Three financial options for commercial property

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There are three main ways to finance commercial property purchases: commercial mortgages, bridging loans and development finance.

According to Daniel Tannenbaum in a January 2017 Startups.co.uk article, the commercial property market is worth around £871bn a year. There are many opportunities available for both new and experienced commercial property investors.

The three finance options have one thing in common – they are all loans secured by the value of the property.

The most common way to finance commercial property purchases is a commercial mortgage. This is similar to a standard mortgage for residential property where the loan is paid back using monthly payments over a long period of time, usually 10 years or more.

Lenders will expect borrowers to have a deposit of between 25% and 40%.

Bridging finance is a form of short-term lending. The advantage of a bridging loan is that it can be arranged much more quickly than a commercial mortgage. The loan will need to be fully repaid in a set period of time, usually between three months and years.

Bridging finance can be ideal for financing property renovations of to quickly complete the sale of a property before a commercial mortgage can be arranged,

Development finance is used mainly for new build projects. Lenders will often lend 100% of the building costs, but only half of the land purchase costs.

Interest rates are low on all three options. Whichever form of finance you need, use a broker who has access to a wide range of financial products.

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