A commercial mortgage is a type of loan which is taken from a financial institution by using property as collateral. This loan is available only for business purposes. The borrower needs to be a business partnership, incorporated business, or a limited company. In case of default in loan repayments, lenders can seize the collateral to recover the loan.
Uses of Commercial Mortgage Loans
-For purchasing the premises to conduct business.
-For the extension of existing premises.
-For making residential and commercial investment.
-For developing property in other manners.
How to Qualify
To get a commercial mortgage loan in the UK, the borrower needs to fulfill some pre-defined qualifications related to:
-the borrower’s company credit history
-income resources
-the worthiness of the guarantor
Commercial Mortgage Loan Versus Other Loans
In the UK, commercial mortgage loans are more popular as compared to other types of loan due to their certain advantages. These include:
-In a commercial mortgage loan, the borrower can have the full ownership of the loan as the lender can only claim an interest return on the mortgage. In no way, the lender can have a share of the percentage of ownership.
-On this type of loan, the interest payments are tax deductible. As the interest payment can be made with pre-tax funds, the borrower can obtain a tax break, if need be.
-With a commercial mortgage loan, it is possible to have a smoother cash flow as it comes with a very reasonable repayment plan along with some lower up-front payment options which make the capital amount accessible to the borrower. The borrower can repay on a biweekly, monthly, quarterly or annual basis as per the agreement.
-A Commercial mortgage loan makes it possible for the borrower to manage their finances efficiently.
What You Must Do
Looking at all these advantages, it seems a good idea to avail a commercial mortgage loan. But, before doing so don’t forget that you need to repay the loan within the given time. Failing to do so can lead to the seizure of your property by the lender.
In case you wish to secure a commercial mortgage loan in the UK for your business, the first thing that you might need is an appropriate business strategy and a detailed plan of your business finances.
However, as the interest rates for commercial mortgages are usually higher as compared to residential mortgages, one need to study and compare various lending institutions before applying for the loan, so as to get a good deal.
