Commercial Mortgages with Bad Credit
Businesses often assume that because they have bad credit, it will be impossible to secure a commercial mortgage. The Revolution team also receives regular enquiries from companies who have been turned down for mortgage finance and hadn't realised that a minor credit issue was going to cause such a problem.
Here we explain the ins and outs of bad credit rating and commercial lending, and why working with an experienced broker is key to finding the mortgage lending you need.
For more help and advice, contact the mortgage brokers team on 0330 304 3040 or via email on [email protected].
Difficulty in securing financing
Securing financing for a commercial mortgage with bad credit is tough. Lenders look at your credit report score to judge how risky it might be to give you a loan. With a low credit rating, many lenders see this as a red flag and may hesitate to offer you financing.
They fear that borrowers with bad histories of managing debt might not pay back the commercial mortgage.
To make matters more challenging, the terms offered by commercial mortgage lenders willing to take on bad credit applicants are often less favorable. Expect higher interest rates and stricter loan terms compared to those with better credit scores.
This means borrowing costs surge, making it harder for businesses to afford their desired property or investment. A specialist mortgage broker can help navigate these hurdles, but applicants must prepare for an uphill battle in convincing bad credit mortgage lenders they're worth the risk.
Tips for Securing a Commercial Mortgage with Bad Credit
Landing a commercial mortgage with bad credit can seem tough, but taking the right steps can lead you closer to approval. Be proactive by checking your score and exploring various loan options to find a good fit for your financial situation.
Check your credit score
Understanding your credit score is crucial for securing commercial mortgages with bad credit. This number reflects your financial history and influences lenders' decisions. A higher score can lead to better interest rates and terms.
Check it annually through official websites to stay informed.
Fixing errors on your report could improve your score over time. Pay attention to any incorrect charges or outdated information that might be dragging it down. After checking, the next step involves getting pre-qualified for a loan, which gives you a clearer picture of what you can afford.
Get pre-qualified for a loan
Getting pre-qualified for a loan is a crucial step in obtaining bad credit commercial mortgages. It gives you an idea of how much money specialist lenders might be willing to offer, based on your financial history and current income.
This process also helps pinpoint what interest rates you might face, enabling better planning for your business's future.
Lenders accept your demands typically after they review your credit score and evaluate your debt-to-income ratio during pre-qualification. Even with bad credit, showing steady income can improve your chances of securing a commercial mortgage.
This early step doesn't guarantee approval but positions you as a serious buyer in the eyes of sellers and agents.
Maintain a steady income
Maintaining a steady income is critical for securing a commercial mortgage, especially with bad credit. Lenders want to see that you have reliable cash flow to cover your loan payments.
Show them consistent earnings from your business or job. This proves you can handle the financial responsibility of a mortgage.
Look for ways to boost your income if necessary. Consider expanding your services, taking on additional projects, or finding other streams of revenue. A solid financial foundation makes you more attractive to lenders and might help offset the impact of bad credit mortgages.
Consider alternative forms of financing
Exploring different financing options can open doors for those with poor credit seeking a commercial mortgage. Business owners might look into private loans, which are often more flexible about credit scores.
Some may find crowdfunding platforms appealing as they allow multiple investors to fund the project, relieving some financial pressure. Another avenue is finding partners willing to invest in the property or business in exchange for a share of ownership.
Hard money loans present an option for short-term needs, although their interest rates tend to be higher. These loans focus more on the property's value rather than the borrower's credit score, making them suitable for renovation projects or quick purchases before refinancing.
By understanding these alternatives, individuals can better navigate their choices and increase their chances of securing funding. This approach ensures that even with less-than-perfect credit, there are viable pathways to obtaining a commercial mortgage.
Moving forward, let’s discuss how maintaining steady income influences loan approval prospects.
Can My Business Get a Commercial Mortgage with a Bad Credit History?
Contrary to popular belief, yes you can - and the right lender all depends on whether the business itself has had issues, or whether the business owner or directors have experienced the adverse credit mortgages.
The commercial investment mortgages market is enormous, and multiple specialist commercial mortgage lenders can offer lending on terms that are adapted to your circumstances.
As a whole-of-market broker, Revolution Brokers can recommend any lender and any product in the UK, so there is always an option!
