• Why Using A Commercial Mortgage Broker Is A Good Idea

    Applying for a commercial mortgage is fundamentally the same as applying for a residential one, some of the questions may be a little different, but the answers need to be broadly the same.

    It will come down to questions about the security you are offering for the loan, your credit rating and how long you want to borrow the money for. Sure if you already know which lenders prefer your type of business, and you know what their lending ratios are you will probably have little trouble arranging your own commercial mortgage. Most other people will get a better deal if they use a commercial mortgage broker, and here`s why.

    Why Using A Commercial Mortgage Broker Is Better

    The commercial mortgage market is relatively small compared to the residential market, however it is much more complex. Lenders want to know that their money is safe, and they also want to understand your business. When a doctor or accountant applies for a personal loan the lender immediately knows quite a lot about that person`s income. Commercial lenders want the same depth of knowledge about a potential borrowers business.

    This means that when applying for a commercial mortgage a lender will want details about your business credit rating, your balance sheet, the purpose of the loan, along with the location and value of the proposed property.

    Applying for a commercial mortgage takes a lot of effort, there are form to fill in, accounts to collate and a 101 other considerations. You want to ensure that you have the best prospects of getting the right deal first time.

    Here are a few things to consider:
    1. Different lenders have different criteria for approving a commercial loan application.
    2. A broker can represent you and submit your commercial mortgage application to the right lenders lenders. Maximising your chances of success.
    3. A commercial broker doesn’t usually earn a fee until a loan is approved, which should mean they are prepared to work pretty hard for you.
    4. Many brokers get paid by the commercial lender and not you.

    It`s easy to get into a mind set of thinking that the first lender to say yes is the deal to go for. Commercial lenders are hungry for the right business so you may be able to negotiate a better deal by playing one off against the other. More importantly it is vital to fully understand the mortgage you are signing. Getting the wrong terms can prove very costly further down the line.

    When you do things the right way they just seem to work. Using a commercial mortgage broker can make sure that you get the best result for the minimum work. A that not only gets you the commercial mortgage you need, but also the most appropriate one for your circumstances.

  • Credit Repair and Credit Raitings

    Whether for personal or business reasons there are many people that are needing to improve their credit rating. Whether your score only needs a small boost or a complete overhaul, these tips can help you get your credit score where you want it to be.

    Remember that business creditors also report the conduct of your account to the credit reference agencies, so if your agreement says 30 days you may find that anything beyond that is reported as a late payment.

    Start by getting a copy of your credit report. There are many agencies where you can get this information.  Look out for the “monitoring” products.  All you need is your statutory report which costs £2.  You can now get the report by post or email.  The only way that you can fix any credit report issues is to get the report, and work out each item.

    If you are the director of a limited company, or a sole trader you will need a business credit report too.  It is vital to understand that if you are trying to raise commercial finance you will still be checked as an individual.  Forget trying to hide behind a limited company name.

    If you are having difficulty be sure to get in touch with your creditors to determine which bills you can postpone and which you can pay a little at a time. You can save yourself a lot of money if you learn what you need to do to avoid paying interest penalties. As you learn what leeway certain creditors will give you, then you will be able to focus the bills that need taking care of immediately.

    Be sure to study your credit report carefully, as it could contain mistakes. Read through every mark against your credit score, and insure each is accurate. In the event that you do discover something suspect, immediately bring it into question with whomever reported it. When you do this, you may be able to have fraudulent or incorrect items removed. That will give you a better credit rating.

    Be aware that you have rights when communicating with collection agencies. For example, you will not be imprisoned because of an inability to pay a debt, and a collection agency cannot legally make threats toward you.  The more you know about your rights, the more you’ll be able to stand up for yourself.

    You should never use more than one third of your credit limit on any card. Keeping your balance in this range also keeps your payments reasonable. Anything over this is not good for your personal financial situation.

    You can try to see if you can set up a payment plan for the bills that are already in collections.  Not taking the call of a debt collector can exacerbate the problem. Often, collection agencies will actually work with you to come up with a payment plan that is realistic.

    If you are behind with your bills try to be more honest you are about your situation.  Don’t start applying for loans before you have set up payment plans, you will just be wasting your time and damaging your credit report.

    These techniques can help you get back on the road to good credit. If you start today, you will be well on the way to getting your credit back in good shape.  It is possible to bet bad credit commercial mortgages, but you need to be ready to answer all the difficult questions!

     

  • Introduction to Commercial Mortgages

    This is an introduction to commercial mortgages to help you understand what you need to do to successfully get a commercial mortgage for your business.

    The principles are the same whether you are a sole trader or limited company.  However it is worth bearing in mind that most limited companies have multiple directors, so as you will see, this can make a difference to the banks.

    The present economic uncertainties combined with restricted availability of capital for commercial mortgages means that it is likely that potential borrowers will have to carry out quite a lot of research in to business financing.

    Commercial mortgages can be used to buy new business premises or to buy an existing business in its entirety. Lenders generally require a deposit of around 25%-40% of the total value. Mortgage terms can run from 1 year, up to around 30 years.

    Despite the UK government’s u-turn on residential buy to let properties being held in SIPPs some people are optimistic that the market will grow further as commercial mortgages become more mainstream.  Any improvement to the wider economy will greatly help investors looking to expand their portfolio into the commercial property sector.

    Using A Commercial Mortgage Broker

    Using a mortgage broker who is expert in arranging commercial mortgages can make a significant difference.  In addition to commercial mortgages most commercial finance brokers will deal in bridging loans, development finance and secured loans.

    You can use a commercial mortgage broker at the same time as approaching your bank directly, but watch out for how many credit checks are being carried out.  Commercial mortgages and the activities of brokers are almost completely unregulated so looking out for membership of a trade association is a good precaution.  The National Association of Commercial Finance Brokers attempts to regulate the activities of its members, so is a good place to start.

    commercial mortgage brokers in a meeting

    Frequently, the mortgage is supplemented by a personal guarantee from the owner(s), which makes the debt payable in full even if the business folds or the property is repossessed.  The lender can also call on the collateral if they think the security will not satisfy the outstanding balance.  A limited company with 3 or 4 directors all providing guarantees is going to be a much more attractive proposition to a lender than a one-man-band.

    Rates and Loan-to-Values for Commercial Mortgages

    The exact loan-to-value you receive for your commercial loan will depend on the lender and the strength of your proposition. Many commercial lenders consider the type of business they are providing the loan for as well as the condition of the property.  The rates charged by different lenders can vary tremendously.

    A good solid business with a proven track record, buying a property in good condition should be able to negotiate very favorable terms from a choice of lenders.  However, if any of these factors are lacking then the rates can start climbing steeply.  Another good reason why using a commercial mortgage broker is a good idea.

  • Commercial mortgages -5 pillars never to be forgotten

    The Five Pillars Of Every Commercial Mortgage

    By: Timothy Frodsham

    Any entrepreneur looking to buy their own premises or investors looking to add commercial property to their portfolio, will need a commercial mortgage. Business loans and commercial mortgages are created to assist businesses and individuals raise the capital needed to buy warehouses, offices, shops and factories or other commercial premises.

    There are some similarities between the two types of mortgages – lenders will tend to offer a sum of money based on the the property you buy, it will act as security in case of default. However there are some fundamental differences. This easy to follow guide highlights the top five facts everyone should know about commercial mortgages.

    1. Deposits for commercial mortgages are higher than for normal home loans: When you decide to purchase a residential property, you will normally have to put down a deposit of at least 10-15 per cent of the asking price. Depending on how risk averse the lender is, will determine whether or not they will require higher deposits, particularly to secure the very best interest rates. Lenders may take into account all manner of personal circumstances before they calculate the size of deposit they will require.

    When buying a commercial property, however, you will have to commit a much higher proportion of your own cash. It is not unusual for a commercial mortgage lender to require you to put down a deposit of between 30 and 40 per cent.

    2. You may need to provide a personal guarantee: Many buyers look to purchase the commercial property in a company name. However, what happens if the company cannot make the repayments? To avoid this situation, many commercial mortgage lenders will insist that the directors of the company provide a ‘personal guarantee’ – a commitment that they will personally keep up the mortgage repayments should the company fail to pay.

    3. Duty Free: If you decide to take out a commercial mortgage, HM Revenue and Customs (HMRC) will treat the interest payments on the capital of the loan as an allowable expense for taxation purposes. Therefore, your company can reclaim the expense of interest payments on a commercial mortgage as a tax deduction when they are preparing the end of year company accounts or the Self Assessment tax return.

    4. Commercial Mortgages Can Be Cheaper Than Commercial Lending: It’s a common misconception that a commercial mortgage is the most expensive financing option, people see the word mortgage and deem it expensive and too burdensome a commitment. But if you compare it to standard commercial loan or covering expenses with credit cards and company overdrafts, the interest rates are much more favourable with a commercial mortgage than any of the above as the lender has the property as security against the mortgage.

    So, many companies use commercial mortgages not only to buy premises, but also to take the sting of exorbitant interest rates out of their business. Think how much money you might be able to save this way?

    5. Commercial mortgages may be structured differently to residential mortgages: Many residential lenders will allow you to take out your mortgage on an interest only basis. However, a commercial mortgage will generally have to be repaid on a capital and interest (repayment) basis. A lender may allow you to make interest only payments for a year or two but the loan will generally have to be converted to a repayment basis after this time.

    One final potential option for commercial mortgage payments would interest payments on the mortgage could be set up to be paid quarterly instead of monthly. This option can be particularly helpful for claiming tax deductions from HMRC as it would make the paperwork easier to handle in this regard. As you can see commercial mortgages have many advantages to consider and don’t have to be the drain on finances that their reputation gives them.

    Author Resource:-> Timothy Frodsham writes for Just Commercial Mortgages the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

  • What’s New In Commercial Mortgages

    In a week that it was announced that the UK economy has crawled out of recession it is worth taking a moment to think about what opportunities exist for commercial mortgage brokers at the moment.

    Commercial mortgage brokers have had something of a difficult time over the last couple of years.  Obviously the availability of cash rich lenders has somewhat changed, but at the same time the number of optimistic entrepreneurs has shrunk.

    One interesting snippet of news is that Birmingham based lender/broker “Crystal Mortgages” have launched a 100 per cent commercial mortgage product aimed at the medical sector.

    These specialist commercial mortgages are available for terms between 7 and 30 years with a minimum loan of £30,000.  Rates are apparently variable and start from 2.51% over BBR (or Libor)

    Considering market that these mortgages are aimed at you can take it as read that management accounts showing comfortable levels of affordability will be expected, along with a near perfect credit history.  Seems that some goodwill can be included in the overall loan.

    An Opportunity for Commercial Mortgage Brokers?

    On a completely separate note, there is one interesting theory doing the rounds at the moment.  It relates to an often overlooked clause in most mortgages agreements (particularly commercial mortgages) that requires the borrower to ensure that the loan does not exceed a specified Loan-To-Value (LTV).

    One of the mainstream residential lenders tried reminding their customers about this type of clause and then retracted in the face of some fierce media reaction.  Such reaction is probably unlikely in the case of commercial mortgages.

    Essentially the clause permits for the lender to demand cash to reduce the loan to an acceptable level if the value of the asset shrinks, or introduce additional security to reduce the loan ratio.  Here’s where the business opportunity for commercial mortgage brokers could present itself:

    Assume that a business took out a 65% LTV commercial mortgage with a mainstream lender on a property valued at £200,000 in 2007.  Three years later the value of the property has shrunk to £155,000 – the loan now stands at around 85% so the bank demands that the business introduces some capital to reduce the loan.  Businessman is stuck.

    Up steps the switched on commercial mortgage broker and takes a customer from a mainstream bank to a suitable alternative lender who offers a higher loan to value.

    Well OK 85% on a self cert commercial mortgage might be a bit of a stretch, but the principle is sound, what do you think?

  • Are you looking to take on more staff in 2010?

    Are you  planning to take on more new staff in the early part of 2010?  According to smallbusiness.co.uk there are quite a few of you out there who are planning to increase your workforce.

    Small businesses say they intend to take on more staff in the New Year.

    One-quarter of SMEs are planning to hire in the next three months, of 2,000 small businesses surveyed by software company Sage.

    Brendan Flattery, managing director of Sage’s small business division, says: ‘The fact that small businesses are starting to think about recruitment in such significant numbers is a very encouraging sign. But there is still a long way to go and good financial planning will be key to their recovery.’

    However, the findings in the poll are in contrast to claims made by accountancy firm BDO that many companies will not be hiring more staff when the recovery comes.

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