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Can I get a commercial mortgage for a retail business?
Yes, there are various financing options for retail businesses, with a mortgage being the most common.
Lenders will take into account various factors when making their decision, such as your experience, historical financial performance and future aspirations for the business.
At Teito, our team of experts have helped many people like you to find the perfect mortgage for their retail business. As a whole of market broker, we have access to more than 100 lenders, including those who specialise in retail mortgages. If you're ready to get started, complete our simple online form and we promise to make your mortgage journey as stress-free as possible.
Who is eligible for a retail mortgage?
To be eligible for a commercial mortgage for a retail business, you should be able to demonstrate a solid track record in the industry, backed up by a robust business plan.
The longer and more successful your career in the retail sector, the more attractive you are to lenders and the better rates you are likely to be offered. Lenders will also want to see that you have a good credit history, which will demonstrate you are a reliable borrower.
Your application will be assessed on a case by case basis, taking into account the following:
- The loan to value (LTV) ratio of the loan
- Your credit rating
- Your experience in the industry
- The affordability assessment of the loan
- Financial performance
- The location of the retail business
How much can I borrow with a retail mortgage?
Unfortunately, there is no single calculation to work out how much you can borrow with a commercial retail mortgage.
Different lenders have different rules and will assess the affordability of the loan differently. However, all lenders will use previous trading history and projections to determine affordability, and some may permit you to declare additional income to improve the assessment. Assuming your business is already trading, lenders will expect to see a minimum of two to three years of financial accounts as well as the projected income.
What deposit will I need for a retail mortgage?
As with all commercial mortgages, you can expect to contribute a larger deposit for your retail mortgage than for a residential mortgage.
This is to mitigate some of the risks associated with lending to business rather than to individuals. For a retail business, you can expect to contribute a deposit of between 20-40%, however, as with all mortgages, the more you can contribute the lower the monthly repayments and the better rates you are likely to be offered.
If you can demonstrate a high level of experience and capability, the lower the deposit requirements and potentially, the more favourable the rates offered.
If you are not able to contribute a cash deposit, you may be able to secure the mortgage against another property that you own, assuming that you have sufficient equity.
You should consider this option carefully as it could mean lead to multiple repossessions if you default on mortgage repayments. Our advisors can provide guidance and more details on this.
How much experience will I need for a retail mortgage?
Ideally, the more relevant experience in the sector you can demonstrate, the better your chances of approval and getting the best deal.
If you don't have a track record in the retail industry, there may still be options for you as some lenders will take into account other management experience alongside your business plan. Our advisors can help you to find the most suitable lender in this scenario.
Can I get a retail mortgage with bad credit?
It is certainly more difficult to be approved for a retail mortgage with bad credit; however, it is not impossible.
Lenders will be concerned with the age and severity of the credit issue, and will not judge all bad credit in the same way. Even if one lender has rejected you, it doesn't necessarily mean that you will be rejected again by a different lender.
If you have a bad credit history, it can be especially beneficial to use a mortgage broker as they will be able to improve your application and recommend lenders who are more amenable to credit issues.
Other finance options for retail businesses
There are several alternative finance options for retail businesses.
Bridging loans
Bridging loans are a type of flexible, short term finance that can be arranged very quickly.
If you're buying a property at auction, for example, bridging loans can be beneficial to ensure you have the funds within the short timeframe required. As you may expect with a short term finance option, the rates tend to be higher, and you will need a clear exit strategy for when the term finishes; which may be a standard mortgage.
Development Finance
If you're looking to finance a retail property development project, either a build or refurbishment, development finance could be a viable option to consider.
With development finance, the funding is released in phases to align with the project, and you will only pay interest on the amount deposited so far. As with bridging finance, development finance is a short term option, and you will need to consider the future financing of the project once it is complete; which is likely to be a mortgage.
How can I learn more?
As a whole of market broker, our team have access to more than 20,000 mortgage deals, including those offered by lenders specialising in retail finance. Get started today, and we promise to make your mortgage journey as stress-free and straightforward as possible.
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Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
