How we assisted a client with 100% borrowing for their new commercial premises – Case Study
At Mesa Financial, it is not only residential mortgages we assist our clients with. We love to assist with the more complex lending requirements. So when one of our clients came to us with a predicament regarding a new purchase of their trading premises we relished the opportunity. Due to amount of vehicles and stock this company had, they needed a large warehouse space with light industrial usage. They also wanted a period of time where they could have both sites at once so they could did not have to rush the transition period. The existing premises had exchanged to a developer with a long stop completion. Although this completion has to be actioned by January 2019.
The onward purchase price agreed is £900,000 and the overall lending requirement is £900,000. There were already £180,000 in borrowing with their existing lender against the unit. This valuation as a trading unit was last valued by the lender at £500,000. Looking at the whole scenario this gives a LTV of 77% across both assets, which is usually out of most commercial lending LTV criteria points.
After doing some digging on the exchange amount, it came to light there were a £2,500,000 figure agreed in the contract of the existing unit. We were then able to negotiate with the existing lender to be able to use this figure when assessing the debt. This allowed us to set up the following structure.
£630,000 @ 2.5% over base rate term loan on the new purchase property
£270,000 @ 3% over base rate, loan amount to be paid within 4 months of completion on the new site
This also allowed us to avoid paying for two valuations as the existing lender already had the charge from the existing debt. Essentially we were able to give 100% lending for the onward purchase, which give them huge flexibility when trying to manage the movement of premises. This would have usually been a stressful time to any business, but due to the understanding of the bank a majority of this stress has been taken away. When advising on commercial borrowing it is extremely important that the structure of the borrowing completely aligns with the business and compliments what they are trying to achieve. This lending fully confirmed the banks support toward their client and also filled us with confidence as the advisor for future clients to be placed with this bank.