amount. A prepack is effectively a pre organised administration. The day after a business goes into administration the directors purchase the old business off the administrator via a new company in a prearranged deal.

Although high street banks and finance companies often take a dim view of such transactions in our view it is provides the business with a clean break and the opportunity to to clear out the dead wood. Unfortunately there will always be casualties however surely a new business trading has got to be better than no business trading at all.

It is certainly possible for a the phoenix company to trade without doing an immediate deal on the property. In fact we have seen deals negotiated with the former bankers whereby the business pays a monthly rent at a much reduced amount compared to the monthly mortgage. In these difficult times commercial properties are being valued much lower than they were 12-18 months ago. Most of the lenders are keen to get some cash in the door so the situation enables the new phoenix company to make a cheeky offer. We are currently seeing businesses purchasing their own commercial property from the administrator for a much reduced amount. Although the high street banks are unlikely to finance the property in the new co there are still one or two building societies and second tier funders providing commercial mortgages. No mortgage lender will provide a facility against the value of the property. In all cases serviceability and cash flow  must be proven.

commercial mortgages

Friday, July 17th, 2009

Probably worth mentioning a few words on commercial mortgages. All the banks are telling you that they are open for business. What a load of codswallop. In reality there are a very few banks skimming the cream of the deals. The banks that are lending are only lending to their own customers providing you have a large deposit, profitable and have a very strong balance sheet.  The government owned banks are lending a bit but i’m sure they dont really want to be lending.  There are all kind of rumours going around as to why they are not lending. Is it because they need the money from the govermenment to strengthen their balance sheets or is it becuase they are playing on the bond makets as someone suggested to me recently? Probably because we are in a recession and they dont want to.

The chances of getting a commercial mortgage from a bank other than the one you bank with are next to nothing. If your business is strong enough to raise the eyebrows of another bank be prepared to have to move your banking arrangements lock stock and barrel in order to get the funding. The most important aspect of the transaction will be the serviceability of the transaction. Even if there is a very low loan to value it doesn’t automatically mean an application will be accepted.

Even the near prime and sub prime  unders that once upon a time would lend up to 80% of the valuation are closely scrutinising the serviceability of the transaction. How times have changed!

 
 
 

XL Business Finance Ltd is a privately owned and independent business financing company with established links to many of the UK's leading finance houses. XL Business Finance provides a viable alternative to high street banks that lack the flexibility and imagination to provide a solution to most business users requirements. XL Business Finance can provide a full range of business financing solutions and we ensure a high level of customer service and pride ourselves on quick decisions. Our independent status will ensure any offer of funding and asset finance leasing is best suited to our customer’s needs.

XL Business Finance, Eaton Place Business Centre, 114 Washway Road, Sale, Cheshire M33 7RF UK.

 

Manchester, Liverpool, Leeds, Preston, Sheffield, Stoke, Merseyside, Lancashire, Cheshire, Staffordshire