Commercial property finance FAQs

Here you’ll find some of the more frequently asked questions that we at ACF Direct are asked on the subject of commercial property finance.

How do you define a commercial property?

Generally, this means a property which is being used for exclusively commercial premises.

The definition might typically include:

  • shops and other retail outlets;
  • factories and production units;
  • storage and warehousing facilities; etc.

What about mixed-category properties?

It is sometimes the case that a property may be categorised as having “mixed-use characteristics”. An obvious example that might come to mind is a retail outlet with integral living accommodation.

There are so many potential combinations of circumstances here that it would be advisable to consult us for a further discussion of how your specific situation might affect your application for property finance.

What attributes are required in order to secure finance for commercial property?

In many respects, these are broadly similar to those applying to owner-occupier or buy-to-let properties. There are though, a number of significant additional considerations arising largely as a result of the typically higher prices associated with many commercial as opposed to residential properties.

To summarise in the most general terms, lenders will need to be clear that:

  • a realistic valuation of the commercial property concerned makes sense when viewed against the sums you may be looking to borrow by way of commercial property finance;
  • the property is in an acceptable state of repair and overall condition;
  • there are no local environmental factors known or coming along (e.g. road re-developments) which might negatively affect the property’s value in future – these are often noted at local authority level;
  • the business case being used to support the borrowing is sufficiently robust to indicate that the agreed repayments against the proposed loan will be affordable. That typically might also include a review of your accounts;
  • the owners and directors of the business looking for commercial property finance have appropriate and verifiable professional backgrounds and some credit reference checks may be required.

Is this type of facility only available for the acquisition of new properties?

No.

Commercial property finance can also be used to provide working capital for any number of legitimate business reasons, such as expansion or diversification etc.

In these situations, the principles and processes are slightly different.

Assuming there is equity associated with a property you already own, you may be able to use that as security in order to obtain a loan that will provide you with liquid capital for whatever purposes you may deem to be appropriate (though the lender may reserve the right to approve the purposes).

It’s important to remember that, as with any funding advanced based upon security over property, your property may be at risk if you fail to maintain the repayments associated with the loan in line with the agreed repayment schedule.

Will I be able to secure this type of finance if I have previously had debt-related problems?

The short answer is typically “yes” although you may need to anticipate needing to pay more for your commercial property finance. That’s because lenders may perceive the risks of lending to you to be higher.

In the 21st century, significant numbers of individuals and businesses have some evidence of past financial problems noted on their histories. Lenders typically understand this and in itself, this type of problem might not be a showstopper in terms of advancing funds.

Of course, if your problems were and perhaps are particularly severe, any lender will reserve the right to refuse your application.

How much will I be able to borrow?

It’s impossible to answer this question in isolation because so much will depend upon your exact requirements, the nature of your existing financial position and perhaps how much capital of your own you are able to invest in the total deal overall.

Many lenders will be prepared to be as flexible as is humanly possible but to say more, it will be necessary to conduct an initial analysis of the above factors.