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Commercial Mortgages

What are Commercial Mortgages?

Commercial mortgages are considered to be one of the best methods of financing a commercial property, or land to be used for commercial purposes. Commercial mortgages are becoming very popular with small businesses especially who have worked to build their company and local reputation in a ‘pop up’ environment, and are wanting to introduce a more permanent base to further grow and develop their niche. The mortgage works in much the same way as a residential mortgage, with a percentage borrowed against the purchase price which is to be repaid at either a fixed or variable interest rate, over an agreed repayment period.

Securing a Commercial Mortgage

Like a residential mortgage, many lenders will require detailed information for approval. While this can seem overwhelming, it’s important for businesses to remember that a lender needs to be able to see that an SME can demonstrate a solid ‘exit plan’ – a way of repaying the commercial mortgage. This is usually through historical data showing consistent growth and improvement in profits and turnover. While requirements vary between lenders, small businesses will usually be asked to provide the following information during the application process for commercial mortgages:

  • A minimum of two years of audited accounts.
  • A detailed profit forecast.
  • Information relating to overall business performance.
  • Stakeholder data.
  • Current credit status of the business.
  • Growth projections and expectations.

Benefits of Commercial Mortgages

Commercial mortgages are sometimes given a bad reputation – on average, interest rates are slightly higher than for residential mortgages, which can deter some smaller businesses. However, despite these higher rates, commercial mortgages do often come with added advantages that are especially designed to meet the needs of growing SMEs. It’s not unusual to find commercial mortgage deals offering interest-only repayments for the first few years of the term, repayment holidays, and a freedom to switch between flexible and fixed rate mortgages throughout the term to ensure businesses are always getting the very best deals available to them.

Evolution of Commercial Mortgages

Research is suggesting that fewer businesses are approaching their normal high street bank for commercial mortgages – in fact, 28 percent opt for alternative lenders, according to a Government report. More businesses approach their usual, everyday bank for overdraft facilities and credit cards than for commercial mortgages, and it’s believed this is due to more attractive interest rates and terms that can be secured through alternative business lenders. Small businesses can quickly and easily identify the most suitable commercial mortgages for them at The online comparison tool allows businesses to compare commercial mortgages to find the best deals to facilitate business growth and development through property purchases and expansion.