If you have a commercial mortgage then it’s highly likely that, at some point, you will need to arrange a remortgage on your commercial property. The main driver for commercial remortgaging is largely the same as with a residential mortgage; often the term of the loan is coming to an end and people want to shop around for lower fees, a better interest rate or a loan term which is more suitable to their specific circumstances.
When it comes to commercial finance, banks generally commit to five-year terms and they’re more likely to be on a variable rate. If the rate is fixed, it can either be fixed against the Bank of England base rate or LIBOR and your commercial advisor should be able to advise which will offer the best deal for your business’s specific circumstance. In some cases, clients want both flexibility and stability and therefore a mortgage or remortgage can be split, with a proportion loaned on a fixed rate basis and the remainder on a variable rate.
When it comes to funders, the commercial landscape can be more complex because banks often set their strategic direction to fund specific sectors or industries. Again, this is where the input of a professional commercial advisor is invaluable, as they should have a good knowledge of the market and the lenders which are most likely to look favourably on your application.
Broadly, funders come from three sectors; the major High Street banks have a suite of commercial products and tend to provide lower loan to value (LTV) ratios, greater levels of security and favourable rates. Therefore, this is often the first port of call for commercial mortgages or remortgages. If High Street lenders aren’t suitable, there are a host of what are termed ‘challenger’ banks, set up specifically to cater to areas they see as being under-served by the ‘big four’ (Barclays, RBS Group, Lloyds Banking Group and HSBC).
Finally, if you have a circumstance which is more challenging, such as a historical credit issue or an asset which banks are struggling to see the value in, then there are a number of specialist lenders who cater for more complicated circumstances. It’s likely that this type of lending will be more costly when it comes to the interest rate and fees, but a good advisor will aim to make this a short-term arrangement to tide a business over until it can transfer to a more traditional (and often cheaper) lender.
Commercial remortgages can be arranged for a huge variety of sectors. The team here at largemortgageloans.com work with buy to let landlords, the hospitality sector, retail, leisure, office and warehousing space as well as businesses from industries including construction, events, property development and technology.
Commercial financing is not just about property either; it also applies to assets. Often assets owned by a business can be refinanced through a commercial remortgage – for instance high value machinery such as cranes or diggers, kitchen equipment or air conditioning systems can be used as leverage or security against a loan. Similarly, property can be leveraged to release finance for equipment deemed as necessary to the running of your business.
In commercial lending, a bank will look very carefully at what I refer to as the three Cs – character, capability and capital. Character refers to the individual applicant(s) – any lender will need confidence in the individuals running the business and their capability to make a success of said enterprise. Finally, they will look at capital – what is the business’s total lending? What assets can be leveraged? How does the commercial enterprise intend to service the loan? Only when the three Cs have been satisfied do we find that an application is successful.
The process can be challenging and it’s almost impossible to navigate without the help of a specialist broker who understands this sector of the market. Pick the right broker and they will ensure your application is targeted to the right lenders, ultimately meaning you get the best possible finance terms, tailored to the specific circumstances of your business.