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Commercial Finance

How Easy Are Commercial Loans to Get?

As with most things, the answer to this question depends on whom you ask. For some getting a commercial loan is as easy as walking into any major lender and filling out a form. For others, it is a most time consuming and laborious procedure, due the presence of blemishes on their financial history.

The ease of getting a commercial loan is no different to that of applying for a conventional loan. There are two primary categories of commercial loans available; secured and unsecured, both of which come with their own terms, conditions and requirements.

What are the Differences between Secured and Unsecured Commercial Loans?

Secured Commercial Loans

Most commercial loans are issued in the form of secured loans. This is where the applicant provides security (i.e. assets) of sufficient value to cover the costs of the loan, as something of an insurance policy for the lender.

This security can take the form of anything the lender is willing to accept, but is usually something like a home or business property. The value of the asset will determine how much the applicant is able to borrow and can even influence the rate of interest they pay.

Secured commercial loans in general typically attach a lower rate of interest, due to the fact that there is a very little risk of capital loss for the lender. It is also possible to qualify for a secured loan with poor credit, no formal proof of income or a history of bankruptcy.

The assets used to secure the loan are at risk of repossession, in the event of non-repayment as agreed in the loan contract.

Unsecured Commercial Loans

To qualify for an unsecured commercial loan, you need to demonstrate your creditworthiness and strong financial position to the lender. This is due to the fact that no security is required to cover the costs of the loan.

An unsecured commercial loan application is usually much quicker and easier to complete than a secured loan application. It can also be the ideal facility for smaller and newer businesses, which may not have the on-hand assets needed to qualify for a secured loan.

There is also no risk of property repossession, but unsecured loans are rarely available in sums of over £50,000. In addition, interest rates and borrowing costs on an unsecured loan may be slightly higher.

A Case of Qualification Criteria

Whether any given applicant is able to qualify for a commercial loan will be determined entirely by the unique policies and lending criteria of the issuer in question.

Generally speaking, you will need to provide evidence of your fairly strong financial position at the time of your application, indicating your capacity to repay the loan on time.

Your creditworthiness and on-hand assets will determine whether a secured or unsecured loan is the better choice for your requirements.

Before applying, consult with an independent broker to discuss the available options and ensure you get the best possible deal from a reputable lender.

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Commercial Finance

Why Is Commercial Finance More Expensive?

Commercial finance provides businesses of all shapes and sizes with access to essential funding for almost any legal purpose. Where available, commercial finance rates are usually slightly higher to those of a conventional residential mortgage.

For a rough idea of what to expect, use our helpful commercial finance calculator to see how commercial finance works in practice.

Where commercial finance rates and/or borrowing costs in general exceed those of conventional borrowing by a significant margin, particularly when it comes to mainstream lenders, as opposed to specialist commercial finance providers, there is often a reason why but what is it about commercial finance that makes it a costlier financial product than a comparable conventional loan?

Elevated Risk for the Lender

One of the factors that contributes to the higher costs of commercial finance is the elevated risk for the lender. Commercial finance is considered slightly riskier in the sense that the borrower’s ability to repay is often based largely on the performance of their business.

As there are no certainties in any sector or line of work, there are no concrete guarantees the business will be able to keep up with its repayments long-term.

This risk is, however, largely augmented by the provision of adequate security to cover the costs of the loan. This is also why the security a lender may request to cover the costs of a commercial loan would need to have a higher combined value than those used to cover a more conventional secured loan.

Different Types of Commercial Finance

Commercial borrowing costs can also be affected by the type of commercial finance the business or individual applies for. In some instances, commercial finance is applied for and accessed in the form of an overdraft, in which case, the borrower can expect higher overall borrowing costs than a similar applicant taking out a commercial loan from the same lender.

Competition also plays a role in establishing commercial finance rates and overall borrowing costs. There is not quite as much competition on the commercial lending landscape as in the residential mortgage sector, which means lenders do not have to be quite as competitive with the rates they provide.

Along with these factors, additional considerations like the applicant’s credit history, the performance of their business to date, their business acumen and so on, may all influence the competitiveness of the deals they are offered.

In most typical cases, commercial finance costs at least slightly more than conventional borrowing.

Independent Broker Support

Irrespective of how much you intend to borrow and your intentions for the funds, seeking independent broker support at an early stage is essential. This will enable you to not only compare as many options as possible from specialist lenders across the UK, but also present your case in such a way as to open the door to competitive rates.

For more information on any of the above or to discuss your requirements in more detail, call anytime for an obligation-free consultation with a member of the team.

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Commercial Finance

For International Individual Commercial Investors, Britain Is Best

The picture from a British investor’s view right now might not be quite so rosy. Nevertheless, it seems as far as private property investors on a global basis are concerned, commercial real estate in the UK is as hot as it gets. More people than ever before are eying up the UK as a commercial property investment hotspot, the latest figures reveal.

Specifically, the report reveals that private buyers accounted for around 27% of all global commercial property transactions last year, while 25% of private wealth is tied up in real estate investments.

“We predict that private investors will continue to take global market share as both the number of wealthy individuals and their assets grow. The number with $30 million or more in net assets rose by 6,340 in 2016 alone, taking the total to 193,490,”.

“We expect that the appetite from private investors for commercial property will continue to increase. The report shows that 32% of ultra-high net worth individuals will invest in cross-border real estate deals in the next two years.”

In terms of wealthy investor populations seeking overseas investment opportunities, the report showed that the United States is slowly but surely being challenged by Asia. As it stands, there are just over 27,000 fewer ultra-wealthy investors in Asia than there are in the United States. However, it is predicted that this will shrink to no more than around 7,000 within the next ten years.

One of the effects of the global financial crisis has been a growing tendency among investors to diversify, both in terms of their portfolios and chosen geographical locations.

“The top markets targeted will primarily be those exhibiting solid fundamentals including tenant demand, liquidity and transparency,”.

“However, increasingly we are advising clients not only on prime office, retail and hotel assets but also strategic investments in growth sectors such as urban logistics, leisure and specialist operating assets including student housing and multi-housing. Overall, property as an asset class remains high on the agenda of private investors.”

Closer to home, investors at all levels in the UK continue to view commercial property investment as a relatively safe haven for the immediate future at least. Once again, H1 capital values have risen 2.5% across UK commercial property, with rental value growth having come out at 0.8%. Not quite as strong as the 1.1% growth recorded during the same period last year, but reassuring performance to say the least.

Of course, the effect Brexit is likely to have on all of the above remains the single biggest unknown for domestic and global property investors alike. So while investment from overseas investors may be on the up, few are throwing caution to the wind having acknowledged that things could look very different just two years from now.

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Commercial Finance Secured Loans

A Brief Insight on Secured Commercial Loans and Unsecured Business Loans

If you are thinking of starting up a new business, or you are looking to expand an already successful corporate enterprise, the chances are that you will get absolutely nowhere and at light speed if you do not have access to the required type of financing you need.

When trying to source suitable commercial finance, an applicant will typically achieve funding by means of at least one, but sometimes multiple, business loan(s).  When the time arrives, the borrower will ultimately be required to decide on whether to apply for a secured business loan or an unsecured commercial loan product.

With this in mind, we need to understand the main differences between these two types of finance so that we can make an informed decision and take the most logical route.

What are secured loans for business?

A secured business loan is a long-term borrowing product that is available exclusively to applicants who are able to offer some type of collateral as security against the sum being borrowed.  In most cases, this type of finance is usually secured on a property or suitable commercial assets.  Although the borrower will typically use a commercially owned building or business asset as security, there are cases where secured business loans are taken out against an applicant’s home or primary residence.

Provided you are entirely certain that you can pay the loan back on time, and in line with the terms and conditions set out in the agreement, a secured loan is often the most affordable type of financing available to the modern business borrower.  As the loan is secured against an appropriate property or business asset, the rate of approval is generally exceptionally high and your personal credit history and company finances will not be scrutinized as they would normally be when applying for an unsecured borrowing product.

Secured business loans are usually paid out at quite a fast speed and the application process itself is incredibly quick and simple to understand.  Of course, there is a downside to all of this , which is the fact that your assets will be removed from your possession and sold on to a third party should you find yourself unable or unwilling to make the required repayments in a frequent and punctual manner.

What is an unsecured business loan?

Unsecured business or commercial loans are short to mid-term borrowing products that are not secured against an applicant’s assets.  The main benefit on offer here, is that If you are unable to pay an unsecured debt, you will not lose your home or valued assets as a direct result.  However, with an unsecured loan, you won’t be able to borrow anywhere near as much as you could if securing the funds against something of value.  The application process is also a lot less forgiving, with much tighter restrictions and you will also find that the interest rates can be quite high if you are successful in terms of accessing the funds you need to help your business grow and progress to the next stage.

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