Broker Guide: Securing commercial finance

Broker Guide: Securing commercial finance


Whether your clients are starting up a business, developing existing activity or expanding, a commercial loan is the perfect fit for acquiring a business, or for a business’s long term aims. 


With high street banks and other larger organizations, getting a decision can take some time but with specialist lenders you will get definite and quick answers and work with specialists in this type of funding.


It may be surprising to learn that a commercial loan can be secured on many property types, including residential, semi-commercial, commercial property and land. Commercial finance can also includecommercial investment, commercial owner-occupier, complex residential investment, different property types and different tenants.


Unlike residential loans, obtaining commercial finance is dependent on individual circumstances and factors such as property assessment, which in turn leads some brokers to believe that the process is too complex and lengthy. Ultimately many don’t bother and miss out on valuable sales and the opportunity to offer a wide range of products and criteria to their clients.


Richard Deacon, Sales and Marketing Director at Masthaven, explained: “The main differences in commercial bridging as opposed to residential bridging are the lack of viable refinance options. We have forged a very close business relationship with the excellent staff at Whiteaway Laidlaw Bank and they have often been the first port of call to see if the exit route for a commercial bridge is viable by them. Santander, Aldermore and Barclays have also been used by Masthaven.”

In the past, the criteria on commercial finance has created a perception that lenders will only consider certain property types as a viable option. This has led to some brokers overlooking commercial finance as a suitable recommendation.


In the current market, specialist lenders have taken a different approach to property criteria and will take an overarching view of an individual client’s situation to provide a suitable solution that will enable a business to progress. Some lenders will consider many different property types, including residential, semi-commercial, commercial property and land. Whether a client wants to secure a loan against a house, warehouse unit or a B&B there is the opportunity to raise finance against a diverse range of properties.


In recent years securing commercial finance has changed. Lucy Barrett, Director at Vantage Finance, told us that: “Lack of liquidity in the markets has resulted in stricter policy, making the commercial finance market difficult.  It is much harder to place commercial mortgages today, and I can’t see that changing for a long while.  LTVs have come down, interest cover for commercial investment mortgages has become harder to meet, and the process of applying for commercial finance is often protracted and requires considerable time and effort to fulfill the requirements.”


Terry Markham, Managing Director at the Funding Operation, believes: “It is much more difficult now to secure traditional funding from the High Street lenders. Criteria has tightened beyond all sensibility.”

Richard Deacon, added: “Masthaven recently supported the NACFB with an exclusive rate for commercial bridging. We felt this was important as it was our way of not only supporting the association, but supporting a very important, and often under-looked part of our industry.”

Gavin Diamond, Finance Director at Cheval Bridging Finance, told us that they are more bullish about residential property at the moment and therefore adopt a more cautious and conservative approach to lending against commercial properties. However, he continues by saying that “we will consider any deal on its own merits. The fact remains that a good deal will always be able to find a home, whether the security is residential or commercial property.”

In comparison, James Bloom, Chief Executive, Regentsmead, told us about the recent changes in development finance: “It is far harder to secure development finance in the current market; many lenders have disappeared or come in and out of the market. The availability on the High Street is virtually non-existent with property development being very undesirable. Regentsmead is still very active in the sector and has seen a 40 per cent loan book growth since 1st April.”

What are the criteria on commercial finance nowadays?

The criteria on commercial finance: “depends on the type of case being placed. For instance somebody purchasing a shop to let out must demonstrate a strong business will be leasing the property from them.” Terry Markham added: “This used to be a lot easier to place than it is now.”

Gavin Diamond added: “Commercial property transactions tend to be more bespoke in nature, which often require a lot more work to obtain the level of comfort required to do the deal, particularly with respect to the exit strategy.”

Graham Allen, Managing Director at Commercial Money Matters, told us that: “the criteria are reasonably unchanged. The main criterion is for a client to pass the Stress Test, the process that evaluates a client’s systematic risk and reaction to different situations. It essentially looks at whether the client can service the loan, passing the bank’s stress tests in terms of income and profitability.”

With regard to development finance, James Bloom said, “The few lenders that are left will usually lend up to 50 per cent of GDV and want experienced borrowers only. Large blocks of flats are very high to raise finance on.”

When securing commercial funding there are many differences between high street lenders and bridging lenders. The perception of funding being difficult also comes from high street lenders restricting their criteria through their stress tests and the availability of finance.


Lucy Barrett, Director at Vantage Finance, explained: “Bridging finance is asset based lending as a rule, and security is key with less attention on the borrower, whereas high street lenders will be looking at the business in a lot more detail along with the people behind the business, and then the security.”


Graham Allen supports this view. “The differences are vast in that high street banks will have their stress testing criteria whereas with a bridging lender they are not so much focused on the repaying time as they are with the security of equity,” he said.

Supporting the security aspect, Terry Markham added: “Bridging lenders are mainly concerned with the type of security. Will they be able to sell it easily if they had to take possession and how easily will the borrower exit their loan. Traditional lenders are interested in the covenant of the lease and how strong the trading company is historically.”

When we asked the industry experts what differences there are when securing the loan against different property types we were unanimously told that there are huge differences and it would take a whole written paper to explain these.  In general though, “The more residential accommodation the property has the more chance of a loan being granted”, Terry Markham told us.


In today’s market, second charge commercial bridging finance and second charge term loans have become more important in the lending sector. It allows companies the opportunity to secure bridging loans or second charge term loans against land or property, enabling them to raise the required capital to progress their business objectives, whether over a short or long period of time. Second charge bridging finance and second charge term loans offer businesses a versatile lending facility, which highlights a key opportunity for brokers to provide an alternative lending option to help businesses take advantage of short-term or long term opportunities.


Brokers need to become aware of the second charge commercial loan options out there with specialist lenders.  A second charge commercial loan allows your clients to stay with their primary lender, who may not be able to offer further finance, and take out an additional loan with a specialist lender as opposed to remortgaging (which could prove costly and time consuming).


This is a much more effective way of raising finance and offers clients a range of flexible repayment options with quick decisions, and allows funds to be made available for the realisation of business goals.


Terry Markham told us that there are very few second charge commercial loan options available. “If the loan required is for a long term, then the borrower is likely to be restricted to £100,000 or less as a maximum loan. Therefore, the only way of getting a loan in excess of this amount is to take a second charge bridge, which will be for a finite term, i.e. up to 18 months maximum.”

Second charge loans can be secured on many types of commercial property or land, and as the broker market is an ever-changing landscape, by offering a range of services, including second charge commercial loans, it will ensure an intermediary supports all client needs and remains in a strong market position. As such, they should play an important part in all brokers’ offerings, to give clients the flexibility and support they need in what remains a difficult trading climate.


Graham Allen believes that second charge: “should not be overlooked and may turn into good advice for your client. It may not disturb your existing relationship with them and provide them future capital for future projects. There are many alternative routes other than the second charge commercial loans to gain funding.”

It needs to be remembered that lenders are keen to develop their relationships with brokers, and will not only work to get the right funding for their clients, but will strive to be available at all stages of a case to make it as simple as possible.


Forming a relationship with a specialist lender will allow intermediaries more flexibility to offer commercial finance to a broader range of clients. This partnership will increase a broker’s client base and, in turn, it’s earning potential – highlighting a key business opportunity for intermediaries.


The relationship between lenders and brokers is a crucial one, but Graham Allen believes that there isn’t enough being done in this area. “Communication tends to be very bad in this area as they are not in sync in terms of the bridging language.


“There’s nothing worse than arranging meetings and nothing productive comes out of them, but with the right people there’s nothing better than a good face to face meeting so that both parties can work actively with one another to reach a goal,” he said.



Whether your clients are looking to invest in the future or simply require some extra funding through a difficult business period, an injection of cash flow from a specialist lender can be the simplest solution.


Cash flow should not be a barrier for businesses moving forward, but with high street banks restricting their lending criteria and the difficulty in obtaining finance within certain timescales, many businesses have found raising capital for cash flow difficult.


If clients need funding to see them through a difficult trading period, secure contracts, fund a relocation or make acquisitions, commercial finance can be used to help them achieve their future aspirations.


Brokers therefore need to be aware of the wide range of finance available for their clients through specialist lenders, who can not only offer funds within short timescales but can offer solutions for a wide variety of individuals and businesses.


Go and enquire with a specialist lender. Right now if you’re a residential broker the market is quite difficult as many banks have reduced their panels. With regard to dealing with commercial finance, unless you have worked or enquired with a bank previously, many banks are saying that they are not taking broker enquiries.


Introducer deals can be struck up quite quickly with most commercial brokers and bridging lenders. In the current climate there is no need to reinvent the wheel, as through bridging there is a quick route to market which is an invaluable viable option for brokers, and they should try to find the right deal with a lender.

In today’s commercial market things move quickly. Some clients need a cash injection to progress an opportunity immediately. With the current restrictions on lending from traditional sources and the changes to future short-term lending regulations, and the industry expanding its commercial finance portfolio to support clients in an uncertain market, it seems that bridging finance will play a more prominent role in the industry, particularly as alternative solutions to provide cash quickly become more important. 


Do you have any queries in regards to securing commercial finance for your clients?

Email me at

[email protected]

By Jason McGee-Abe

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