Owner-occupier commercial mortgage for business with low profits

We were approached by a broker whose client wanted to buy a mixed use property consisting of a shop with a 2-bed flat above located on the high street of a busy Suffolk town. The broker specialises in residential mortgages which is why he wanted our help.

The client is an experienced electrical and plumbing contractor who planned to run the shop as a heating showroom and live in the flat. He wanted his business to make the purchase but had only been operating via a limited company for 18 months – most lenders request at least two years’ trading accounts. Added to this, the accounts showed that the business had only generated a very small profit.

We worked with the broker to assemble a comprehensive proposal which would demonstrate that the business and the client were a good risk. This included the client’s last three SA302s, financial accounts from the trading limited company and six months of management information.

Once the proposal was complete we took the case to an intermediary only lender, which we knew would consider the case. Although the chosen lender was happy with the proposal, a concern was raised about the client’s personal expenditure.

We explained that the client’s outgoings would reduce as a result of living above the business, as the company would now be covering mortgage payments and utility bills. The client produced a future personal income and expenditure statement to support this.

 

Property Details

Happy with the details provided, the following terms were offered.

Property value: £137,500

Loan amount: £103,125

LTV: 75%

Rate: 6.14% over LIBOR (minimum 0.75%)

Term: 10 years interest only

Mortgage payment:  £601 pcm

Lender arrangement fee: 1.25%  (£1289)

SPV or trading Ltd Co? Trading Ltd Co

Consultant: Andy Elley, 01732 471644

26th April 2017