Commercial Lending: Is it Back to Normal?

It’s been a tough time for anyone trying to access commercial property finance over the last 15 months, but things are looking up. Commercial Broker, Robin Tait, explains the current situation with lenders and who can access commercial finance solutions.

The end of March 2021 saw the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS) deadlines come to a close. The statistics show that in the 12 months up to 31st March 2021, there were more than 2.2 million applications and more than £69 billion approved in lending.

With figures like the above, it’s no surprise that the schemes took up a vast amount of resource for the banks and commercial lenders. Bank staff were pulled onto processing and assessing applications, while lenders had to increase due diligence to ensure business owners were not taking on more debt than they could handle or using money from these schemes as deposits for property investment.

The Recovery Loan Scheme

The Recovery Loan Scheme (RLS) has replaced CBILS and BBLS; loans of up to £10 million are available, backed 80% by the Government. However, the borrower is always 100% liable for the debt. The criteria for this scheme is more prescriptive than its predecessors, as you must be able to prove that your business “would be viable were it not for the pandemic” and that it “has been adversely impacted by the pandemic” (Gov.uk). Ultimately, it’s up to the banks and lenders discretion to confirm eligibility.

New Commercial Mortgage Applications

What about new commercial property finance applications? While we did have access to challenger banks throughout the height of the pandemic, their pricing was not always as competitive, and as such, many businesses placed their plans on hold. Now, however, I’m pleased to say that options are really starting to open up. Not only do lenders now have the capacity to deal with new business, but growing confidence in the UK’s economic recovery and lessening chances of national lockdowns are opening up options. That’s not to say that anyone and everyone can access the finance they may want; there is a pragmatic approach to supporting businesses minimally impacted since March 2020 and those that would likely survive should we return to strict lockdown measures.

Sectors such as manufacturing, healthcare and office-based businesses have increasing finance options. However, it’s still challenging for those in hospitality and leisure at this time. Lenders are no longer just concerned with your finances; the whole performance of your businesses over the last 12 months is considered. Yes, you’ll still need to provide proof of retained profits, whether you’ve had to borrow and up to date accounts dating back two years, but lenders will also want to know how you’ve managed to operate with social distancing and whether you’ve faced issues with suppliers and customers. The focus on pre-pandemic profitability is why it is unfortunately still very challenging to secure finance for start-ups, although the further away from possible lockdowns, the more this should begin to ease.

The other good news is that processing timescales are almost back to pre-pandemic levels. We now expect agreements from banks to take five to seven days and completions around 10-12 weeks. So, if you’ve been putting off plans until things calmed down, now is undoubtedly an excellent time to start investigating your options! Mortgage pricing for commercial property is also competitive; in particular, owner-occupier rates start from around 3.5% on repayment terms. Mortgage terms tend to be for between 15-25 years dependent on the lender.

Whether you’re mortgaging or remortgaging a property that your business operates from or a commercial investment property, do get in touch to see what options are available to you. As a whole of market broker, we have access to many challenger banks and lenders you can’t apply to directly as a borrower. This means we can give you access to a wide range of rates and options that you might not otherwise be able to secure. Our years of experience mean we have developed strong working relationships with many lenders. We’re able to talk them through your individual application, giving you the best chance of success.

To talk through your plans and requirements, you can call me, Robin Tait, on 01625 416391 or email me robint@mortgagesforbusiness.co.uk.

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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