Short term commercial mortgages rely on an exit route and this has been the problem for alot of clients who need the benifit of a short term facilty to create some breathing space abd enable them to plan ahead. As the banks crawl back into the lending market place we all hope that the exit routes start to appear and business will start to blossum where it is currently stagnating.
Confidence apart from cash is king in the property market. There are so many properties up for sale that are being sold way below market value, and short term commercial finance enables the investors to purchase these properties at bargain prices, spend a little of money on a refurb and either sell on or refinance and take out the profit.
We desperately need access to commercial mortages, finance, and flexible banking to get business on the move, we have the short term finance now the banks must step in and start lending, or it will be a very long winter indeed.
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( 3 / 124 )As the government continues to print money as part of its quantitive easing programme and runs around the banks with a begging bowl asking them very nicely if they would not mind lending some of the many millions that have been pumped in to them. Commercial mortgage and finance brokers can confirm that we have not seen any sign of the long awaited green shoots of recovery in lending.
It maybe good for the banks to off load their toxic loans and rebuild their balance sheets and smell of roses but it is not helping business to recover.
The government have launched their much vaunted Enterprize Financial Guarantee Scheme, and help with SMEs but the funds are not coming through and do the banks and business advisors have enough information on the schemes and how they can help.
The banks are so negative at present you begin to wonder if they have forgotten how to lend, and when they do expect your family jewels, inside leg measurement, personal guarantees and a floating debenture to form part of any loan document.
To go forward businesses must have access to commercial mortgages and finance, and our very highly talented commercial mortgage brokers must have the confidence to approach lenders and expect a very much higher degree of success with the applcations that are of a straight forward nature.
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( 2.9 / 132 )In this very difficult market a good commercial broker will not just save time and make life a little easier in trying to obtain a commercial mortgage, they will know who is still lending, and on what, and if it is possible to get finance for the proposed property in the credit crunch.
A number of lenders have just closed the doors to new business, and most of the others are cautious and do not want to lend on anything that may be seen as risk.
As we all know any business has some risk attached to it so expect to pay a higher margin against BOE and see charges that will reflect the lenders stance in this very difficult market. Certain sectors of the market for some lenders is just a no go area, because they feel over exposed in that sector or the prevailing market conditions are not attractive.
Investment commercial mortgages are attractive to lenders if the tenants are high street names, they have a lease that is FRI with a long term left on the lease, 3/5 year rent reviews and no break clauses.The lender gets comfort if the rental income will service the mortgage payments by a margin, normally around 130--140%.
The actual trading position of the client is then not so important, as long as we have good coverage of the mortgage interest payments. New business start ups are very difficult unless you have good backing and lots of experience in that particular trade.The quality of your presentation to the lender is crucial to your success and advise should be sought on the best way to acheive this.
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( 3 / 123 )Short term commercial finance is still the driving force behind many of the current property deals that are completing in the current market, especially those where clients maybe buying below market value. ( BMV ).
In the current market where vendors who want to sell have had to take a deep breath and agree to sell well below their expectations if they want to sell today, rather than sit and hope for better times, which are if the market if is correct around 12 months away.
Also we are seeing Auction Houses showing that the buyers of commercial property are around,but everybody is looking for a bargain, and with the amount of repossessions that are coming to the market the bargains are there.
This where short term commercial finance comes into its own, its quick because its based on the bricks and mortar valaution and is is low loan to value and therefore is deemed to be low risk.
A defined exit route is normally required, but if the lender feels that a take out is possible given the circumstances of the property and the client, short term can mean 1 month or even 24 months.
In an ideal world short term commercial mortgages and finance should be excactly that, as the costs of short term finance can be expensive, and profits can soon be eaten away if the clients have not done there due diligence.
We just need the banks and commercial lenders to come back into the market aggressively in order that taking out some of the short term commercial mortgages and finance is not the problem it seems to be in some circumstances.
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( 2.9 / 133 )There still seems to be no softning at the underwriting stage of most commercial mortgage applications with lenders still finding it much easier to say no at a very early stage rather than do battle with the credit committee in trying to get a case through.
Just how many good cases are getting the early bath rather than play until full time to try to get good cases through is very difficult to quantify, but it does suggest that some BDMs are giving up the race at the first hurdle rather than try and negoiate a possible route to success.
It must of course be very frustrating for the BDMs if they keep getting knocked back by the credit committee, but if you do not try and fight your corner, how can we take this very difficult market forward. If a case is a good case, and a commercial mortgage would be appropriate, then we have to do all we can to get the BDM to present in its most favourable light.
A competant commercial mortgage broker takes a long time to build up relationships with lenders you then have faith in the broker to bring them good quality business, and that broker is far more likely to get your application through because he is aware of the lenders attitude to sectors in the market and what appetite they have to lend in this area of business.
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( 2.9 / 139 )Short term or bridging finance still seems to be the driving force behind so many deals that are still being done today despite the banks being unwilling to lend in certain areas.
If you have cash in this market then you are set to make a lot of money in the future when the market comes back. Cash is King and never so true as now in this market where only the brave will survive.If only the banks would trust the clients who have proved over time that they know what they are doing, they would be building up good lending on low loan to value with good rental coverage.
Short term finance has filled the void but for how long can this go on without the banks coming in to take out the initial finance and replace with long term commercial mortgages. Short term finance was never meant to be open ended, but that is what is happening when clients take a flyer on a deal in the knowledge that they have nothing in place to take out the short term facility and are looking for a change in the market to enable banks to come back with confidence.
The lenders must make a real return to the market not a token one, and get businesses thriving again, lending to expand and get some of those workers off the dole queue and back to work paying tax and helping the country to get back on its feet.
Commercial mortgages, finance, and business loans is the life blood of bringing industry and business back to life, the banks must reach out and start to lend and lend now.
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( 2.7 / 152 )The lenders although very cautious in the current market conditions still find commercial investment properties far more attractive as a proposition to lend on than the owner occupied property.
Lenders are looking for clients with long commercial leases, FRI and 3 or 5 year rent reviews, and if possible a recognised tenant with good financial strength.
Provided that the rental income services the mortgage interest by an acceptable margin, the clients own trading position is not irrelevant, but far less important, as lenders want to see that any investment property is self financing.
The margins by which lenders calculate affordability have certainly got wider as lenders tend to use notional rates to calculate coverage rather than the actual BOE base rate because as we are all aware rates will not stay at this level and lenders do not want clients to over extend themselves in this current market, in the certain knowledge that many clients would suffer when BOE rates rise to anything like the previous levels at between 4--5%.
Most investors have tended to go for maximum leverage, which would not be wise in this current low interest rate market.
We can expect most commercial mortgages to be set with a margin around 3---4% above base, and with BOE at 0.5%, its a very good deal. However with BOE at 4% its a very different story, and this be upper most in our minds when we look to see how any loane maybe covered in the future.
LOng term planning and doing our due diligence with the future interest rates in mind is so essential to make sure that we do not run into trouble with a commercial mortgages in a very different interest rate climate, when servicing the debt maybe a little harder.
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( 3 / 125 )Why do we need to seek the services of a commercial mortgage broker when we might just as well ring round ourselves and try to get some interest in our proposal, what are the advantages of using a commercial mortgage broker.
If we had a normal market you could argue that you have all the time in the world and could do your own research, and maybe get lucky and find a lender who will help you. Whether you have got the best terms for that loan remains to be seen.
However in this market more now than at any time in the past the services of a commercial mortgage broker should be sought to help you through the process of obtaining a commercial mortgage. Lenders are very cautious at present and anything that even smells like it may have some risk, receives a polite no.
You need to know your market and the lenders in it, and what they are looking for. A good relationship with a lender is worth its weight in gold to have them trust you and know that you will only introduce quality business.A lender will always try to help a good introducer,both in terms of service and the lending terms. That relationship cab be worth 0.25% on the rate and a tweak on the fees.
Nobody wants bad business, and those that have accepted it in the past are no longer lending, which tells its own storey. A good commercial mortgage broker will know where to look for the right lender to lend in your particular circumstances and how far he can go to squeeze the best lending terms for you out of the lender.
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( 3 / 134 )Have we seen any major changes over the weekend to give us that little bit of confidence that now we are in springtime the sun is about to come out on the world of banking and finance.
It would be nice to report that the sun has got his hat on hip hip hip hooray and life in financial terms is back to normal. It is to early to say if the quantitive easing, or the printing of extra money has had any impact on the banks attitude to lending, bcause this was a massive decision to make, like dropping a national icon, Bobby Moore from the England Team, you cannot be sure if you have done the right thing and only time will tell if it going to work. The cost of failure is unthinkable, a short sharp painful shock we can cope with, but years of depression is not on the agenda.
If we can just get the banks to see that siiting on balance sheet does not help anybody, we have to get the wheels of industry and business back on the road to recovery and access to commercial mortgages, finance and business loane is a must and the sooner the better for everyone.
The banks have to turn on the tap and get the money flowing again around the markets. You cannot starve businesses of cash flow and expect them to survive and grow. Without growth and confidence there will be some very long dole queues for a very long time.
Lets say it again just in case the banks did not hear us, we need access to commercial mortgages, finance, business loans and flexible banking NOW.
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( 3 / 127 )Those two magic words that most of us have never heard of let alone know what it means, come into play today for the first time in recent times QUANTITIVE EASING.
What in english does this mean, printing more money and punmping it back into the economy. Sounds quite simple, well if it was why did we not do it before. Lets not go there, most people use commom sense before we make a decision, very saddly there are not any schools who teach this degree and most of our ex UNI people who leave stuffed full of degrees in all sorts of ollergees, do not not have a clue what you are talking about when you use those magic words, ITS COMMON SENSE,god help us.
In order to get our banks lending again the first purchase of £2 billion worth of government bonds from financial institutions will start today.If we pop down to our bank tommorrow full of the joys of spring and ask for help with our commercial mortgage, finance, or business loan will we get the thumbs up and the red carpet treatment. Please let me know how you get on.
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