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As a business owner, you may be a sole trader, a partnership, or a limited company. And of course, you could be operating in any one of a myriad of industry sectors.

Hotels and guest houses, restaurants and fast food takeaways, pubs and wine bars, newsagents and supermarkets, scaffolding companies, hauliers, nursing and care homes, engineering and manufacturing businesses, software and IT companies, solicitors, dentists. I could go on, but you get the idea.

The point is, if you run your business from a freehold commercial property that you or the business owns, (depending on your business, amongst other things it could be a retail premises, office, industrial unit, warehouse, surgery, hotel, or a care home) then when it comes to raising finance, a commercial mortgage could be an option for you.


What is a commercial mortgage?

Essentially, a commercial mortgage is very similar to a residential mortgage. You take out a residential mortgage when you buy your home, and the lender uses your home as security for the mortgage, by taking a legal charge over the freehold.


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A commercial mortgage works in the same way. The commercial premises from which you operate your business is the security for the mortgage.


What can you use a commercial mortgage for?

You can use a commercial mortgage for many reasons, including:

  • If you are acquiring a business where the main asset is the property from which the business operates, then the property can be used as the collateral for a loan to assist with the purchase of the business.
    • For example, if you were buying a hotel that operates from a freehold premises, then a lender will provide a commercial mortgage to assist with the purchase and use the freehold hotel premises as the collateral for the mortgage.
    • We have arranged many commercial mortgages where our client was buying a business and the freehold property from which the business operates has been used as the security for the loan.
  • If you already own the business premises from which you operate, then a commercial mortgage can be raised against the business premises. The reasons for doing this may include:
  • re-mortgaging an existing loan to obtain a better rate of interest, or to lengthen the term of the loan, thus reducing the monthly outgoings;
  • to raise additional funds to help with expansion plans, buying out a current business partner, to inject much needed cashflow or working capital into the business or to pay a large bill or creditor.

Whilst this is not an exhaustive list of reasons for raising a mortgage against your commercial premises, these are some of the common ones.

One other reason for raising finance against a commercial property that we come across on a regular basis is for what is called a ‘sitting tenant purchase’.

This is particularly common where the commercial premises involved are retail, an office premises or an industrial unit.

This scenario occurs when you run your business from a property that you rent or lease.

The landlord, to whom you have been paying rent, decides to sell the property and offers you the opportunity to buy the freehold. You would then raise a commercial mortgage to enable you to go ahead with the purchase.

If you would like to find out more about your options and how we can help you arrange a commercial mortgage for your business, book a call with one of our commercial mortgage brokers. For other business finance options, learn more about asset finance, invoice finance and unsecured business loans.