June 2018 - First 4 Commercial

What is a Semi Commercial Mortgage

A semi commercial mortgage features aspect of both residential and commercial mortgages. It’s not the most common type of mortgage due to the unique circumstances a property requires to quality for a semi commercial mortgage.

To qualify for this type of loan, a property needs to be both residential and commercial. This typically comes in the shape of a small business that has a commercial area on the ground floor and a residential area above the business.

Because on part of the property is used commercial while the other is used as a personal residence, a semi commercial mortgage can be arranged to accommodate the unique circumstances. Common examples of a property with semi commercial elements would be a pub or shop on the ground floor and a flat on the top floor.

Loan amounts are similar to commercial mortgages, typically falling between 60% and 75% of property value, while lenders calculate the criteria of the loan in the same manner as a commercial mortgage, basing it around the accounts, profits, and business plan of the borrower.

Some lenders provide 100% semi commercial mortgages, although you do require a form of additional security, which is most typically owning another property. Many businesses looking to expand use this to their advantage, especially when renting the property to residents.

In fact, a semi commercial mortgage is treated as a type of commercial mortgage by lenders, meaning you need to seek out a commercial mortgage financier to acquire such a loan.


What are Commercial Finance Brokers?

Trying to get a loan to buy a business is rarely easy. Trying to acquire a commercial loan from a borrower is a time-consuming, and often stress inducting, process.

There is a lot of back and forth between the individual borrowing and the lender, which is typically a bank or building society, leading many to hire the services of a commercial finance broker.

What is a commercial finance broker?

A commercial finance broker is someone that works to get the best possible financial solution for clients seeking a business loan. People hire the broker as the go-to between them and a borrower, helping to find the best possible deals for securing a business loan.

What does a commercial finance broker do?

A commercial finance broke is an expert at finding the best rates and deals for any type of business loan. They have contacts in the industry that allows them to procure better deals than most people cannot usually find themselves

They’ll speak with lenders, conduct market research, and generally do everything they can to secure the best rate possible for a business loan. Furthermore, a commercial finance broker does much of the leg work for securing a business loan.

There is a lot information required to secure such a loan, and the broker can work diligently to get all the necessary information, best pitch your business plan to the lender, and avoid mistakes that could see the loan rejected.

In most instances, they use their connections to fast-track the application process and greatly improve the chances of getting the desired loan.


Tips for Getting a Business Loan

Getting a business loan is far more difficult than securing a personal loan, as there are much higher risks when lending to a business. There are stricter rules in place for getting a business loan, which became even harder to qualify for after the financial crisis.

Therefore, being a small business owner and securing a loan to finance your business is rarely easy. However, there are ways to help improve your chances of getting a business loan.

Clearly explain the plans for the loan

When talking to a lender you must clearly explain the plans of the loan and how it will impact the business. This basically means providing a solid business plan that can explain how the loan will be used in your business.

Keep the plans realistic and watertight – pay close attention to projected revenues and accounts, even consider hiring an accountant to give the figures a look over.

Review your credit history

When starting up a new small business, applying for a loan faces much more scrutiny from banks. They will want to know about your personal credit history, so be sure to review this and do whatever you can to make improvements should it be in poor condition.

For those unaware, you can request a credit report to ensure everything is in good order and there are no mistakes or unexpected surprises when reviewed by the lender. If your credit history isnt great, you’ll need to take time to repair it before applying for a business s loan.

Show that you can repay the loan

Every lender wants the borrower to demonstrate their ability to repay the loan, so this should be part of your business plan. You’ll need to make predictions about your revenue and explain current cash flow and clearly show that the business is growing – nobody wants to finance a failing business.


How are Commercial Mortgage Rates in the UK at the Moment?

There are currently two types of commercial mortgage rates in the UK – fixed and variable. The rates are generally higher than a residential property, namely due to the higher risk a lender faces when providing a mortgage to a business. Deposits are therefore much higher, ranging from 15% to 30%, with lower deposits usually being deemed a higher risk and coming with increased interest rates.

Fixes rates for commercial mortgages remain the same for the entire duration of the loan or for a fixed period, after which they revert to a variable rate. For a variable rate, the amount changes depending on the current base rate from the Bank of England, while other commercial mortgages are also influenced by the base rates.

The base rate in 2018 is 0.5%, with the Bank of England recently deciding to hold the same interest rate to help stimulate growth. This is good news for anyone with a commercial mortgage, as expected changes tend to create a lot of unrest, scaring away many investors due to increases in market prices.

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