Commercial mortgages are often required when you want to purchase a property or refinance existing debt and the property is for business use, i.e. industrial unit or office space. Some high street banks and building societies do offer commercial mortgages however they can have a strict lending policy and if you have bad credit registered, such as missed payments, CCJ or had a previous business that was closed with outstanding debt, you will more than likely need a more specialist lender to provide a bad credit commercial mortgage.
What deposit will I need to put down for a bad credit Commercial Mortgage?
This depends upon may factors such as the type of asset (property), the financial position of the business who wishes to purchase the asset and overall credit profile. It is common that you would be required to put down at least a 35% deposit. It is worth discussing your enquiry with an experienced commercial broker to confirm the deposit amount required.
What interest rate will I be charged if I have bad credit?
Interest rates on commercial mortgages are usually risk related. This means that the lender will look at each commercial mortgage application and asses a number of things that include the risk factor and exposure to the lender. There is a standard risk profile used by many commercial mortgage lenders and this is used to asses each application individually.
How much can I borrow?
The amount available to borrow for a commercial mortgage varies with each application and the purpose of the loan. For example, buying an existing business with stock and goodwill elements making up part of the valuation and loan requirements will not be considered as strong and safe as an owner occupied building or commercial property with a stronger level of deposit. Minimum loan sizes start from £26,000.
What fees are payable for a Commercial Mortgage?
Valuation Fees are an essential element to a commercial mortgage application. Commercial properties by nature are often unique and individual and require an in depth valuation report that can start £500+.
Arrangement Fees for commercial mortgages are usually in the region of 1-2% of the loan amount and some lenders may charge what is called a commitment fee that covers all of their preparation work in the event that the loan is not accepted by the applicant for whatever reason.
Legal Fees – You will need to source a solicitor to represent you in the transaction.
Broker Fees – Your chosen broker may charge a fee to help arrange the mortgage. The broker should outline all their costs clearly from the start so you are fully aware.
What documents would be required for a bad credit Commercial Mortgage?
The following is standard documentation that would be required:
Company Accounts – You will have to provide at least 1 year’s accounts, if you can provide 2/3 years accounts this would help.
Personal Income Evidence – You will be asked to provide your tax calculations & tax overviews to prove your personal income.
Business Bank Statements – Generally this is the last 3 months statements. This would be to see how the account operates and is managed.
Assets & Liabilities – This is to understand the business and your personal situation.
Business Plan – Some lenders may ask to see a business plan.
Credit Report – An up to date credit report from either CheckMyFile, Experian or Equifax would be required to understand your personal credit profile.
Proof of Identity – This will be your Passport &/or Driving License to verify your identity
Plus the lender will have their own documentation which will need to be completed. As with any type of mortgage the lender can always request further information to complete their due-diligence on the transaction.
– Your chosen broker may charge a fee to help arrange the mortgage. The broker should outline all their costs clearly from the start so you are fully aware.
How to arrange a bad credit Commercial Mortgage?
Commercial mortgage applications are taken on individual merit and each case is assessed sympathetically towards the individual and their requirements. Please contact our team of specialist advisors on 0203 725 5830 for more information on commercial mortgages or complete the above enquiry form and we will call you discuss to further.
There are specialist lenders that provide bad credit commercial mortgages to clients and these lenders generally offer their mortgages through selected commercial brokers. If you have had missed payments or defaults for example, we could help source a commercial mortgage for you.
Many commercial mortgage lenders don’t take into consideration your credit score, instead they are interested in your overall credit profile – i.e. how you manage credit. To qualify for high street lenders you will need a good credit profile, however if you have some bad credit registered such as defaults or CCJ’s for example, there are specialist lenders available through mortgage brokers who could help.