Company directors raise capital for BTL from their unencumbered hotel
The Client: A mother and son, both of whom are directors of an SPV limited company which owns outright a buy to let and a hotel. Both directors live off the rental income from both properties. They approached us for help in releasing equity tied up in the hotel, which they believed to be worth more than £1million.
The Property: A two-storey hotel including a restaurant on the ground floor in Surrey which the directors have owned for more than 15 years. Originally they ran the hotel themselves but after the business failed, they changed strategy and leased it as a going concern to tenants who have now been trading successfully for five years.
The finance solution: The directors wanted to raise a mortgage of £600,000 secured against the value of hotel building, preferably on interest only terms, in order to expand their buy to let portfolio.
Only one lender regularly offers finance against unencumbered commercial premises, so we knew which one to approach from the off. Unlike many banks, this specialist lender also offers:
- Up to 10 years interest only terms – most lenders will only go between 2-5 years if at all for similar proposals
- A pragmatic, hands-on approach to commercial underwriting – particularly useful given the directors’ income (which is derived solely from rent) and past trading record
- A speedy property valuation service – useful because the directors were keen to proceed as quickly as possible
The application process: To support a mortgage application with this lender, we asked the directors to provide two-years’ accounts for the SPV, a copy of the tenant hotelier’s lease, three-months’ personal and business bank statements, plus proof of identity and address. We ensured that all of this information was packaged in the lender’s preferred format and duly submitted the application.
True to their reputation, the lender’s surveyor got to work and a few days later produced a comprehensive valuation report for the hotel. Unexpectedly, the report down-valued the hotel by some £200,000! Whilst this reduced the amount the directors could borrow, fortunately, it didn’t affect their immediate investment plans, although it did delay the application process by a few days whilst the directors reconsidered their strategy and organised additional supporting documentation from their accountant.
Paperwork and new loan amount sorted, the lender issued a formal mortgage offer which our clients were happy to accept. The application then proceeded without further ado, thanks to our case management team who ensure that all parties are kept in the loop and processing stays on track. The entire deal completed three months later.