Ten Step Guide Archive

With Lancashire Mortgage Corporation

A step by step guide to setting up and completing a commercial loan...


1. Commencing 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. 
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. In addition, many income sources ranging from employed, self-employed and sole traders to partnerships, limited companies and pension funds will be considered. Funds can be used for all existing investments to re-finance and improve its cashflow, or to purchase business’s such as hotels, land or retail units.
Commercial Finance is not the lengthy or complicated process that people may think. Funding from specialist lenders can offer you fast and effective finance for almost any client; and each week we will demonstrate the simplicity, flexibility and choice of products available with commercial finance that you can offer your clients.
2. Commercial isn’t complicated
For many brokers, there can be a pre-existing and inaccurate stereotype that Commercial Finance is complicated; which is preventing the opportunities to offer a wide range of products and criteria to their clients. The perception of funding being difficult also comes from high street lenders restricting their criteria and the availability of finance.
There is a stigma with commercial loans that they are a lengthy process. 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 ultimately they don’t bother and miss out on valuable sales.
Commercial finance from specialist lenders however, is actually far from complicated and in fact, can often be done quickly. With high street banks and other larger organisations; 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 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.
3. Bridging the gap
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, 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. 
Bridging finance is no longer a last resort option; it is a flexible, viable solution to short-term liquidity issues. It also provides several repayment options to offer clients the time required to attain longer-term business objectives. 
As the funding options continue to be limited and the industry expands its commercial finance portfolio to support clients in an uncertain market, bridging will become a key growth area. 
4. More property possibilities
In the past, the criteria on commercial finance has created a restrictive 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.
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.
5. Second charge choices
In the current lending market, accessing finance has never been more difficult. Traditional lenders, such as high street banks, have tightened their lending criteria and become more cautious.
Many businesses will have a first charge loan with a bank, which makes gaining access to finance even more difficult as banks are less likely to consider further advances on their long term business loans. This approach, not only restricts businesses accessing finance and developing, but even organisations that do secure funding will have to go through a lengthy process to get the money they need.
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.
6. Maintaining the flow
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.
7. The lay of the land
In previous years it may have been difficult to obtain finance for both the purchase of land or alternatively, using land as security against a commercial loan.
Strict criteria from high street banks along with the timely process, has led to the misconception that commercial finance for land is complex and difficult to obtain.
Proactive lenders however, will consider finance for almost all types of site, from farmland through to industrial brownfield plots, for agricultural purposes and with or without planning permission, all with a variety of repayment options. Specialist lenders are also a lot more flexible in that they can allow you to use land as security against a commercial loan.
Having this type of commercial finance available in your portfolio will allow brokers the opportunity to expand their client base and offer key solutions to their clients.
8. Second Charge Commercial Loans
In this economic climate, many mortgage intermediaries are finding that clients are struggling to gain access to additional funding for their business.  Major Banks have had to squeeze their lending criteria making commercial funding hard to come by.
As a result, 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.

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.


9. Buy to let on the up

Time is of the essence for any busy landlord and brokers need to be up to speed to be aware of specialist lenders who can help them obtain suitable commercial finance for their clients.

With a stagnant mortgage market, renting has become far more popular in recent years.  As a result, there has been a surge in demand from tenants and in turn, an increase in new landlords entering in the market.

Getting on the landlord ladder can be helped by specialist lenders providing funding for almost any property in various states of repair and many client status profiles.  Usually the rental income from a property will need to cover at least 100% of the monthly repayments, but in the current housing market, some lenders will take additional income from employment, providing a wider option of lending solutions.

Being a landlord or having HMO’s is a long-term investment and commitment for your clients.  By extending lender panels to incorporate Buy to Let plans, it will open up possibilities for brokers to advise their clients in expanding their property portfolio and maximizing the return on their investment.
Buy to let lending is a viable diversification for brokers to fulfil their client requirements, and if managed properly, generate a steady and profitable return for them.


10. Seize the opportunity

The previous tips have outlined the real benefits of commercial finance. It is a quick, effective, viable option for businesses to gain access to suitable funding.

Every client has different needs and risk profiles. The commercial finance industry has responded to this and introduced more innovative products into the market to support a range of clients. Specialist lenders will take an overarching view of each individual case and consider a range of property, land and income types to provide a solution.

Whether it’s cash flow, expansion or investment, commercial finance can offer a business a financial lifeline, and as traditional lending channels remain restricted it offers a real opportunity for intermediaries.

Forming a partnership with a forward-thinking specialist lender will increase the potential commercial finance solutions an intermediary can offer, ensuring a comprehensive product range and increased adaptability to suit the ever-changing needs of clients. This alliance will not only increase a broker’s potential client base, but it will also improve their earning potential.






with Lancashire Mortgage Corporation