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Buying a business premises

23 May 2016
This article is part of our Business Premises Guide
Providing information to support business owners with some of the more common decisions and considerations that you would need to take into account when moving business premises, from taking a commercial lease or buying a property to tips on who you should seek help from at each stage.
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Business Premises Guide: Buying a business premesis

Buying a business premesis can work well for more mature and established businesses and gives more freedom in terms of making adaptations to properties.

Advantages and disavantages of buying a business premesis

Advantages

  • You are not subject to any rent reviews. Your business mortgage repayment is likely to cost around the same as rent
  • If the value of your property rises, you will benefit in the long-term if you decide to sell
  • Making changes to your property can be much easier. You may still require planning permission but there is no landlord approval needed
  • You have the benefit of long-term stability as you have ultimate ownership of the building
     

Disadvantages

  • Buying requires a deposit, the cash set aside for a deposit could benefit the business in other ways
  • There is less than half of commercial property for sale than there is to rent in the UK [1] so finding  premises to meet your requirements may be more difficult
  • If you have too much or too little space, there is less flexibility to adapt as selling can be time consuming
  • Ownership of a property means that you are responsible for all management and maintenance. Repairs and updates may have a substantial monetary impact on the business

Commercial Mortgages

Find out more about our full Business Premises Guide here or browse through the content below to learn more.

A commercial mortgage is the most common form of finance for the purchase of a building. Before you begin the process of searching for a commercial mortgage provider, you should have relevant documentation and business numbers prepared. Your lender will likely want to see:

  1. Audited accounts for the last two years
  2. A profit and loss forecast/ growth projections for the next few years
  3. Current business performance
  4. The personal details of the key stakeholders in the business for credit-checking
  5. Asset and liability statements for each applicant
  6. A business plan detailing how the property will contribute to your cash flow and how you plan on repaying the loan
  7. The credit status of the business
  8. Details of any personal investments involved

Note: Different mortgage lenders may require different information so check with them to find out exactly what they need to see ahead of a mortgage application.   

 

Calculating the cost of a commercial mortgage

In costing out mortgages, you should consider:

  • Booking fee
    This is also known as an Application Fee, this is the charge to ‘book’ or ‘reserve’ your mortgage funds whilst your application goes through.
  • Arrangement fees
    This is sometimes called a Completion Fee, it is the fee that your lender charges to set up your mortgage and is usually charged between 0.5% and 1.5% of the loan value.
  • Valuation Fees & Valuation Administrators Fee
    Cost of the lender undertaking a basic survey on the property to establish value, this is also known as a Mortgage Valuation.
  • Legal Fees
    Including legal documentation and surveys
  • Redemption Penalties
    A fee payable to the lender if you pay off your mortgage before your agreed term

Who can help with a premises purchase?

If you are considering buying, speak early on to your bank to see if they are prepared to lend you the money that you need. Typically banks will lend around 75% of the purchase price (subject to valuation) although this may vary depending on individual circumstances.

Business insurance with Premierline

It is important to make sure that you have the right insurance in place to protect the business that you have built. Every business is different and has its own business insurance needs, which is why we work with some of the UK’s most well-known insurers to ensure that you are getting the right insurance cover for your business.
Get quotes today
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