Ten Reasons A Commercial Mortgage Is Beneficial For Your Business

A commercial mortgage gives individuals and companies the ability to buy property such as office space, manufacturing facilities and warehouses. Here are our top ten advantages to taking out a commercial mortgage.

1. Ownership is everything: When you take out a commercial mortgage to purchase a property, you legally take ownership of that property asset. As a general rule, property prices tend to rise over the long term in the UK, and therefore, if you hang onto the property for a given period of time you will be able to make a profit when you sell it on.

2. Repayments are tax deductible: When preparing your company accounts or your own Self Assessment tax return, you need to work out what expenses you are allowed to claim. HM Revenue and Customs (HMRC) generally consider that interest payments on a commercial mortgage are allowable expenses and so they can be deducted from your profit for tax purposes.

3. Stability: Not only is renting 'dead money' but rents are most likely to go up when the annual rent review is due, it's hard forecasting spending for you business when you do not know what one of your most important expenses is going to cost year to year. A commercial mortgage cancels this inconvenience out, the Base Rate changes might push up payments slightly when they change, but a monthly mortgage payment is normally lower than a monthly rent payment in most cases. Plus this obviously gives you a much longer term projection of outgoings, giving a more stable footing and outlook for your company.

4. Cheap Borrowing: Some businesses borrow commercial mortgages to consolidate other business debts, in much the same way that households have done with residential mortgages in the last ten years. If your business is paying a high interest rate on an overdraft, unsecured loan or credit card it might be more cost effective to use a commercial loan to pay these unsecured borrowings.

5.Make sure you are the landlord not the tenant: IF you decide to buy commercial premises, you might buy property that is too large for your overall needs. Whilst you can use the premises to expand into in the future, it also offers potential space for sub-letting in the short term. This is a useful way of generating extra income to help pay the mortgage. This is something that you will need the permission of the mortgage lender for.

6. Less unpredictability: When you take out a commercial mortgage, the structure of payments will tend to extend for a number of years. This gives some stability in terms of repayments, allowing you to focus on profit and loss instead of worrying about a unpredictable cash flow.

7. You are in control: Instead of raising a loan by selling a percentage of your business or property to an investor, you retain complete ownership if you have a commercial mortgage. A private investor would demand a share of any increase in the property value whilst a bank or mortgage lender is only entitled to an interest return on the mortgage. You retain the benefits of ownership of an asset that is likely to grow in value.

8. You Keep The Capital: A commercial mortgage by its nature is not a black hole that will bleed you company dry of every last penny of capital. You will need some capital for the deposit, but the rest obviously comes from the mortgage lender, leaving you with capital now and in the future to use to expand your business.

9. You Control The Property: As a tenant, there are no doubt many do's and don'ts from the landlord you have to abide by, it can be stifling for your business and working practices. Furnishings, decorations, parking might all be restricted; it won't be if your business owns its own premises.

10. Save Money: You might be paying interest on the mortgage, but overall you will most likely be saving money compared to renting a property. Even after rent rises and mortgage interest rates, a commercial mortgage comes in at a lower rate than rent would, a landlord is looking to make a profit and cover his expenses in a shorter time. A mortgage is repaying the loan over a long term period so has as much interest in setting a lower monthly payment rate, if your business does not prosper the lender won't get its money back.

As you can see, the advantages are broad in scope and commercial mortgages save more money than they lose compared to the alternatives.