Trading Ltd Co receives £5m for development of engineering factory at a rate of 2.25%

£5m commercial mortgage for multi-national to finish building new factory

30.08.16 | Written by: Andy Elley

The client: A privately owned engineering company, head-quartered in the UK and with sites throughout Europe, America and the Far East.  

Established in the 1950's the business specialises in the manufacture of scientific instruments. It employs more than 200 staff of which 100 or so work at two engineering factories in the UK. The business has an annual turnover of c.£20 million. 

The project: The company directors planned to replace both the UK factories with one, purpose-built 80,000 sq ft operation equipped with modern engineering and office facilities. Using company funds, the build had already commenced but the directors required additional finance to complete the fit out.

The finance: Needing a loan of £5 million the directors had already approached their bank and two others on the high street for finance. All three lenders had offered to assist but none had been able to meet all of the company’s borrowing requirements.  Specifically, the directors were looking for:

  • Competitive commercial mortgage terms instead of development finance which is more expensive

  • No debenture over the fixed and floating assets of the business (or restrictive monitoring covenants)

  • No directors' personal guarantees

  • No legal charge over the new premises (estimated value £10 million once complete)

  • No arrangement fee

  • Interest only terms

A big ask, however, when the directors contacted Mortgages for Business we accepted the challenge.

We worked with the directors to find another form of security that might be acceptable to a lender and identified six other properties owned by the company, valued collectively at £7.7m, which we believed could provide the solution. Three of the properties were residential and three were commercial.

We then helped the directors adjust their proposal and approached another high street bank with which we have worked on similar projects. Impressed with the company's turnover and profits, the bank took just six weeks from application to agree commercial terms which included a charge on the six properties as security for the mortgage. No debenture or directors' guarantees were required and interest only terms were offered.

Estimated security value: £7,700,000 (six properties)

Gross development value: £10,000,000 (new factory)

Loan amount: £5,000,000

LTV: 65%

Rate: 2.25% term tracker (Bank Rate + 2%)

Term: 5 years interest only

Mortgage interest payment: £9,375 pcm

Lender arrangement fee: Nil

ConsultantAndy Elley, 01732 471 644

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