Property finance is typically offered as a type of commercial mortgage, a type a loan that is acquired for commercial properties and purposes. Usually, the proceeds that are gotten from the loan will then be used to acquire, develop or refinance a commercial property. Property finance generally attends to the needs of business owners who are looking into investing in a property for their business. With a property finance, you as a company owner can get funds to buy business premises, expand your business premises, redevelop your business premises and make commercial investments.
Typically, the repayment period for a property finance plan lasts for 10years. In some instances, a commercial mortgage can last for 30years. Some lenders render bridge financing , which is usually a short form of commercial mortgage that can be used for emergency funding of the company. There are different ways your company can benefit from property finance. Below is our compilation of five ways property finance can help your company:
- A commercial mortgage typically offers you lower interest rates and lower monthly payment options. This means that you enjoy more flexibility than if you decide to take up other unsecured loans to fund your business. Lower interest rates with a fixed payment period helps you understand what the total cost of your debt would be. Lower monthly payment options that can be fixed for you, helps you enjoy flexibility that allows you to effectively plan your finances accordingly. This means that you get to grow your company with a loan that is cheaper to handle than an unsecured loan.
- Provided you are able to convince your lender into agreeing, you can earn more money by subletting part(s) of your premises to other businesses. Also through property finance, you get to enjoy a better management of your cash flow. All in all, pretty finance loans are easier and cheaper to manage, and you do not need to make a dent on your company’s revenue to pay back your debt. This means that your cash flow doesn’t ridiculously affected and you can earn more cash to pay up your debt by subletting your premises to other businesses. You have to ensure that the provider you work with concedes with the arrangement before you venture into it.
- With a commercial mortgage, you can be reset assured of a steady work planning environment because property finance is not subject to fluctuations that occur in rents. Having a fixed payment option for your business property will give you a sense of stability that aids the planning of your company’s production activities. You do not have to worry about rental fluctuations and this would help you achieve a stabilized planning technique that would help your company grow.
- Commercial mortgage interest payments are generally tax deductible, meaning that payments can be made from whatever taxable income you earn in your company. This can help to reduce your company’s annual tax overhead. You get to enjoy having to pay less on taxes and have enough profits from whatever revenue you earn in your company.
- You can make and gain substantial capital gains when you decide to get a commercial mortgage to invest in a commercial property. Typically, the prices of properties increase over the years and this way, you get to enjoy capital growth over a long, fixed term.
All in all, property finance helps you with the growth of your company in everything related to it. Having to not worry about making continuous monthly payments will help you focus on doing all there is to ensure the growth of your company. You get to save more money that can be used to increase your workforce, get new machineries and tools, takeover or merge and acquire other business ventures that can ensure growth, etc. All these would be focused on increasing your company’s growth and revenue.
Things To Consider Before Taking Up A Commercial Mortgage
As much as property finance can help your company, you need to understand that certain things can make it the detriment of your business too. Property finance has its own shortcomings and you need to make sure that you understand what it entails before you take up the loan. Some things to consider are:
- Access your finances and find out if you are capable of making your monthly payments. Typically, the lender would want to know if you can make payments before they would give you the loan. You need to access your finances to understand your capability. Since you’re the proper of your business might be the collateral for the loan, you need to evaluate how much revenue your business provides or is likely to provide.
- What type of building you are looking to purchase, rent or construct and what your business is for. These two things are typically major determinants in a lender’s decision to give out a commercial mortgage. When the business is used as collateral, the lender is typically the owner of the deed title of the business premises and can sell it if the borrower is unable to pay up the debt. If the building is a special purpose building, it might be hard to sell it off and this could mean a loss.
- Compare deals from different lenders to determine what is best for you. Approach different lenders and find out what taking a loan from each one’ would mean. How much interest rates would you need to pay, how flexible your monthly payment options would be and how long the term would last for.
- Evaluate your cash flow and how often it changes. How often does it change and how drastic the changes that have occurred have been. You wouldn’t want to be worrying about making payments monthly while struggling to cover other costs that are involved in the running of your business. Ensure that you understand your cash flow before you take up more financial commitments.
- You have to consider how detailed and informed your business plan is. Most lenders want to have adequate information on the business before they would be willing to part with a large amount of money in commercial mortgage. Ensure that you have detailed and sufficient details on your business, its services and plans before applying for a loan.
Your decision to venture into property finance can be a financial decision that would be capable to be the starting point of your company. Understanding completely what it takes to venture into property finance is the only way to really enjoy the benefits that come with the plan.