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Buying a Business Through Mortgage Lending

Buying a Business Through Mortgage Lending

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The Revolution team often hears from investors looking to purchase a business and wanting to know whether mortgage lending is available to finance this.

Mortgages can undoubtedly be used for a business purchase, and here we explain the most important factors to be aware of.

With more help with mortgage lending for business investment, contact Revolution Brokers on 0330 304 3040 or send us a message to info@revolutionbrokers.co.uk.

What Business Investments can I Pay for Through Mortgage Finance?

Lenders will consider a broad range of circumstances, so the best option is to consult a professional, independent broker who can point you in the right direction.

Commercial mortgages fall into two main categories:

  • Investment mortgages - for buy to let commercial properties.
  • Owner-occupier mortgages - for business to buy premises to trade from.

Business mortgages can finance any sort of premises acquisition, including offices, medical facilities, schools, retail sites, and professional properties.

How do Lenders Calculate Business Mortgage Eligibility?

Every lender will consider a commercial mortgage application on its own merit, and will consider the following factors:

  • Affordability - whether the business profits demonstrate that the company would be able to keep up with the mortgage repayments.
  • Deposit - most lenders need a deposit of 20-40% for investment mortgages, depending on the risk factor. Owner-occupier mortgages usually require a slightly lower deposit of 20-30%. If you have no deposit, then you may be able to borrow at 100% LTV, but will need to offer another form of security.
  • Credit history - if you have a bad credit history, then you will need to apply through a specialist lender who caters to this scenario.
  • Trading history - if you have a long track record for at least two to three years’ accounts, the business is considered less risky.

How do I apply for a Commercial Mortgage to Buy a Company?

The key is to apply to the right lenders, where you know you meet most of their eligibility criteria. It can be challenging for businesses to make this decision without having the experience and insight of an expert commercial mortgage broker.

Your broker will help you to put your application together in a favourable way to meet the criteria of your chosen provider.

Are there Alternatives to Finance a Business Investment?

There certainly are - you will find a range of commercial lending products, each of which has its own pros and cons. These include:

  • Bridging finance
  • Remortgaging
  • Unsecured business loans

Bridging Finance to Buy a Business

Bridging loans are quick to organise and often used for company purchases at auction, or where time is critical.

It is vital to have an exit strategy to work out how you will repay the temporary finance when the term ends, usually after one to three years.

Most borrowers either plan to remortgage, or sell the asset, to repay their bridging loan.

Remortgaging to Invest in a Business

Another option, where you have an existing property and own equity, is to consider remortgaging. This releases the equity you need to purchase a business, although the affordability assessment will apply.

Unsecured Business Loans for Company Investments

Loans are often a good choice if you need to borrow on a shorter-term basis, and need £25,000 or less. These are usually quicker to arrange and do not require any security.

If you need to borrow a higher value, another option might be more cost-effective.

Are Commercial Mortgages Available to Buy a Residential Property?

Commercial mortgages are not intended for this purpose, so if you'd like to buy a home, you are best applying for a residential mortgage.

However, if the property is going to be a business - such as a B&B - then commercial lending is applicable. If you live in the business property, your residential space must not account for more than 40% of the total property space.

In some cases, a semi-commercial mortgage is the most suitable choice, for properties with both a commercial and residential aspect, such as a retail premise with an apartment above.

How Can a Broker Help me Fund a Business Investment?

The Revolution Brokers team has years of experience in commercial mortgage lending. As a whole-of-market, independent broker, we can recommend mortgages from any provider, and any product that we think best suits your circumstances.

For help with commercial mortgage lending, including negotiations and access to off-market products, give us a call on 0330 304 3040 or email at info@revolutionbrokers.co.uk.

Check out our handy calculators

Our quick mortgage calculators are designed to give you an indication of how much you can borrow and allow you to consider the different mortgage options available to you.

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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