lending guidelines Business Mortgage Solutions

July 2010 Update

In the current commercial lending market there is not a one product fits all solution. Each deal needs to be considered on its strengths and packaged to fit within lenders criteria.

We are continually striving to find creative solutions to borrowers funding needs and whilst lending remains cautious the following summarises the market.

Freehold Businesses

We are currently securing up to 70% of the open market value of the going concern value of businesses and up to 75% of the open market value for commercial property only This is for borrowers who are suitably experienced and where accounting information is fully supportive.

We are still securing 100% funding plus costs for going concern businesses and commercial property where accounting information is supportive and suitable additional freehold property is available as security. Again sector experience will be important.

Bridging residential property until sold. This will only apply in exceptional circumstances but is ideal for those wishing to delay selling their house to fund a purchase, as no early redemption penalties will apply.

For those without sector experience or additional security then 60% to 70% funding should be considered the realistic limit. This will be dependent on financials and other skills they can bring to the business

For businesses being sold without accounts or closed then the level of borrowing will depend on the purchasers experience, other assets or whether they have additional income. Usual lending levels equate to 50% - 60% of the purchase price but this is an area which is becoming increasingly difficult to find lender support.

VAT loans – we are able to arrange a 5 month VAT loan to assist with the purchase of corporate disposals where VAT is charged. This can only be offered in conjunction with a long term loan facility.

Cautionary note

The above guidelines are reviewed on a monthly basis and reflect current lending experience. Other broker's web sites may be showing historical terms which are not currently acheivable.

Leasehold purchase and asset & goodwill businesses

The majority of funding opportunities in this sector is backed by additional freehold property to act as the security for the loan.

The usual blend of experience, accounting information and security value will determine borrowing levels but we are regularly securing 100% of the purchase price, day one costs and working capital. As a guideline the additional security is calculated by taking 70% of the “realistic” current valuation of the security, less the first mortgage.

Once again this can be used as a bridging facility until residential property can be sold

Where no additional security exists then we can in most instances secure funding against the lease, usually where the business qualifies for support under the Governments (BERR) Enterprise Finance Guarantee Scheme, which does provide an element of security for a lender. Funding is usually available on a 30% to 50% deposit basis

We can also still arrange re-mortgages on residential property or buy-to-let investments to raise capital.

In the current market more than ever careful attention needs to be taken with all funding proposals to lenders to ensure they are tailored to fit within the lender’s criteria, potential objections are addressed at the outset, the strengths emphasised and full financial projections are provided. All this, including the forecasting is prepared by us “in house” to give every proposal the greatest chance of success.

Please call us on 01834 849797 for more information and to discuss your proposal.