Commercial Property Loans: How to finance your business premises

Purchasing a business premises is a step that many companies take as they continue to grow but, as you’re probably aware, commercial property can be expensive.

Luckily, there are a host of financing options available including mortgages, loans and more.

In this article, Commercial Property Expert Patsy Whitford breaks down your financing options and their pros and cons, so you can make an informed decision on which to choose.

What is a commercial mortgage?

The most common type of commercial property loan is a mortgage.

Commercial mortgages work similarly to residential ones, upon providing a deposit (a down payment on the property) you can get up to a 90% loan for the purchase of the property, which will need to be repaid.

Commercial mortgages often attract a higher rate of interest than residential ones. 

Although commercial mortgages are so common, it may not suit your needs. A mortgage is a long-term commitment and involves making regular payments every month. Many people opt for more short-term loan options.

You will also often be asked to provide personal guarantees from individual directors and a debenture from the company. 

This article predominantly focuses on the other types of loans for purchasing commercial property. You can read our dedicated article on commercial mortgages here.

What is a bridging loan and how does it work?

A bridging loan is a short-term loan that, hence the name, helps you bridge the gap between the sale of one asset and the purchase of another or a temporary shortfall in available funds.

For example, you could take out a loan of this type to help raise funds for a new commercial property while you wait for the old premises to sell.
Bridging loans can be open, meaning there won’t be a set date for you to repay it, or closed which means there will be.

Related: Getting your commercial property ready for sale – a checklist

How much can you borrow on a bridging loan UK?

This differs from lender to lender and will depend on your particular circumstances. 

Bridging loans are secured so you’ll have to secure these against an asset, a property for example. If you don’t have any loans already secured against the property a lender may be more generous in what they will lend you.

In the full article, Patsy outlines the pros and cons of bridging loans, how asset based lending works and contemplates which loan is best for commercial property. Click here to read it.

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