FACT 4. Terms are improving.
FAO Commercial Property owners, or holders of commercial mortgages:
It is definitely worth applying for commercial mortgages today. Why? Credit policies in various banks are changing, and for the most part, they are improving.
I deal with banks on a weekly basis, and it has been very noticeable to see the changes that are occurring. Debt service ratios per sector are improving, rates are certainly more attractive, and 6-12 month interest only periods are creeping back into quotes.
My personal opinion is that there is a real desire from individuals inside banks, within the secured commercial mortgage sectors, to lend to UK business. This again flies in the face of most of the media coverage, but something I believe to be true.
In the commerce property investment sector, for example, lease terms are beginning to be more flexible. A thorny issue for sometime, with tenants refusing to commit to the long-term, and banks needing long-term leases to lend, a softening of the position is happening. Banks are beginning to understand that they will not be lending much if a rigid stance continues. 3 year leases are certainly considered, down from 5 to 10 year positions in the last 12 months, with some banks at least. A view is increasingly being taken on the odd 12 month licence if it does not affect the overall % of income too much.
In the manufacturing sector, one bank has been offering 1% discounts, bringing rates down from around 2.5% over base to 1.5% over base.
In the owner occupier sector, 80% LTVs are on the table. So for businesses occupying their own asset, be it warehouse, office, or factory, there is encouragement to be had.
The message is this: some banks are definitely wishing to lend, and the changes in credit policies right now reflect this. Fact 5 will discuss the relevance of previous borrowing history, or the lack of relevance!
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16 Facts At a click and a glance
1 - Why going into the High Street branch is not the best way to source a commercial mortgage, business loan, or business banking manager
2 - Brand loyalty does not pay. I'll explain why your current bank is not incentivised to offer a better deal
3 - Bank managers that understand your business do still exist, but they are not where you used to find them. Find out where they are, and how to access them
4 - The good news about Business Bank Credit policies: the criteria for assessing businesses is changing regularly, and in the main terms are improving
5 - Why your perfect borrowing history is of little relevance, and why its not personal
6 - You can profit from moving bank, right now, by accessing a much misunderstood fund, as well as improved terms
7 - Different banks like different sectors: what's happened
8 - State-owned banks: an update on where they are
9 - Privately owned banks: an update on where they are
10 - Interest only commercial mortgages: today's marketplace
11 - How a change of mindset can be of great help
12 - Why banks want to know your inside leg measurement, and why it’s not personal
13 - How to work out if a bank will lend to you, right now
14 - Debt service cover: what it means, why its important and the good news coming your way
15 - Why you may need to bank with more than one from now on
16 - If your business does not own property, nor wish to buy one, there are other, new, niche financiers available that can help with your requirements.
About Chris Davidson
Chris Davidson is Managing Director of Discover & Invest Ltd.
He believes passionately in providing businesses with market-leading financial insights that have a positive impact on the bottom line. As a result, Chris helps get the best rates and terms available at any one time.