There is an estimated 5.2 million commercial properties
within the UK. The commercial property market expanded
by over 32 per cent during 1990-2000 (according to the
new products started) compared with the previous decade,
in itself a decade of exceptional growth. Bank lending
for commercial property deals rose by a record £7.7
billion in the first quarter of 2005, according to data
provided by the Bank of England, and property experts
believe the bulk of the new lending was for investment
purchases.
There has also been a substantial rise in the number
of investors looking to buy commercial properties to put
into Self Invested Personal Pension Schemes. Property
investment funds received a boost as of late last year
after the Government announced plans to allow them to
be included in an ISA (Individual Savings Account) wrapper.
Savers will now be able to add investments, such as property
funds and funds of funds, that have previously been restricted
from being included in ISA's because the asset class did
not feature on a European standard of eligible investments
and commercial property funds are seemingly the greatest
beneficiary of the rule change.
With this diversified interest in commercial property
by investor, speculator and businesses alike the role
of the broker has become a more integral part of the process.
Increasing numbers of mortgage brokers have branched out
into non regulated markets such as the commercial loan
sector since Mortgage Day in late 2004 and subsequent
involvement by the Financial Services Authority, interestingly
58 per cent of mortgage brokers claim profits are down
since Mortgage Day.
Commercial lending is now not the preserve of the high
street banks who, in the past, have not only seemed to
cherry pick but have also had a tendency to only lend
to their existing business customers. The result was that
there are now over 1,200 commercial lenders currently
operating within the UK.
The competitive market for commercial lending has also
been confirmed by the rates available. There are also
many other flexible options such as rolled up interest
(No interest payments) for the first year to help with
cash flow, start up finance, business expansion finance
or even for finance on low yield investment properties.
Lenders will typically lend up to 80 per cent loan to
value but 100% is achievable with additional security.
Three years audited accounts are also now not the normal
requirement as self certification of income has also found
its way into commercial lending. Adverse credit clients
are now considered and in the majority of cases loans
approved. However self certification and bad credit applicants
can expect a loading on the rate of typically between
1 to 4 per cent.
A cross section of business funding is available to retail
businesses such as convenience stores, fast food outlets,
specialist shops and supermarkets. Investment properties,
professional practices such as accountants, doctors, vets
and solicitors. Property development including speculative
or pre-let for both commercial and residential. Offices
and factories along with the health care sector including
nursing homes, residential care and special needs homes.
The leisure market has also been seen as the main stay
for commercial lending over many years embracing hotels,
guest houses, cafes, restaurants, wine bars and pubs.
Although latterly pubs have often sought brewery loans
as a traditional way of borrowing money in the trade often
referred to as Advance of Discount (AOD) or "Write
Off" loans, the interest rates seem favourable at
significant discounts over the banks but barrelage discount
is affected and the repayment terms are often shorter
over 10 years.
Lending on leasehold is also available up to 65 per cent
on the security property (often the applicants main residence).
With many businesses failing in the first year and business
failure rates up 13 per cent in the first quarter of 2006
applicants must carefully consider whether they should
be securing their main residence against the lease.
To calculate monthly charges use one of our many custom
built calculators. Commercial
loan applications, for both single and joint applicants,
are processed on our own dedicated secure server.
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