A Commercial Mortgage is a loan which is secured on commercial property such as Business Premises, Warehouses, Factories, Workshops, Garages, Shops, Hospitals and even Schools.

Typical repayment periods on commercial mortgages extends from 10 years up to a maximum of 30 years, however, some lenders may offer mortgages with very short repayment periods – as low as 2 years in some cases. Some lenders have provided the borrower with interest-only payments for the first 2 years whereas some have allowed the borrower to make deferrals on up to 2 payments per year.

As with all business loans and grants, much of what’s available is governed by what commercial mortgage products are available at the time in question.

Whatever plan a business has, it’s fair to say that a commercial mortgage does offer some important advantages over the rental of property or land. That said, it is important that before a business takes this big step in securing a commercial mortgage of any sort they should consider carefully the advantages and disadvantages of commercial mortgage loans.

Advantages of Commercial Mortgages

• you’d retain ownership of your business and your business premises. Whereas other investment options might involve giving up some of your business ownership.
• you can make a substantial capital gain. This can be a great way of realising capital growth over a long period.
• commercial mortgages are not subject to rental fluctuations of residential properties giving you a more stable business planning environment.
• with typically lower interest rates than other unsecured loans/overdrafts, they offer lower monthly costs. Plus they can be fixed which can help you more accurately manage and forecast your finance.
• tax-deductible interest payments. Commercial mortgage interest payments are tax-deductible. This can contribute to reducing your business’ annual tax overheads.
• improved cash flow management. Commercial mortgage payment plans normally extend for several years letting a business focus on profit and loss and cash flow matters and providing the lender agrees, you can sub-let some of your business premises.

Disadvantages of Commercial Mortgages

• a decent-sized deposit would be required. This represents money which could be used in other business operations
• it can be harder to move your business if you own the premises. With property rental, you can often negotiate to end your rental agreement or find another business to take up your tenancy
• if you have a variable rate mortgage, you can leave yourself vulnerable to interest rate increases
• you’re responsible for your property including maintenance, insurance and security
• if you lose value on the property, this will reduce your capital.

Interested in a Commercial Mortgage?

Being able to access a Commercial Mortgage Loan saved us the trouble of having to relocate when our landlord decided to sell up and retire.