Business mortgages

jimjim22

Hello All,

Would anyone be able to tell me how business mortgages are worked out - to be specific I need to know whether lenders when calculating how much they will lend you - do they use gross or net profits to calculate the amount they will give.

many thanks

jimjim22

AndrewSmith

Hi,

It is based on the package as a whole, and the overall viability of the proposal being made, and the type of business / premises involved.

It also depends what you are actually looking for. Is it a mortgage to buy business premises or is it a loan to buy a business?

They are very dfferent things.

Apologies of I am telling you what you already know.

Andy

jimjim22

Hi Andy,

Thanks for your reply.

I am looking to buy a shop/post office with house (all freehold) - an established business. We have seen profit and loss accounts for this and are unsure whether lenders use the gross profit or net figure for how much they will lend me.

Hope this makes sense.

thanks jimjim22

AndrewSmith

Makes perfect sense. Thanks for clarifying.

Post offices work slightly differently to any other business when you are looking to buy one.

As you know, the first thing is that you must be interviewed by the post office and accepted as postmaster/sub-postmaster.

The thing that makes it unique is that not only do you have the profits from the general sales within the store itself, lottery commission, newspapers etc, but you also have the Post Office Salary which is also taken into account when calculating the possible funding. I believe that with such things as a Post Office each case is looked at individually, as opposed to using a standardised model or income multiple.

It will also depend on how much you personally have to put into the venture. Most lenders will want to see at least 25% deposit, however it is sometimes possible to do it with as little as 15%.

Also to qialify as a business mortgage the residential element must be no more than 40% of the total building.

My first advice to you would be to check with the Post Office to see if they have any exclusive funding options or deals set up with major commercial lenders or Mainstream Banks. I have a feeling they do.

If not, then you will need the services of a broker who deals in commercial mortgages.

The most important thing is to take your time and seek legal guidance and professional help before making any binding commitments.


Hope this helps

Andy

jimjim22

Hello again many many thanks for you help/advice on this.

the house is bigger than the shop so is it correct to assume that we will have a residential type mortgage? we are looking at putting 30% down as deposit.

cheers
jimjim22

AndrewSmith

jimjim22 wrote:

Hello again many many thanks for you help/advice on this.

the house is bigger than the shop so is it correct to assume that we will have a residential type mortgage? we are looking at putting 30% down as deposit.

cheers
jimjim22

With a Post Office I think the rules are different. This is because there is generally some kind of residential property attached which makes them nearly always fall outside the 40% rule.

Deposit size sounds fine, should be no problem there.

What figures are we looking at and I'll do a bit of research for you?

Cheers

Andy