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.
Tags: commercial mortgages
