Owning a business premises makes your balance sheet stronger and ultimately will make it easier to access alternative funding in the future. However, buying a property is expensive and you will need to thoroughly understand the commercial property finance market, before taking out a Commercial Mortgage.
Very few business owners have enough cash in reserve to pay for a new property without the need for funding.
In the case of owner-occupied commercial properties, businesses can borrow up to 75% of the value of the property. Terms of up to 20 years are obtainable.
We work with a number of partners including the high street banks and specialist funders in the sector and are able to tailor a structure/package to obtain you the funding you require whether it is purchasing new premises or refinancing existing premises.
FACTS
The amount of funding available is determined by a number of factors:
A funder will want to appoint their own Independent Valuer to determine the Market Valuation. Typically the funder will lend against the Vacant Possession value although in certain sectors such as Care Homes, Hotels and Restaurants they will lend against the Operational Value.
A funder will want to see a strong track record of profitability, usually 3 years and evidence that profitability is sustainable through projections. They will want to ensure that the business can still meet the repayments if interest rates should rise and will sensitise with a default rate typically 2 to 3% above the rate for the Loan. After sensitising in this manner they will look for EBITDA to cover total business repayments by between 1.1 and 1.5 times.
A funder will look for a business to meet its EBITDA v Debt Service Cost Covenant with a Break Even Margin of Safety. If they were looking for a Break even Margin of safety of 20% then the business would need to demonstrate that it could lose 20% of its turnover and still meet the covenant.