Large Commercial Property Finance
There are lots of places you can get a commercial mortgage. Your local IFA, an accountant and a mortgage adviser to name but a few.
However, what they won’t be able to do is help you if you are looking for a large commercial loan. A loan in excess of £5m and sometimes in excess of £50m, because this takes specialist commercial finance knowledge of which we, here at The Finance Business, have plenty.
Large commercial mortgages will take a lot more preparation and packaging than a typical commercial loan. A lender will want to see the following as a bare minimum:
- Cashflow forecast
- Business plan
- Profit and Loss statement
- Balance sheet
- Assets and Liabilities
- Rationale for buying or developing the property in question
Don’t panic if you can’t provide these essential documents, we can help you with all them at no cost to you.
How large is large?
Up to £50m in one transaction, however if the loan can be split into two or three tranches or phased in increments, we can arrange funding up to £150m.
Of course, your typical high street bank wouldn’t be able to do this but it can be done because we advise high net worth individuals all the time on similar transactions.
Who do we lend to?
Anyone with a business plan and the experience of doing a similar project. Commercial mortgage lenders need to be convinced that the person or company applying for the loan knows what they are doing.
At the very least, they will want to see a professional team behind them such as a good builder, project manager, architect, designer, QS, solicitor, etc. It doesn’t always have to be that the borrower has huge experience in property development, the most important thing is the professional team.
Most of the commercial mortgage lenders we speak to will insist on the above and let’s face it, if you were going to lend millions of pounds, you would to wouldn’t you?
What do you have to do to qualify for a large commercial mortgage?
Do your numbers. Make sure the project stacks up as most lenders will want to see that there is a decent profit margin in the deal, otherwise they will ask the question as to why the borrower wants to go ahead with it.
Get your professional team in place
As mentioned previously, this is one of the most important factors a lender will look at. Ask around your property contacts, look at similar sized developments and get some background and history on the people you are going to work with such as:
- Have they done a similar type of project before?
- Did it come in on time and within budget?
- Do they have the necessary skills within their team to do what you need to get done?
- Will they all be happy to sign collateral warranties?
- Are they full covered in terms of the necessary insurances?
- Are they available to discuss issues as and when they arise (because they will)?
Once your team is in place, start looking for projects.
Once you have identified a project, sit down with your architect and apply for planning permission because depending on the local authority planning department, this could take months. Unless it is PDR of course.
Types of property we will lend on
Absolutely everything. This will include hotels, bars, restaurants, factories, warehouses, car parks, shopping centres, retail parks, industrial estates, residential units and apartment blocks.
Sometimes this will be a combination of both residential and commercial in the case of a mixed use development of residential living and retail for example.
In the hotel sector, operating and/or management lease will be an important factor as will the current occupancy levels (of existing hotels) and predicted occupancy levels of yet-to-be-built hotels.
Large Commercial Development Finance
Development Finance by its very nature is much more complex than a single, one off commercial mortgage transaction. Even more so if it is a Ground Up Development.
Lenders will insist on checking the property out themselves via regular site visits and this will usually be in addition to the usual site visits by a Quantity Surveyor. Sometimes they will charge a fee for this and sometimes they won’t.
Development finance is a minefield
What a lot of first time developers fail to grasp is how difficult it is to deliver a development project on time and under budget. Now imagine this is a large commercial development finance mortgage above £10m…The propensity for something to go wrong at this size of loan is hugely magnified and when it does go wrong at this level, both the lender and the borrower could be in real trouble.
This is why every lender will insist on Step in Rights. It gives them peace of mind that if the project does go wrong, they can move in and install their own team of builders and other professionals to finish the job.
We have seen some large commercial development mortgages in the region of £64m recently so there is still plenty of appetite for lenders to get involved in this sector.