Property Loans

Raising business financeIf you want to own a commercial property rather than rent, but do not have sufficient funds available to buy such a property outright then you will need a property loan with which to do so. This can be personally, through your business or through your pension scheme.

The normal route to financing will be via a long-term commercial mortgage.

Occasionally your circumstances may mean that you will need to use short-term funding through a bridging loan to finance a purchase.

Alternatively you may already own a commercial property and wish to use these services to raise some cash and if you need to maximise the cash raised you can also consider a sale and leaseback arrangement.

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Buying a business property is a major step for any business and needs to be carefully considered. Many businesses see that their likely mortgage payments (on which the interest element will be tax deductible) will often be similar to the level of rental payments for a similar property and therefore think it makes sense to buy a property so as to ensure control of their site and not be subject to rent increases or landlord’s restrictions while obtaining the advantage of any increase in the building’s capital value which might include any future planning gain involved in conversion of the site for housing use.

There are however many potential disadvantages of buying a property as the other side of increased stability is a lack of flexibility. While you could possibly sublet any unused space in buying a property you will have had to tie up a large amount of your capital in a substantial deposit on the building, funds which you might subsequently want to have available for other use in your business. You will also have a large loan which will need to be serviced over a long period and if you business changes, expanding, contracting or needing to relocate it can be far harder to do so as the owner of a property that needs to find a buyer or a tenant for the business as opposed to exiting a lease at an agreed break point.

Also many commercial properties increase in value at a much slower rate than domestic properties so the prospects of a capital gain may be much less than you expect, while since you are now responsible for the costs of maintenance of the property, any reduction in the property’s value will directly affect your balance sheet. Do not forget as well that if you take out a variable rate mortgage you will be exposed to increases in interest rates which can change over short periods of time in comparison top rent reviews which will generally only happen on a five year cycle.

Information provided is copyright and subject to the Important Notice on the home page.

Of course the information contained in an article like this can never be a full statement of the legal position as the relevant laws are complex and liable to change. This article can only therefore be a general guide as to the issues involved and as these can have serious implications you should always seek appropriate professional advice on your own particular circumstances before taking any action.

Property finance enquiries Plant and machinery finance enquiries Trading cash flow finance enquiries

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