What Security Is Required For A Commercial Mortgage?
If your business is considering purchasing its existing or new premises then it is likely that it will need to borrow some of the funds required to complete the purchase. One of the most popular ways of doing this is by way of a commercial mortgage that are typically offered by the likes of banks and building societies as well as some other specialist lenders.
The lender will no doubt require some form of security to reduce its exposure to a risk of loosing some or all of the money it lends. The normal form of security is a first legal charge over the commercial premises that it is lending your business the money to purchase. The premises should either be freehold or have a long lease and they will no doubt limit the amount that they will lend to a % of the value.
This percentage that they will advance may vary between lenders based upon a number of factors such as the amount you wish to borrow but may be up to in the region of 70% with your business/the owners of the business finding the balance from their own resources. If your business wishes to borrow more than that figure then the lender may consider your request subject to you providing additional security that could include things like other property such as the homes of the business owners/directors, a mortgage debenture over the businesses assets and a personal guarantee from the directors or owners of the business.
With regard to the value of the property, the lender will require what is referred to as a forced sale valuation from a suitably qualified person. In simple terms, this is a value based upon the price that the property may achieve if it were sold quickly – say within 3 months.
As commercial mortgage lenders may have different criteria, you may wish to get in touch with us and speak to one of our specialist team about your requirements without any obligation.