How many of your clients are self-employed? For every home buyer or remortgagor you work with who runs their own business there is potentially an unmet demand for commercial finance and opportunity for you to help.
Even if you don’t have experience of commercial lending, working with a specialist distributor, either by referring a case or working together, can help you to access the expertise and products that you need to provide your client with an additional service and diversify your offering.
And, by helping your clients secure commercial finance, you could be helping their business to grow and their personal finances to become stronger, which could in turn increase their appetite for mortgage borrowing in the future.
So, how can you identify opportunities to help your mortgage clients with their commercial funding?
Here are three questions that provide an example of how you could introduce a conversation about commercial finance to your self-employed clients.
1. “Are you fed up of rising commercial rent costs?”
If your clients currently rent the property from which they operate their business, have they ever thought about buying it? Commercial mortgages are available for trading businesses that want to purchase or refinance their own premises. They can cover a variety of property types such as retail units, offices, factory units or any commercial premises used by the business.
The maximum loan amount is normally 75%, but in some circumstances up to 100% may be possible for a selection of professionals or with additional security. Interest rates start from around two per cent over the base rate and lender fees from one per cent. Repayment loans are typically over 20 years, but interest only facilities can be arranged. The funds can be borrowed in personal names, limited company, pension fund or trust.
2. “Do you need finance to upgrade machinery or equipment?”
Asset finance is available to help businesses to grow by providing lending for the purchase of company assets, such as tools, equipment, vehicles or furniture. Here are some of the main types of asset finance:
• Hire Purchase
One of the most common types of asset finance, hire purchases enables a business to hire an asset from a leasing company over a set amount of time. Once the payments have all been made, the company owns the asset.
• Finance/Operating Leasing
This enables a business to use an asset for a fixed period of time in return for regular payments, however the business will not have ownership of the asset at the end of the term.
• Asset Refinance
Asset refinance has become more popular in recent years and can help a business to free up cash by selling assets to a lender and then leasing them back. This provides a cash injection for the business and also lets it retain the use of its assets.
3. “Are you looking to increase your property portfolio to include commercial properties?”
Commercial investment mortgages are available to fund commercial or mixed-use properties that are being purchased for rental return and capital gain. Lending can be taken out against any type of commercial property, including offices, shops, industrial units etc.
With the right property, investors in commercial property can earn a good yield on a full repairing lease, with tenants generally tied in for longer periods than a standard AST, so they can have real stability.
The strength of a lease is an important consideration when it comes to a commercial property mortgage, but lenders are becoming more flexible on the types of lease they will allow on commercial properties. Traditionally, high street lenders would want a five-year lease on a commercial property, with no break clause, but the challenger banks reduced this requirement to two years and some lenders will now allow a rolling lease, which can make the property more attractive to potential tenants.
Understanding what is required on leases and which lenders will consider different types of lease is one of the most complex elements of commercial property lending and we can help by providing the expertise to identify the most suitable product for a client’s circumstances.
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