Posted on: 23 May 2016
Buying can work well for more mature and established businesses and gives more freedom in terms of making adaptations to properties.
Some of the advantages and disadvantages of buying business premises
You are not subject to any rent reviews. Your business mortgage repayment is likely to cost around the same as rent
Buying requires a deposit, the cash set aside for a deposit could benefit the business in other ways
If the value of your property rises, you will benefit in the long-term if you decide to sell
There is less than half of commercial property for sale than there is to rent in the UK  so finding premises to meet your requirements may be more difficult
Making changes to your property can be much easier. You may still require planning permission but there is no landlord approval needed
If you have too much or too little space, there is less flexibility to adapt as selling can be time consuming
You have the benefit of long-term stability as you have ultimate ownership of the building
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
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:
Audited accounts for the last two years
A profit and loss forecast/ growth projections for the next few years
Current business performance
The personal details of the key stakeholders in the business for credit-checking
Asset and liability statements for each applicant
A business plan detailing how the property will contribute to your cash flow and how you plan on repaying the loan
The credit status of the business
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.
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? 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.
View our full business premises guide here or browse through the content below to learn more.
- Making the decision to move premises
- Taking a business lease
- Taking a business licence
- Buying business premises (You are here)
- Finding the right premises
- Building surveys for business premises
- Planning permission for business premises
- Business premises insurance
- Additional costs of business premises
- Making an offer on business premises
- Moving business premises
 PIA Property Data Report 2015 Final – Royal Institution of Chartered Surveyors
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