Archive for the ‘Commercial Loans’ Category

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Why Use Bridging Finance?

Why Use Bridging Finance?

Traditionally Bridging Finance, or Bridging Loan as it is also known, has been used to ‘bridge’ the financial gap between the sale of one property and the purchase of another. Allowing borrowers to purchase the second property before selling their existing property.

Numerous other uses for Bridging Finance include -

Allowing Buy to Let investors achieve a discount for a faster completion
Auction purchases, where funds are required quickly to complete the purchase
Entrepreneurs requiring a quick injection of cash to fund a new business opportunity
Property developers, utilizing the speed of Bridging loan to quickly buy and sell on a property

Fast Cash When You Need It Most

The traditional mortgage application route is well known for the snails pace at which it can sometimes operate. At the speed we live in today’s postmodern age this can be a very frustrating state of affairs.

The property market has numerous opportunities but many can be left on the shelf. Either through the chain collapsing or the lender not having funds in place quickly enough. To add to this a discount on a property is a definite possibility if funding can be arranged quickly enough. Bridging Finance is a fast and easy solution to all these headaches.

But why is this? It’s very simple. Bridging Finance tends to be ‘Non-Status’. Lenders consider the type and quality of the property as security as a measure of the lending possibility.

Unlike traditional lending bridging underwriters are generally looking at minimum lending terms of between 3 months, 6 months or 12 months. But some lenders are even more flexible in this regard and will lend with no minimum period on the loan. Lending is available at up to 75% LTV (Loan-To-Value), in some cases 85% LTV may be available. Apart from credit checks, the non-status factor is the same as mainstream non-status lending. The benefit is that the decision to lend is very much faster.

A Short Term Solution

Bridging Finance can bridge a financial gap. But it should never really be considered a permanent solution. A more permanent solution in the form of a regular mortgage should be considered if the property is to be held on to long-term. Or in the case of a more speculative investment the borrower will sell the property to make a quick profit.

Bridging Finance is flexible in another way. In terms of the redemption date it can set as both ‘open’ with no definite end to the loan, or ‘closed’ with a set redemption date. It is advisable to only use the open variety when you are confident of the sale of a property or the replacing of the loan with a more long-term finance solution.

Bridging Finance remains the fastest and most appropriate loan type for making a property purchase quickly.

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US Commercial Mortgage Basics

US Commercial Mortgage Basics

Commercial mortgage loans are used when purchasing structures such as office buildings, apartment complexes, health care facilities and retail outlets. Whether it’s a hi-rise tower or a family-owned restaurant, buyers typically need additional funding to complete the transaction. Commercial mortgages are what they pursue.

Commercial And Residential Mortgages Are Similar

Similar in many ways to residential loans, commercial mortgages require far more paperwork. Both types of loan require that the properties being purchased undergo a thorough appraisal. Both require collateral to secure the loan and protect the lender against default.

Like residential mortgages, commercial mortgages can be refinanced to take advantage of more favorable terms, or they can be re-mortgaged to establish a line of credit to use for running the business. And like residential mortgages, the lender will hold the deed to the property until such time that the loan is repaid in full.

Commercial Mortgage Interest Is Usually Tax Deductible

During that time, the lender makes money off the interest on the loan. If the borrower fails to make payments on the commercial loan, the lender has the right to initiate foreclosure proceedings and take the property. Remember, the property likely is what will be used as collateral. The interest paid on the commercial mortgage usually is tax deductible; just be sure to consult with a professional first.

When you apply for a commercial mortgage, you will typically be offered two different types of loans: fixed rate loans and variable rate loans. These work the same as they do for residential mortgages.

Fixed Or Variable

On a fixed rate commercial mortgage, the interest rate that is negotiated and agreed to remains in effect until the loan is fully amortized. If you’re obtaining a commercial mortgage and interest rates are heading higher, a fixed rate likely is a better option. You can always refinance your mortgage should interest rates go lower than your fixed rate.

With a variable rate commercial mortgage, the interest rate will fluctuate during the payback period. Interest rates are determined by the US Federal government. Make sure you understand how variable rates are determined. Also, find out from the lender how often the rate on a variable rate mortgage will change. It’s fine as long as the interest rate is decreasing; it’s the increases that you need to worry about. Make sure, too, that should the interest rates increase, you can still afford the monthly payments. With some variable rate loans, the rate is fixed for the first few years, and then converts to a variable rate loan.

Early Redemption Charge

When applying for a commercial mortgage, also ask about the Early Redemption Charge (ERC). Remember, lenders make money off the interest on the loan. When the loan is repaid in full sooner than anticipated, the lender loses money. To avoid losing money, lenders often include an ERC which can amount to a substantial, one-time sum. If you discover an ERC in the fine print, try to negotiate it away. If you’re not successful, take your business elsewhere.

Applying for a commercial mortgage means that you’re about to make a serious investment. Be sure you know exactly what you’re signing before you sign the documents. You have a right to ask questions, renegotiate more favorable terms and do whatever else you feel is necessary. It’s your money and your future. Good luck!

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Securing Commercial Finance

Securing Commercial Finance

When you first decide to take up Commercial Finance from a Commercial Lender, you need to consider what you have to offer as security for the loan. Items that you can use to secure a Commercial Finance package are generally property, revenue and equipment.

In the UK, most Commercial Lenders will require up 75% of the value of the loan. You will need to come up with as much as possible to secure the loan. The items you put up to secure the loan will be confiscated by the Commercial Lender should your fail to honor the terms of the loan. Let’s look at each of the things that can be used and how they work.

Property
This can be in the form of residential property owned by the principles involved in the business. It can also be existing commercial property that is owned by the business. Finally, it may also include the property you are purchasing, if the Commercial Finance package is being used to purchase property.

When you put up property to secure the loan, the lender will be looking at the equity value of the property first and the total value of the property second. They will also look at the payment history of any property that has not been paid for outright. When the lender has finished looking at the property you have, they will look at your account receivables.

Revenue
The amount of revenue generated on a regular basis. This can be weekly, monthly, quarterly and even annually to see if the income is there to support the payments on the Commercial Finance package. The lender will also look at what your potential for grow is for your receivables. Your previous growth history will help them figure that out. They will look at how much is left when you subtract all your account payables, except the loan repayment and it should be greater than 1.35:1.

Equipment
The degree to which this is helpful will depend on the type of commercial financing you are looking for and the type of equipment you are planning to use to secure the loan. If the equipment has a long shelf life, it will be more desirable than things that have a short shelf life. If your business is a trucking company, the vehicles and the equipment used to fix them could be used to secure commercial financing.

The parts that you would use to keep them running could not be used to secure commercial financing. This is because, once the part is used, it no longer exists to secure the loan. The use of a truck to secure the loan is better because it will presumably be around for a much longer period of time.

If your business is a factory, you could use the equipment you use to make the product you sell to secure commercial financing or a Commercial Mortgage. The supplies used to make the finished product would not be good because they are not going to be around once the product has been made.

This does not mean that short life-span materials cannot be used, but they are counted as general inventory in much the same way as office supplies would be. You need to keep in mind that anything you use to secure the financing from your lender will be lost if you fail to honor the terms of the finance package. The longevity of the equipment is something that will be looked at carefully by the lender.

This is because some equipment, in some industries, out date very quickly and loose value very quickly as well. If you work primarily with computers, your equipment and software will be outdated and worthless long before a loan would be paid off. Factory equipment, on the other hand, will still retain its value many years after the Commercial Finance start date and should satisfy your Commercial Lender.

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Securing A US Commercial Mortgage

Securing A US Commercial Mortgage

What’s the most efficient way to secure a US Commercial Mortgage? Work with a mortgage broker who specializes in this area. If you’ve ever applied for a loan, you’re familiar with the mountain of paperwork you are required to complete during the process. The lender takes the applicant’s information, runs it thought their guidelines and formulas and after waiting many weeks, a decision is made to either approve or deny the loan. If approved, the transaction can proceed. If denied, the applicant has to begin the process all over again.

US Commercial Mortgage Lender Guidelines

US commercial mortgage lenders use guidelines similar to those used when applying for a residential loan. The applicant must provide a good reason for needing the loan. The property must have an acceptable appraised value. The location of the property is also considered. The credit history of the applicant, including the financial condition of the business is thoroughly investigated. In addition, commercial mortgages require significant collateral to secure the loan. This can be in the form of business equipment or inventory, personal or other properties, heavy machinery, or any asset with a significant value.

But even the most carefully prepared and well-documented commercial mortgage applications can be declined. When this happens, the applicant has no other choice than to start the tedious commercial mortgage loan approval process over again. Weeks go by, opportunities are lost, and still the outcome remains unknown. How many times do you want to go through this process?

Work With A US Commercial Mortgage Broker

Most applicants agree the correct answer is only once. The way to achieve this goal is to work with an experienced and reputable US commercial mortgage broker. A broker takes your one completed commercial mortgage application and submits it to many different commercial lenders, all at the same time, which greatly increases your chances of approval and saves you a considerable amount of time.

A commercial mortgage broker works with these different lenders every day. The broker knows what each lender looks for in an application and sends your application to those with the best chances of approving your loan. This method is highly targeted. And, brokers only get paid when they successfully match applicant with lender. Their financial incentive is what motivates them. Best of all, the lender pays the broker’s fees, not the applicant.

Using A US Commercial Mortgage Broker Makes Sense

Working with a commercial mortgage broker costs you, the applicant, nothing. Working with a broker frees up your time so you can get back to running your business. Working with a broker greatly increases your chances of getting your commercial loan approved fast. In fact, brokers often get approval from multiple lenders which puts applicants in a great position to bargain better loan terms. And best of all, brokers will handle these negotiations!

There are so many reasons why working with a US commercial mortgage broker makes sense. Yet it’s amazing how many applicants don’t take advantage of their services. You work hard at streamlining your business and cutting your operating costs so why not streamline your commercial loan approval process? For fast results, contact a US commercial mortgage broker today!

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Commercial Mortgages

Commercial Mortgage

In many ways a commercial mortgage is just like a residential mortgage in that you pledge real property as collateral against a loan to either buy or that property. You can also receive a commercial re-mortgage and use it as a line of credit for any business purpose.

When you use a commercial mortgage to buy property, or to raise funds for any other business purpose, the lender retains an interest in that property until the loan has been paid in full. Unlike other types of business loans, which usually have a relatively short repayment period, you can take out a loan for as long as 30 years if you like.

The lender receives repayment of the commercial mortgage principal and interest over the lifetime of the loan. If you default on the loan and go into arrears then the lender can foreclose and take possession of the property that was used as collateral.

Generally speaking, the interest on a commercial mortgage is tax deductible and the net proceeds of the loan are not considered to be taxable income. However, you should always check with your accountant to be sure because the tax consequences can be severe should it be determined that your usage of the funds was not for a qualified business purpose.

Should you be seeking a commercial mortgage for the purposes of operating your business, rather than actually buying property, then the lender will either want to re-finance your current mortgage, and include enough money to provide the amount that you are seeking, or they may arrange an equity line where they lend you the difference between the current value of your commercial property and the amount that you owe on the current mortgage.

Two Types Of Interest

There are generally two types of interest schemes available when you are applying for a commercial mortgage.

The fixed rate commercial mortgage establishes an interest rate that is in place either for the life of the loan or for a fixed period of time. If it is for a fixed period of time then it will normally convert over to the second type of rate, which is called a variable interest rate, after the fixed time period expires.

In some cases your lender may add a Early Redemption Charge (ERC) clause to your commercial mortgage contract which states that if you pay off the note prior to the end of the fixed rate period then the lender is entitled to a one-time lump fee to offset their loss of expected income. In some cases this ERC may extend to longer periods possibly up to the entire term of the loan. Be very sure to read your loan contract carefully to make sure that you understand the implications of the ERC if it is present.

Lender Competition

With competition from lenders heating up you’ll find that many of them are dropping ERC clauses all together. If there is one present in your loan contract you may be able to negotiate it away with little effort. It’s worth trying in any case and you can always apply somewhere else if your lender is not willing to negotiate.

In the case of a variable interest rate commercial mortgage the rate is based upon those issued by Bank of England. The lender will usually state that the rate consists of the published rate, which will likely vary up and down over the life of the loan, plus some pre-determined premium that remains the same for the life of the loan. Be sure that you understand how frequently your rate will change and that you are comfortable with the amount that the lender is charging as a premium. As with any terms of your loan you can negotiate both of these factors.

A fixed rate commercial mortgage is a good choice when you feel that interest rates are headed up sharply and you want to lock in the current rates. On the other hand, if interest rates are in flux, and economic indicators point to a downtrend, then a variable rate may be your best choice.

Keep this strategy in mind during the lifetime of your commercial mortgage. If you are locked into a fixed rate, and interest rates have dropped significantly below what you are paying, you should consider applying for a re-mortgage and selecting a variable interest rate to take advantage of the lower rates. On the other hand, if you are in a variable, and all indicators are that interest rates will be skyrocketing soon, then look to move into a fixed rate so you can protect yourself against future increases.

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Is Bridging Finance For You?

Is Bridging Finance For You?

By definition, Bridging Finance or Bridging Loan is a short-term loan used to purchase commercial property. This is something that can come in very handy, depending on your particular situation.

There are two main points that you need to consider before you opt for a Bridging Finance package, your needs and the state of the property market.
The whole point of Bridging Finance is that it will allow you to close on a property and purchase a new property before you sell your existing one. You will need to evaluate your current situation to determine if your needs justify taking on this type of finance.

Will you lose the new property if you can’t offer a deposit? Would you be eligible for a discount on the purchase price if you can come up with the cash fast?

Existing Market Conditions For Bridging Finance

What are the existing market conditions in regard to the sale of your existing property? Is it going to be possible to sell your existing property in the time frame set out in your finance package? Most Bridging Finance typically runs for one year and will need to be paid in full at the end of the term unless it is possible to convert it into a Commercial Loan.

You will also need to be aware that the interest rates will be higher on a Bridging Finance package.

If the market is slow and you do not have an urgent need for the new property, it may not be in the best interest of your business to take on this type of loan. On the other hand if the property market conditions are good, you can be out from under a Bridging Loan fast. However, it is still something that will need to make sense for your business.

Use A Specialist Commercial Lender

If you feel taking on Bridging Finance is the right thing to do, you will be far better off going through a specialist Commercial Lender.

This will shorten the entire process as a specialist will know the market and they can quickly make a judgment on the best package for you, based on your particular circumstances. Be sure to check that the package can be converted into a conventional Commercial Finance package. You will also want to check on the type of interest rate and the costs you will entail if you do have to convert.

Most Commercial Lenders will be willing to extend the terms of the Bridging Finance package. Let’s say, for example, you have a buyer and you are waiting for the sale to close. Bridging Finance in general is much more flexible and accommodating than you might expect in this respect.

Paying back your Bridging Loan at the end of the loan term more often than not depends on your ability to sell your existing property. If it does not sell in the required time, you will be paying the existing loan on your current property, your new property and the newly converted Bridge Finance as well.

If you believe this may be a possibility be sure to take a package that can be converted to a Commercial Loan if the need arises. Otherwise you may have to come up with the full Loan sum at the end of the term of the loan.

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Contact Us

Contact – Wayne Smethurst
Commercial & Residential
76 New Cavendish Street
London
W1G 9TB
Tel: 0207 871 9997

66 Sankey Street
Warrington
Cheshire
WA1 1SB
Tel: 01925 405 405

If for any reason you would like to contact us regarding commercial mortgages, bridging finance or buy to let loans our preferred method is via the contact form below.

However you can also call us direct via the number and address listed above.

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Commercial Lending Market Sectors

Commercial Lending Market Sectors

Commercial Lifeline can lend to various market sectors you can find a brief list below.

   
Retail
Antique Shop
Art Gallery
Auction Room
Baker / Confectioner
Beautician
Bookshop
Butcher
Car Showroom
Cash & Carry
Chemist
Clothing
Babywear
Childwear
Adultwear
Dairy
Department Store
DIY
Dry Cleaner
Estate Agent
Financial Institution
Florist
Food Store
Footwear
Franchise
Funeral Director
Furniture
Garage
Garden Centre
Gift Shop
Grocer
Hairdresser
Hire Shop
Launderette
Leisure Centre
Newsagent
Nursery
Office Equipment
Off Licence
Pet Shop
Record Shop
Shopping Centre
Sports Shop
Shopping Centre
Sports Shop
Supermarket
Toy Shop

Country Property plus Land
Farms
Land
New Development
Re-Development

Health
Dentist
Doctor
Other Medical Professions
Veterinary Surgeon

Investment Properties
Factory
Industrial Unit
Office
Residential
Shop
Warehouses

Leisure
Amusement Park
Bingo Hall
Boarding Kennel
Bookmaker
Cafe
Cinema
Night Club
Guest House
Public House
B & B
Restaurant
Riding School
Snooker Hall
Sports Complex
Take Away
Wine Bar

Professional
Accountant
Architect
Bank
Solicitor

and many more.

 

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Commercial Lender Packages

Commercial Lender Packages

Below is a small selection of some of the commercial lending packages Commercial Lifeline has access to, there are many more and we are sure to be able to find the right finance packe for you and your paricular ciircumstances.

Whether you have good or bad credit or you’ve been refused finance elsewhere we can help.
Lender A • Mortgage terms available from 10-30 years

• Advances from £50k to £2m

• Self certification option

• Adverse credit accepted

• Red book valuation required from surveyors’ panel

• Margin from 2.5% to 6% over LIBOR

• Up to 100% LTV (with additional security)
Lender B • Semi commercial only

• Rates from 3.5% above BBR

• Interest only available

• Adverse credit accepted

• No MIG & fast completions

• Max 60% LTV
Lender C • Term loans (first or second charge)

• Max 70% LTV of ERRP

• Capital & interest options

• Bricks and mortar valuation

• CCJ’s, arrears, IVA’s & self-employed (no accounts)

• Unusual properties
Lender D • Bridging Finance

• Stage payment facilities

• True non status

• Interest roll up option

• CCJ’s, arrears, IVA’s & self-employed (no accounts)

• Development finance

• 72hr completion on unencumbered properties
Lender E • Loan amounts of £25,001 to £10 million

• Pension-linked commercial mortgages available

• Interest margin from 1.5% to 3.5% above FHBR

• Decisions in principle made within 48hrs of application

• No penalties for partial capital reductions

• No compulsory banking or insurances required

• Up to 75% of market value incl. the business element
Lender F • Minimum loan £30,000

• Interest only option

• Rates from 4% above LSB base rate

• Adverse credit accepted

• Self certification of income available

• Bricks and mortar valuation required on all properties

• Non standard construction

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Commercial Bridging Loan Advice

Commercial Bridging Loan Advice

A commercial bridging Loan is a short-term loan used as a way to provide funding for the purchase of a new property while the borrower awaits the sale of an existing property. Unless all the stars are in perfect alignment, it’s tricky to coordinate the sale of one property and the purchase of another property in such a way that the transactions occur simultaneously.

A commercial Bridging Loan or “Commercial Bridging Finance” as it is also commonly known, makes such transactions possible. They keep the borrower from getting stuck in a rough financial corner, which typically means being forced to pay two mortgages at the same time. commercial Bridging Loans can be used either for commercial or personal reasons.

Short term in nature, the application process for a commercial Bridging Loan is similar to that of a standard loan. Most importantly, it’s advisable to work with a lender that is experienced with this type of loan. Plus, as the need for a commercial Bridging Loan often arises with little advance notice, being pre-approved for such a loan is a smart move.

Bridging Loan Interest

Commercial Bridging Loans are usually interest only meaning that the borrower pays only the interest on the loan each month. The borrower continues with this repayment plan until the property the loan is being used for is sold. When the sale finally does occur, the proceeds of that sale are used to repay the principal. The principal payment typically is in the form of a one-time, lump-sum payment.

The lender need not be too concerned about default because the borrower is required to put up collateral to secure the loan. This is typically in the form of another piece of property. But rest assured the lender will still thoroughly review the credit history of the applicant, the business and any partners or others with an ownership interest to assess the level of risk it is undertaking. Poor credit however need not be an obstacle.

Bridiging Loan Rates

The interest rate on a commercial Bridging Loan is based on several key factors: the potential risk associated with the loan, the current interest rates and a premium added by the lender. As commercial Bridging Loans are short-term, generally not longer than two years, and in most cases only a metter of months, the lender has only a short time to make a profit on the deal. The profit is derived from the interest rate.

Expect to pay a higher rate of interest for a commercial Bridging Loan. And remember, the monthly payments are generally interest only. You should also expect to pay off the commercial Bridging Loan in full, usually as a one time payment, as soon as the property is sold.

In the off chance that the property is not sold before the commercial Bridging Loan matures, it can usually be converted to a conventional loan without a payment penalty. But as ever you should not assume this is the case and be sure to check with your lender that this is an option if circumstances call for it.

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