Guide

Commercial mortgages and lenders

What commercial mortgage lenders need to know

Any mortgage lender will want to be sure that your business is on a sound financial footing before agreeing to a commercial mortgage.

A lender's main concerns are that:

  • you will be able to repay the money
  • the property is worth enough to cover the amount borrowed if you default

Set an upper limit of what your business can afford to repay every month. Don't be tempted to over-borrow - doing so could deny your business the cashflow it will need to grow. Do not overestimate the value of a property. A lender will almost certainly appoint a surveyor or property appraiser to inspect and value the premises.

You will be asked to provide information about your business' financial performance, which will probably include:

  • audited accounts for the last two years
  • indications of current performance
  • a profit-and-loss forecast for the next year
  • business bank statements for the previous six months
  • identification of each partner or director in your business for credit-checking
  • asset and liability statements for each applicant
  • a business plan showing how the property will contribute to your cashflow and how you intend to repay the loan

If you are buying a business and property combined, it is likely you will need to supply the lender with additional information, such as:

  • why the business is being sold
  • projections on how the business is expected to grow
  • details of any personal investment there might be
  • credit status of the business

Bear in mind that you will almost certainly need to find a deposit - normally at least 25 per cent of the purchase price of the property. However, depending on the availability of security or other factors, some lenders may be more flexible.