How much can I borrow when buying a property based business such as a shop, hotel or nursing home?
Fri, 26 Oct 2007
You may be able to borrow either simply against the value of the property with a commercial mortgage or bridging loan, or against the value of the business including the property.
Many types of business such as shops are based around a particular property and you may obviously be able to arrange a commercial mortgage against the ‘bricks and mortar’ value. But you may also be able to arrange a loan against the value of the business.
A bricks and mortar valuation is solely concerned with the value of the property while a business valuation in addition looks at the value of the trade carried out from it. If buying a freehold shop therefore you might qualify for a mortgage based simply on say 85% of the value of the property; or you might obtain a loan based on 75% of the value of the business (which is generally the value of the property plus say 2 years worth of the business’s profits). It is therefore worth checking which is likely to give you the better advance and rate.
The numbers of lenders who will lend on business valuations is quite limited and the process will require a formal valuation of the business as well as the property by a specialist firm of agents so can carry a higher ‘up front’ cost than a normal mortgage. Against this, this type of loan can sometimes carry a lower interest rate than a non status mortgage so may save you money in the long term.
If this is of interest please contact us to discuss your requirements.
