Commercial mortgaging criteria
Commercial mortgage lending varies from residential mortgages in terms of affordability assessments, eligibility criteria, and the rates and terms available.
The benefit of using professional commercial finance brokers, compared to a residential mortgage, is that you have access to the entirety of the market without any product restrictions or limitations on the lenders you have access to.
Our established networks of specialist commercial mortgage lenders work with our commercial mortgage brokers to negotiate terms and structure tailored commercial property lending for each of our valued clients. A commercial mortgage is a type of business loan secured using your own business premises.
How do commercial lenders evaluate candidates with poor credit?
As you may know, the industry is still unregulated, which gives lenders more latitude. The lender will consider every aspect of your credit history, including its duration, severity, and cause; this information may be weighed against the viability of your investment or business plan.
It's important to remember that there are no rigid requirements that you must fulfil. Lenders of commercial mortgages are free to establish their own unique standards.
Can you get a commercial mortgage with bad credit, and if so, which issues are acceptable?
The term "bad credit" refers to various problems with differing degrees of severity. A candidate with a few late payments is different from a candidate whose bankruptcy has not been discharged.
The following list of typical credit issues includes information on how they could impact your application for a commercial mortgage:
Defaults
A missing payment is a default. Mortgage defaults will be taken very seriously, whereas bill and debt defaults will be treated less seriously. Any kind of mortgage with defaults, especially one that is recent or several, may result in the denial of your commercial mortgage; however, single defaults or those that are older than two years may be disregarded.
Plans for managing debt and voluntary agreements for each individual
An individual voluntary agreement (IVA) is a debt management plan that allows you to spread out the repayment of your business or personal debt over a longer length of time than originally agreed upon—typically up to six years.
Obtaining a commercial mortgage may be challenging if you currently have an IVA in place. You'll be in a better position after you've finished it and established a history of on-time repayments (for example, 12 months). The same holds true for DMPs, or debt management plans.
County court rulings
A county court judgement (CCJ) is an order from the court that a creditor can use against you personally (if you owe them money) or your company (if you have debts) to force you to pay them back.
Your application is more likely to be denied if the CCJ is big (more than £1000), recent, and unpaid. Most lenders will stop holding a bad credit judgement against you if it is fully settled, or repaid, and has been open for more than three years. Some are even more kind and will approve your application right away.
Bankruptcies and seizure actions
A commercial application that has filed for bankruptcy within the last year is typically rejected by lenders. But, if no new credit problems have arisen within the previous six years, you can be eligible for a commercial mortgage from a specialised lender. Repossession requirements are comparable, but keep in mind that commercial lending is always decided more flexiblely and on a case-by-case basis than residential.
Commercial property lending and credit ratings for a business mortgage
Whether raising a commercial property mortgage to invest in a new site, re-mortgaging to raise capital, or seeking help from commercial financing brokers to release cash flow against your assets, credit rating is something we are often asked about when discussing a business loan.
Appraisals for commercial mortgages for a business mortgage differ than for individuals since the company is providing the primary security. However, most lenders will also assess the liquidity and credit history of the business owners.
You may also be asked to offer personal guarantees if there are any circumstances in the businesses trading - for example, being newly incorporated - that means it cannot provide sufficient security.
Many applicants have bad credit scores, and this is not a precursor to being unable to secure competitive commercial lending or get a commercial mortgage.
Give our commercial financing brokers team a call today on 0330 304 3040, and we will help you source the right mortgage lending for your business.
Purposes of commercial property mortgage loans
Revolution, as a commercial financing broker, works with a wide variety of clients and businesses looking to raise mortgage finance or remortgage an existing property asset.
Commercial mortgages are not restricted to buying property to conduct your business from and may be used for multiple other purposes.
These include purchasing investment properties to let, including HMOs (houses of multiple occupancies), so they are a flexible solution to raising finance with competitive terms.
Why choose us for your commercial mortgage?
Working with commercial mortgage brokers means having an independent expert on your team, here to assist you with getting the most value out of your commercial mortgage business loan.
Our expert team of consultants has an in-depth understanding of the commercial mortgage sector and collaborates with an extensive network of reputable lenders. We tailor our offers to your needs and negotiate with lenders on your behalf to secure the best possible rates and terms.
There is no one size fits all in your commercial lending, and Revolution commercial mortgage brokers go the extra mile to ensure that you know precisely what the options are, and the advantages and disadvantages to each.
Want to get more detail on your commercial mortgage? Visit our Commercial Mortgage Calculator page to check the standard interest rates and see how you qualify for this type of business loan.
What makes Revolution Finance different from Commercial Mortgage Brokers?
With our extensive market access, we can offer:
- New commercial mortgages as they come onto the market.
- Bespoke terms and rates negotiated with your lender.
- Fast processing and support with documentation and paperwork.
- Exclusive access to offers and opportunities not on the open market.
- Tailored mortgage solutions to best fit your business.
- Independent advice on which mortgage products are most competitive.
- Mortgage support for applicants who have been rejected elsewhere.
- Specialist mortgage solutions for non-mainstream products.
Our commercial mortgage brokers work to the highest standards of professionalism and are a friendly and experienced team who will work with you to understand how our services can help you.
We pay close attention to detail, with an ethos of complete transparency, so you always know all the options available, what the purchase price is as well as the costs and and the arrangement fee involved with each.
Our experienced commercial mortgage brokers can support you with every aspect of your application, from completing paperwork with you to demonstrating affordability and meeting your chosen lenders' criteria.
Types of commercial property mortgage offered by commercial mortgage brokers
You will find a wide range of commercial mortgage options available, and Revolution commercial mortgages brokers work to broker deals that exceed the competitiveness of offers available on the open market.
Typically security is not required for commercial lending up to £25k, but for more significant mortgages the security will usually consist of a charge held against the property, and potentially other forms of protection which your commercial mortgages brokers can negotiate.
Most commercial mortgages have a term from three to twenty-five years, although if you require short-term financing, there are other products available such as bridging loans for commercial mortgages that might be a more cost-effective way of raising cash flow funds quickly.
Another factor to consider is the loan to value ratio. These commercial mortgage terms explain the proportion of lending against the value of the property being financed. For investment properties, it is the anticipated annual revenue achievable from rental income against the value of the borrowing.
Many mainstream commercial lending firms will offer a maximum LTV ratio of 70-75%, meaning that you will need to have a 25-30% deposit in place to move forward. Revolution commercial mortgage brokers work with a specialist commercial mortgage lender who can negotiate on LTV terms and offer incredibly competitive rates with high LTVs and low valuation fees.
Benefits of using commercial property lending
Borrowing against a commercial property can raise finance for any number of reasons. As commercial mortgage brokers we can help you to:
- To purchase a premise or an investment property by analysing the property value.
- To refurbish, fit-out or modernise an existing business property.
- To remortgage at more competitive interest rates.
- To raise finance for other working capital requirements.
There are multiple benefits to choosing a commercial mortgage as your form of lending. Revolution commercial mortgages brokers will work with you to understand your funding needs and will recommend alternative products if we anticipate that they will be more cost-effective or better suited to your plans.
Also, you can use our commercial mortgage calculator to tailor the amount you would want to borrow according to the repayment possibilities.
It's worth noting that if you take a break from paying off the principle of the loan which is called a process called capital repayment holidays, the interest needs to be paid into a servicing account which will accrue during that period and may take longer to repay the loan.
Benefits to choosing commercial mortgage loans organised by commercial mortgage brokers include compared to residential property mortgage loans:
- Tax-efficiencies with interest payable on your commercial mortgage is tax-deductible.
- Capital growth in line with increases in the value of your property by making regular monthly repayments on your mortgage.
- Potential for rental revenue with investment properties to let (buy to let commercial mortgages)
For help from the leading commercial finance brokers in assessing your commercial mortgage lending needs, give us a call today at 0330 304 3040.
