What Sort Of Security Will Lenders Accept For Business Borrowing?
If you are a business owner and are looking for financial support from your high street bank say for working capital purposes or to buy a commercial premises then it is quite possible that the lender will require one or more forms of security to provide them with peace of mind in the event that you default on the borrowing and the bank ends up calling on the security to liquidate the borrowing.
So, what sorts of security may the bank require before providing the finance?
Well, you will be pleased to read that there are several potential forms of security that a bank may accept. For instance, the director(s) may be asked to provide a personal guarantee that may or may not be supported by say a second mortgage on the director’s residential property. This form of security ties the directors in on a personal basis as, if the business was to default on the borrowing, the directors could end up having to sell their homes to help clear the liability. On occasions, the directors may also be asked to provide cash cover to support their personal guarantees.
The bank may also require a first legal mortgage over the business premises especially if the borrowing is being provided to fund the purchase of the premises. The lender will usually require a certain security margin and only lend up to a certain percentage of the value of the deed security.
Another form of security that a bank may require is a mortgage debenture over the business premises and the likes of plant and machinery, fixtures and fittings and stock.
A benefit of providing security, apart from being able to obtain much needed finance, is that the interest rate charged by the lender may be lower than if you were seeking funding on an unsecured basis. The reason for this is that secured borrowing is obviously less of a risk to the lender than unsecured lending.
If you are looking for finance for your business then why not get in touch with us here at Commercial Mortgage Link and we will be pleased to put you in touch with a firm of specialist commercial mortgage brokers who have an extensive panel of lenders at their disposal.