Commercial Mortgages - Pros and Cons Compared With Renting

Financing a commercial property purchase, such as a shop, warehouse, office or factory, will involve a good deal of planning. If you are running a small business then it is likely that you will need a commercial mortgage to make such a purchase, and this will usually require a lot of research before you decide which mortgage deal is best for your circumstances.

You will need to compare commercial mortgage deals across a range of lenders, but before you do so, consider these pros and cons of purchasing using a commercial mortgage deal rather than renting a property.

Pros for buying with a commercial mortgage instead of renting:

1. Using a commercial mortgage means you can purchase a property with fairly low costs at the outset

2. You will be able to be flexible in creating a repayment plan to suit the needs of your particular business

3. The interest payments on commercial mortgage deals are tax-deductible

4. The ongoing mortgage payments may well be very similar to the rental payments you would otherwise have to make

5. The property itself will be an asset for you company, and if it increases in value your business capital will increase along with it

Cons for commercial mortgage deals:

1. Unlike when you are renting a property, a purchase means you will have to organise any maintenance needed and pay in full

2. If the property you have purchased goes down in value, your business capital will go down with it

3. If you run into financial trouble and have to default on mortgage payments, the property may be repossessed by the lender

4. Purchasing a property tends to be a long-term commitment, with repayments running for 15 years or more, so it may not be ideal if you need to change your business premises or location at short notice

5. Depending on the capital you have available, it may be tricky to come up with the necessary deposit, which normally has to be about 20-30% of the total value of the property.

Also: you will need to provide evidence of your business' profitability and longevity

The evidence asked for by the lender will often include a range of specific documents. These can include a detailed business plan outlining how you intend to repay the mortgage and how the purchase may affect your business' cash flow. They may also ask for projections for the next few years and audited accounts for the last two years, as well as a review of your current business performance. Lenders will often also ask for the personal details of key stakeholders for credit checking.

Making the decision

If you have decided to go for a commercial mortgage deal, it is vital to get all the information you can before choosing which deal to opt for. Financial and legal advice is usually a key part to getting the correct mortgage deal for your business' circumstances, so is comparing mortgages deals across a range of lenders and across different types of mortgage deal. Then you can make an informed decision, based on all the facts.

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Commercial Property Solicitors - How Does Commercial Property Law Differ From Domestic Conveyancing?

Though they both deal with the transfer of property, the issues involved in commercial property law are very different to those associated with domestic property. In a domestic situation the legal process is fairly standard. Property solicitors are simply required to oversee the exchange of property from one owner to another. Though it may not seem so at the time, this process is relatively straightforward.

The commercial property arena is significantly different. The number and importance of the roles that commercial property solicitors are required to fulfil are a lot more varied. Firstly, the legal requirements that companies have are a lot more diverse. It is equally common for companies to want to buy, sell and lease buildings and land which are very different from those dealt with by domestic property solicitors.

Commercial property solicitors need to deal with anything from warehouse leases to agricultural purchases. This means that they must not only be familiar with the legal implications of the transactions they oversee, but also have a good understanding of the property requirements relevant to a number of different corporate sectors.

Another difference between commercial and domestic property exchanges is the importance of timing. In domestic property exchanges there is a lot of red tape which means that exchanges can take a long time to go through. In a commercial environment these delays could have huge financial implications. One very good reason to use specialist commercial solicitors is their ability to work to a deadline. Due to their experience in the particular field of commercial property law they will know the importance of completing a sale or lease contract on time. Additionally, their experience will enable them to utilise various methods to ensure that your deadlines are met.

As with most legal disciplines, using a specialist has many advantages. Compared to a non specialist solicitor, commercial property solicitors will be tuned into the specific needs of their clients. They will understand the importance of deadlines and communication. They will also understand the greatly amplified financial implications of any hold ups or problems for your business. As a result you are likely to receive a much better service as well as greatly improved results. If your company needs to buy rent or sell a property then you will want it done as quickly as possible, with the least amount of stress. You will also want the process managed by someone you can rely on. By far the best way to achieve this is by using professional commercial property solicitors.

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