Arranging a first-time commercial loan can be overwhelming, particularly for borrowers who have never owned a commercial property before. I recently arranged commercial property finance for a young first-time buyer. A self-employed entrepreneur, the client was looking to purchase a semi-commercial property in Twyford. The property was valued at £800,000 and comprised four shops with four flats above.
The client had no previous experience of commercial property ownership and did not have any other property assets. His work also meant that evidencing his income presented an additional challenge when approaching lenders.
The flats had been sold on a leasehold basis, meaning they generated only a small amount of ground rent. The majority of the property's income therefore came from the four commercial units.
The client had previously approached another lender, but they withdrew from the transaction at the last minute. This made the purchase particularly time-sensitive, and I needed to identify an alternative lender who could move quickly.
He required lending at 65% loan to value (LTV) on a capital repayment basis, which was challenging given the limited evidence of personal income and his lack of previous commercial property experience.
OUR SOLUTION
Fortunately, I had previously worked with a niche lender on a similar case, so I felt confident they would be willing to consider this application. Rather than relying on the client's personal income, the lender was prepared to assess the affordability of the loan based on the income generated by the four commercial units.
The lender was also comfortable taking a positive view of the property despite this being the client's first commercial purchase. Following discussions around the structure of the transaction, I secured 70% LTV with a first charge over the property, on a 4.25% interest rate over a 25-year capital repayment term.
This case demonstrates how specialist commercial property finance can provide options for first-time buyers whose circumstances may not fit traditional lending criteria. A lender willing to assess the underlying property income rather than relying solely on the borrower's experience or personal income can make a significant difference.
If you are considering your first commercial property purchase or looking to arrange finance against an existing commercial asset, specialist support can help identify suitable options across the market.
Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, affordability, property suitability and lender criteria. Terms, rates, LTVs and availability may vary depending on individual circumstances.
Risk Warning:
Your property may be repossessed if you do not keep up repayments on your mortgage or other borrowing secured against it. Property values can fall as well as rise.
Information contained in our case studies is for market and illustrative purposes only. In some cases, these may be made up of multiple cases and are for illustrative purposes only.
Some case studies are made up of enquiries that have come into the business, not all business completes, and the posting of a case study does not represent a completed piece of business.
Property values can fall as well as rise, and you may not get back the amount originally invested. Property investments can be illiquid and may take time to sell. Where borrowing is used, your property may be repossessed if you do not keep up repayments on a mortgage or other loan secured against it.
