H1 Buying the premises you work from can actually cut your costs and increase security for your business,. But large-scale funding will be essential.
Buying the premises you already work from can be a sound investment.
rather than giving a share of your profits to the landlord each month, it would allow you to invest them in an asset which should approaciate - and provide an important facility for the futue of your business.
It means that your business enjoys greater security, and will no longer be at the mercy of a landlord when it comes to rent increases. What’s more, buying it can reduce your monthly outgoings, compared with renting, and create a valuable additional asset for the future of your enterprise.
It could give you the freedom to grow and remodel your premises to suit your business needs - and avoid the need to move your business to a new location. But whatever your business and whatever your plans, getting the most appropriate type of finance, and the most cost-effective deal to fund your industrial property purchase is essential.
Business property can include -
Warehouses and storage facilities
Manufacturing plant
Self Storage facilities
Factory Units
Depots, storage and distribution centers
Workshops
Office Buildings
Retail spaces
Professional practices
Studios
Clinics
But of course the main questions will be, can you persuade your landlord to sell the property to you - and if the answer is yeas, what is the best way to fund it?
Commercial mortgages
A Commercial Mortgage is one of the most common forms of finance used to buy business property of all types..
Commercial mortgages operate like residential mortgages, and are simply a large scale loan, with the security supplied by the property itself. Generally, Commercial Mortgages are for 15 years or more and, as with a residential mortgage, the premises will be at risk if you are unable to keep up your repayments.
However, there are some important differences to a homebuyers mortgages. One of the most significant is that the rates and terms for a Commercial Mortgage are arranged individually, and your business will be as important as the property you want to buy
Lenders will always look at your business, your accounts and projections to ensure that and set interest rates based on the level of risk they believe it presents.
A sound business in a growing sector could expect to secure the best rates and terms - which can be substantially below most other types of business funding
There will also be valuation, arrangement and legal fees and substantial additional costs for the services of professional advisors which will add to the initial costs.
Because of all the legal and administrative costs of setting up a commercial mortgage, it is usually uneconomic to use this type of lending to borrow less than £50,000, and some lenders have a minimum of £75,000 or more, but there is no set upper limit, and for very large loans in the multimillion pound level there may be special arrangements to be made which can actually make it more cost effective to buy a large costly property than a smaller one. For these larger loans, t we can help find lenders with bespoke terms that are tailored to your requirements.
However, you will need to make a large contribution to the purchase price yourself. Typical loan-to-value ratios will be a maximum of 50% of the purchase price for new businesses. Owner-occupied businesses such as offices or shops can normally get a loan-to-value of around 80%.
Commercial Mortgage deals can be either fixed-rate or variable rate, and you may also be able to choose between a repayment mortgage option where you pay the capital and interest back each month or an interest-only mortgage, where you only pay the interest..
Other types of business property finance
Although Commercial Mortgages are a popular form of funding for business property of all types some other options exist.
Property Development Finance
Property Development Finance is a type of lending that experienced property development businesses can use to fund new building projects, or refurbishment of an existing property. They may be suitable for projects such as the conversion of a major factory site into units, or for the construction of new buildings.
Different scales of lending are available, designed to support projects from light renovation to conversion, to ground-up new builds.
Lenders may advance up to 70% of the gross development value, with terms that can be up to 24 months. Property development finance is usually only available for experienced developers, who have a portfolio of previous development projects to showcase their skills.
Bridging and Auction Finance
Bridging Finance is a property finance solution often used as a short term, temporary solution for property purchase. It works like a mortgage, in that the funding is secured on the property itself, but unlike a mortgage bridging finance carries a relatively high interest rate. It might best be thought of as the means to bridge a funding gap, until a more suitable long-term solution can be provided. However, it can be useful in providing large scale funding very quickly - potentially in days, rather than the months required with
Raising funds with business property refinance
A commercial mortgage can offer excellent rates compared with other forms of finance, and so a loan secured on business property that you already own can be the most cost effective solution to raise funding for a wide range of business purposes, such as a company purchase. Property remortgaging or refinancing could let you use the property you currently own as the security to raise cash at a preferential rate. Refinancing lets you access the investment you have already made in your office, factory, warehouse or other property to provide the funding to use again. If you own the property outright, all the money you raise is yours to use in any way you wish. You can also refinance a property with an existing mortgage, repay your original loan, and use any surplus cash to help build your business. You regain full title to your premises when the funds are paid off and to take advantage of rates that are exceptionally low.
Refinance can also be the solution if you want to get a better deal on your current business Industrial finance commitments.
You do not need to have paid off your current mortgage to arrange a new one. Your property will probably have appreciated in value, and the means that the chances are that you can get a better deal on your existing loan. So if you want to reduce the monthly repayments on your current mortgage, cut the demand on your cashflow and release funds for use elsewhere in your business, refinancing your current commercial mortgage could help. You may be able to pay off an existing loan and replacing it with a new one at a lower cost.
Property finance from Rangewell
All types of property involve substantial costs, and the scale of many business properties makes very high costs inevitable. Even a fraction of a percentage point can make a substantial difference to what you actually pay each month, while fees and penalties can complicate the position still further. There are many different lenders who may be prepared to offer funding. Each has its own approach to interest rates and fee arrangements, and comparing offers needs an expert eye.
At Rangewell, we use our property finance expertise to support your business – and ensure that you have the financial solutions you need.
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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