Why use a commercial mortgage to buy your business premises?

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Some businesses rent their business premises, such as a shop, workshop, warehouse or factory. This works fine for some, but is not always the best strategy. There are several advantages of using a
commercial mortgage to purchase your own premises.

Retaining business ownership

If you need to raise capital to purchase your business premises, you can apply for a loan or find an investor who can put money in your business. Both these strategies can mean that you sign over a percentage equity in your business. A standard commercial mortgage lender will not ask for equity. They make their money from the interest charged on the mortgage.

You won’t be paying money without seeing a return

When you pay rent, the person that profits from this is the landlord or the company that owns the property. If the building increases in value, they will benefit, not your business. Rental payments can be around the same level as rent, but the building is an asset to your business and part of its value. Any increase in the value of the property is a direct increase in the value of your business.

Interest rates are low

Compared to many loans, interest rates on commercial mortgages are low. Any interest paid is tax deductible so that your total tax bill is reduced.

A commercial mortgage is easy to end

If you rent premises, you will normally have to sign a long lease agreement that is difficult to end early. If you expand to larger premises, you can arrange to transfer the mortgage to the new building and increase the value of the loan to cover the extra costs of the new building. If your business does extremely well, you could pay off the mortgage early. There may be exit fees to pay, but you will be the sole owner of the building. If you move premises, you could keep the original building with its mortgage and rent the premises top tenants. If the rental income is more than the mortgage payments, you could effectively pay off the mortgage and own a building at virtually no cost to your business.

Getting the best commercial mortgage deal

If you find the perfect premises for your business that is available to rent, you will normally have to pay the full rental cost set by the landlord. If you want to buy a building, you can first discuss your finance requirements with Ascot Mortgages, who will then approach one or more lenders to find the best commercial mortgage deal for you. We can often find deals that are unavailable by going directly to a lender, which can save you money. Our role doesn’t stop at finding you a commercial mortgage offer. We can help you with the mortgage application, submitting the right documents, engaging a good lawyer for the legal work. If you want to purchase your own business premises, it makes sense to finance the deal with a commercial mortgage arranged by us.

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*Privacy Notice - Any information provided will be treated with confidentiality and will only be accessible within Ascot Mortgages