An Introduction to Commercial Development Finance

Whether you’re looking to take your first steps onto the commercial property ladder, or you want to kick start your next project, you will probably find that you need to source commercial funding.

There are a whole host of commercial development finance solutions available for landlords, property developers and investors. But the lending market can often be overwhelming, even for the most experienced property developers and landlords.

We’ve created a helpful introduction to commercial development finance – we hope that you find it useful.

What is development finance?

Development finance is a type of loan that releases a set amount of funds in stages, in order to cover the cost of the development of a commercial property.

The funds are generally released at set stages of the project and are typically taken out over a period of six to 18 months. So, for example, funds are released in the early stages to secure the property and then at various points throughout the project to allow for construction and refurbishment.

Once the project has been successfully completed, the property can either be sold or a commercial mortgage can be taken out against it.

Whether you’re completing a short-term refurbishment project, major renovation work or a ground up development, there are lots of development finance options available, designed to accommodate your project scope and time frame.

Commercial development checklist

If you’re considering applying for commercial development finance, almost every lender will ask for the following information before they start processing your application:

  • Details about your company
  • Your development track record, including evidence of experience and proven returns
  • Six years’ business accounts and tax returns
  • A thorough breakdown of project costs
  • Detailed development plans
  • Estimated gross development value (GDV)
  • Details of assets and liabilities associated with your company
  • Exit strategy plan

The amount you’ll be able to borrow depends on a number of different factors, including your credit history, how long you need the finance for, and your track record when it comes to managing and delivering successful property development projects.

There is also a range of other development finance options that can be used to tap into the commercial property sector, including commercial mortgages, bridging loans and auction finance.

Choosing a commercial mortgage for your exit strategy

Commercial mortgages are used to purchase a wide range of commercial properties such as offices, warehouses, shops and other commercial buildings. They are commonly taken out following a commercial development project.

Just like a residential mortgage, commercial mortgages allow property developers to purchase a building and spread the cost over a set period of time.

If you’re considering buying a commercial property, it’s important to speak to someone experienced in the sector to ensure you are aware of all the funding options available to you.

 

Get in touch to speak to one of our skilled and experienced team. Here at Stewart Hindley, we are always on hand to answer any of your queries regarding commercial mortgages and commercial development finance.

Bed & Breakfast Finance Going Forward

2020 is definitely going to be a year to remember. Life went from normal to “lockdown” overnight and hospitality businesses were closed down by the government. So does this mean that you won’t be able to buy a bed and breakfast or guest house in the future?

Of course not, what it does mean is that lenders will see the sector as a higher risk post Covid 19 and as a result loan to value ratios may change. Up until now the maximum loan a new to trade operator would have been able to secure on a bed and breakfast or guest house was 65% of the purchase price meaning you needed at least a 35% deposit plus funds to cover fees such as stamp duty, valuation etc. to be able to buy your dream property.

Going forward we are still to see how lending criteria will change but, having said that, Stewart Hindley & Partners have mainstream and specialist lenders who are still willing to lend on hospitality properties. We don’t know what society will look like after the Covid-19 pandemic has gone but one thing we do know is that many people will be looking to take more short breaks and staycations in the UK rather than travelling abroad.

Post Covid-19 could mean a boom period for bed and breakfast owners which would help them to recover from the sudden loss of their incomes and hopefully inject some confidence back into the sector.

If you are thinking about buying a bed and breakfast or guest house and need the best finance deal available to meet your circumstances speak to us here at Stewart Hindley & Partners as we are specialists in the hospitality sector and if we can’t help no one can!

Contact us today and you could have your own bed and breakfast.

CBILS Funding

CBILS Funding

Lenders are currently overwhelmed with applications and it may well take several weeks before the relevant lending manager gets to look at your case and then assess your application. At Stewart Hindley & Partners we have direct access to your local r lending or relationship managers. By using an FCA approved broker such as ourselves you can dramatically reduce the amount of time your application will take, get the best interest rate available given your circumstances and clarification of your situation in the immediate future.

Not every accredited lender can provide every type of finance available under CBILS, and the amount of finance offered varies between lenders. As “whole of market brokers” we have access to a wide range of lenders and will be able to find you a loan solution even if the prime lenders have declined to help.

Stewart Hindley & Partners will do all the work for you all you need to provide is the relevant supporting information.

The British Business Bank has a lot of information available to small businesses to help them access funds during this unprecedented time a summary of which is below.

The lender makes a decision

The lender, not the British Business Bank has the authority to decide whether to offer you finance.

Under the scheme, lenders will not take personal guarantees of any form for facilities below £250,000.

For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but:

  • they exclude the Principal Private Residence (PPR), and
  • recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied

 If the lender turns you down

If one lender turns you down, you can still approach other lenders within the scheme but this will be considered as “new to bank” and differing qualifying criteria may apply.

Access to the scheme has now been opened up to smaller businesses facing cashflow difficulties who previously would not have been eligible for CBILS because they met the requirements for a standard commercial facility.

You may therefore consider re-contacting your lender if you have previously been unsuccessful in securing funding.

Who is eligible

Your business must:

  • Be UK-based in its business activity
  • Have an annual turnover of no more than £45 million
  • Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic
  • Self-certify that it has been adversely impacted by the coronavirus (COVID-19).

View the British Bank Quick Eligibility Checklist

https://www.british-business-bank.co.uk/wp-content/uploads/2020/04/CBILS-check-list-v10.pdf

Businesses from any sector can apply, except the following:

  • Banks, insurers and reinsurers (but not insurance brokers)
  • Public-sector bodies
  • Further-education establishments, if they are grant-funded
  • State-funded primary and secondary schools

View CBILS frequently asked questions for businesses

https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/cbils-faqs-for-smes/

 What lenders will need from you

When you apply for a business loan, most lenders will ask you for the following:

Details of the loan

  • The amount you would like to borrow
  • What the money is for — the lender will check that it’s a suitable business purpose and the right type of finance for your needs
  • The period over which you will make the repayments — the lender will assess whether the loan is affordable for you

Supporting documents

You will need to provide certain evidence to show that you can afford to repay the loan. This is likely to include:

  • Management accounts
  • Cash flow forecast
  • Business plan
  • Historic accounts
  • Details of assets

The above requirements will vary from lender to lender. If you do not have everything listed here, a CBILS loan could still be an option to provide finance to support your business.

Note: For many customers approaching their existing lenders for a smaller facility, the process may be automated and therefore may not require the same level of documentation.

To learn more about lenders’ requirements, see the Better Business Finance lending application checklist.

Here’s the link – https://www.british-business-bank.co.uk/wp-content/uploads/2020/04/BBF_factsheet_-_lending_application_checklist.pdf

How To Turn Your Home Into a Guesthouse

Running a guesthouse can be rewarding and fun, not to mention a great way to make money from your property without having to sell it.

However, it’s important to keep in mind that running a guesthouse is a big commitment, and there are rules to follow and standards to meet.

Here are just some of the things you need to consider if you’re thinking of turning your home into a guesthouse.

Starting a guesthouse business

Get The Relevant Permissions

Before you can open your guesthouse, you’ll need to acquire the relevant permissions, so your first step should be to contact your local council to see what is legally required.

If you’ll be carrying out building work on the property, you may need to apply for planning permission. Regulations change frequently and vary depending on where your property is located, so be sure to check in with your local planning office.

Even if you aren’t making any structural changes to the property, you might need to complete a change of use application before you can open your home as a guesthouse. Again, ensure you check these details with your local council.

You’ll also need to comply with fire and gas safety legislations, as well as food standards if you’re planning on serving any meals on the premises.  Find out more by contacting your local environmental health department.

Finally, make sure you contact your mortgage provider and insurer. You may need to update your policy and will need to switch your existing mortgage to a commercial mortgage.

Fit Out The Guest Rooms

Once all the relevant permissions are in place, you’ll need to ensure that your property is up to the job of hosting visitors. That means properly furnished bedrooms with facilities including WiFi, TVs, storage space, and tea and coffee making facilities. Today, most guests will also expect their room to come with an en suite bathroom.

If you’re offering breakfast or other meals at your guesthouse, you’ll need a dining room where your guests can comfortably enjoy their meals.

Finishing touches such as bathrobes, slippers, and washing products can go a long way to ensuring your guests have a memorable experience.

Market Your Guesthouse

If you want to promote your guesthouse effectively, a good website is essential – make sure it’s responsive on all devices, appealing, and optimised for search engines such as Google. Social media platforms like Facebook and Instagram are also useful ways to market your guesthouse successfully.

Running Your Guesthouse

Running a guesthouse can be immensely enjoyable and rewarding, but you’ll also come up against several challenges.

One thing to always keep in mind is that this isn’t just a hobby, you’re running a business and it’s important to approach every aspect of your guesthouse with a business mind to ensure that it is a success.

That’s not to say you shouldn’t have fun! Part of the attraction of running a guesthouse is the interaction with guests, building lasting friendships and ensuring visitors get the most out of their stay.

Running a guesthouse is flexible – you can choose when you want people to stay and when you’d rather have the space to yourself. But it’s important to set boundaries if you want to avoid working 24/7 and burning out. Have house policies in place, including setting out the times breakfast will be available and when reception service will be provided.

Get In Touch

If you’re thinking of turning your home into a guesthouse, get in touch. We can help you find the most effective way to re-finance or release capital to launch your guesthouse.

6 Things You Need To Know Before Buying Commercial Property

Guest Blog

In most circumstances, buying property can be considered a sound investment. This applies as much to commercial property as it does to a domestic property purchase. But in the same way that you would not buy a private house until you had gone through all the checks and put everything in place ready to make an offer, commercial property also requires that you attend to certain preliminaries before making any commitment. So here’s a list of six tasks which should definitely be on your to-do list.

  1. Does this property meet your business needs?

It’s true that a rental property may offer a business a certain extra degree of flexibility, but the downside is often that the business owner has little control over future rental costs. By comparison, a property owner agrees mortgage terms at the outset and therefore has much more control over future outgoings. In addition, where business tenants may have limited options to modify their premises, commercial property owners are free to make any alterations their budget (and the local planning laws) will allow.

It’s usually wise to invest in something slightly larger than you currently require. That means you have room for expansion when needed, and there’s always the option to rent out part of a building to generate additional income while leaving yourself some flexibility to make further changes as required.

Remember too to check ‘business basics’ like adequate parking facilities and good access to the transport links your business trading demands.

  1. Is this the most suitable type of property?

Unless you are an experienced investor, don’t buy a commercial property just because it’s an irresistible deal. Commercial property falls into distinct categories such as business offices, retail premises, industrial sites, leisure accommodation and special-function units like schools and petrol stations. As a novice, that means you should always go for purpose-built property and forget any ideas about conversions and/or complexities like possible ‘change of use’ applications.

  1. Have you set your budget?

Your pending commercial property purchase is a business acquisition and thus will need to feature in your business development plans. That in turn means exploring, and fixing, the budget you have available prior to searching the market. And given that this purchase is also a business investment, part of your planning should also quantify what return you would expect for this capital injection, and specify the period over which you will reap the rewards.

  1. Optimise the location

Most high-performing businesses will positively benefit from an optimum location chosen wisely. That means making relevant decisions e.g. about city-centre or out-of-town sites, the location of your potential market, how close you want to be to your rivals, as well as considering the future growth potential of the area.

This is one element where it will pay to speak to professionals such as estate agents and business brokers.

  1. Assess the local property market

To make an informed decision, you will need to check features such as: local commercial property values and pricing trends, property taxes, mortgage interest rates and rental values. This will give you detailed information about how much your proposed commitment might cost, and what returns you might expect. And as regards investment returns, your analysis will be more helpful if it can establish what your short-, mid-term and longer-term prospects will look like.

  1. Check commercial mortgage availability

There is, of course, little purpose in searching for a property if you are not eligible for mortgage funding. This should be considered as two separate issues:

  1. a) gaining acceptance ‘in principle’ for commercial mortgage funding up to a certain amount;
  2. b) securing a commercial mortgage on a property you intend to purchase.

Obtaining a mortgage in principle is largely a matter of having a good credit record and meeting a provider’s lending criteria, whereas agreeing a mortgage on a specified property is likely to involve detailed structural surveys and property assessments.

Here again, it is likely to be in your interests to seek specialist advice in each of these areas, especially given that commercial mortgage providers will require such detailed information to decide whether they wish to quote mortgage terms.

Finding a commercial property

You may find commercial properties listed on different online sites and perhaps be tempted to go it alone armed with your portfolio of information. However, just as in the domestic property market, the input of local professionals and/or those who specialise in your business sector can prove invaluable. They will ensure you find the best property for your needs and secure a good purchase deal which meets your business investment objectives.

By Matthew Hernon is an Account Manager at Dynamis looking after Business Transfer Agents, Franchises and Commercial Properties across BusinessesForSale.com, FranchiseSales.com and PropertySales.com.

What You Need to Know About Financing a Pub Purchase

Many people who run pubs start off as tenants or leaseholders before considering buying a freehold once they’ve built up their knowledge, skills and experience.

Buying a pub and running it as a free house means you will be an independent business without any ties to a specific brewery or company – so you’ll be fully in charge of every decision.

Of course, buying a pub will usually require some form of finance. If you’re thinking about buying a pub, here’s what you need to know about financing a pub purchase.

Commercial mortgage for pubs

Taking out a commercial mortgage is another way to fund your pub. Working in the same way as a traditional, domestic mortgage, a commercial mortgage will be secured against the property and can form up to 75 percent of the market value of the pub.

Commercial mortgages can be surprisingly affordable. Unlike residential mortgages, they do not have standard rates of interest, meaning the lending manager will look at each application on its own merits in order to determine the level of risk involved and set the rate accordingly.

Of course, securing a mortgage that allows you to buy a freehold or leasehold pub naturally involves several different steps to those required to finance a house purchase.

Merchant cash advance for pubs

While a merchant cash advance is not a suitable finance method for funding the initial purchase of your pub, it may well provide an effective solution for covering costs such as equipment or other unexpected expenses, as well as expansion, stock, or renovation.

If you have a sudden or unexpected need for finance to keep your pub running and your customers happy, a merchant cash advance could provide a quick and flexible solution. This type of pub financing works particularly well for pubs that accept credit and debit card payments, as the advance is repaid this way.

Expert advice

If you’re looking for funding to finance a pub purchase, one of the first things you should do is consult a specialist broker who will be able to provide further information about the options available to you, and search the market for the best possible offers.

At Stewart Hindley, we are experts in this sector. Get in touch to find out more or to arrange a completely free, no-obligation consultation.

Everything You Need to Know About Commercial Mortgages

Whether you’re thinking of investing in a property for your business or you want to free up equity from an existing property, a commercial mortgage could be the answer.

Here’s our guide to everything you need to know about commercial mortgages.

What is a commercial mortgage?

A commercial mortgage is a mortgage that is specifically designed for buying or refinancing land or property for business purposes.

Commercial mortgages are typically available to cover 70 – 75 percent of a property’s value, and usually last between three and 25 years. Business mortgage plans differ from standard residential mortgages in several ways.

You’ll likely have to pay a higher interest rate than a residential mortgage and there aren’t generally any fixed rates available. However, in comparison to business loans, commercial mortgages do tend to offer better rates as they are secured against the property.

Is a commercial mortgage right for you?

If you’re a business looking to purchase a property or release value from an existing building, which can then be re-invested into the business, a commercial mortgage could be for you.

There are several benefits to taking out a commercial mortgage, for example:

  • The interest paid on a commercial mortgage is tax deductible
  • If the property increases in value, your equity could also increase

Is it hard to get a commercial mortgage?

Anyone can apply for a commercial mortgage, from small start-up businesses through to large, well-established enterprises.

Of course, like any mortgage, to qualify for a commercial mortgage, you’ll need to pass your lender’s eligibility checks and meet certain criteria. These checks typically analyse:

  • Cash flow and any debts
  • Projected income
  • Your ability to pay a deposit, usually ranging between 20 – 40 percent of the loan amount
  • General income, credit and assets

Just like a residential mortgage, it’s important to search the market for the best possible deal available. What’s more, commercial mortgages are generally quite complex, hiring a specialist broker can help make the application process far easier, while ensuring that you get the best deal on the market.

At Stewart Hindley Commercial Finance, we’re experts when it comes to commercial lending. With extensive market experience and knowledge, we can provide information and advice, and source the best possible deals.

Get in touch for a free, no-obligation consultation to discuss your commercial mortgage requirements.

Commercial Property Finance – Invest in your Business

The Federation of small businesses reports that there were 5.6 million small UK business at the start of 2018, and the UK real estate market is still a very desirable investment. The appeal of owning commercial property, whether to run a business from it, or rent out the space is keeping the UK commercial property finance market a highly competitive industry.

There are many types of commercial property finance, and many factors that influence the type of lending required. Industry, length of term, size of business and client risk profile are all aspects that potential commercial lenders will assess.

Anyone can apply for commercial property finance from small start-ups to large established businesses. Some lenders are more specific to the industry for example; hospitality or retail and can offer more specialised plans depending on the property investment and circumstances.

Adaption and flexibility

Commercial lending has had to adapt in recent times as owners and tenants are demanding more flexibility. Commercial office space in particular has had an influx of people looking for flexible working spaces. The evolution of “hot desks” and remote working requires owners to provide shorter leases to tenants.

The commercial property finance industry has had to meet the changing needs of commercial property investors, moving away from very rigid lending solutions and offering more customisable commercial lending options.

Owner vs Tenant

The commercial property market is not just for investors. When owning and operating a business there are many reasons to consider commercial property finance and purchase a building as opposed to renting a space.

Depending on the type of commercial property acquired, mortgage payments may not differ greatly from rental payments. Property prices are frequently rising so there is always the opportunity for capital gains and a premises could experience a significant increase in value over a short time.

Expert Advice

Working with a broker like Stewart Hindley is advisable when considering commercial lending. Extensive market knowledge means they can source the best deal available and offer expert advice on how to proceed. Commercial property finance can be quite complex and it is important to have a strong understanding of what potential lenders may need and how to present an attractive proposal to successfully secure commercial lending.

Stewart Hindley Commercial Finance can advise the type of funding you are likely to need following a no obligation consultation and suggest the best approach.

Get in touch today to discuss options available.

7 of Britain’s very best boutique hotels

A relatively new addition to the hospitality trade, boutique hotels, thought to have been created in the 1980s, are typically small, independent businesses containing anything from 10 to 100 rooms. The very name suggests accommodation that is chic, classy and luxurious – that’s certainly what guests expect, at any rate.

We’re always helping new clients secure commercial business mortgages so they can open their very own boutique hotels – and with access to hotel finance, plenty of research and lots of attention to detail, there’s no reason why theirs couldn’t emulate the country’s best boutique hotels. Like these:

 

Randy Pike, Lake District

HOTEL FINANCE
Situated in the beautiful Lake District, Randy Pike is a converted gentlemen’s hunting lodge which has been recently renovated. The three large suites (with ‘a bathroom virtually the size of Luxembourg’) have been decorated meticulously, in keeping with the original features and without detracting from the wonderful views outside. The owners, Andy and Chrissy Hill, have earned legendary status on TripAdvisor.

 

Monachyle MHOR Hotel, Balquhidder, Perthshire

hotel financeImage: Monachyle Mhor Hotel by Raymond Chisholm

This award-winning 14-room hotel is set in the wooded banks of atmospheric Loch Voil. The 18th Century farmhouse has been renovated into a contemporary, stylish property, with design elements which were influenced by nature and the immediate surroundings. It contains incredible suites – some with their own log burners – and a restaurant which serves a-la-carte dishes. The hotel has been described as ‘exceptional’. You can even arrange to arrive by seaplane.

 

The Plough, Kelmscott, Oxfordshire

hotel finance
Deep in the Cotswolds is the delightful Plough Inn, the perfect spot from which to explore the neighbouring countryside. Retaining its traditional feel, the refurbished inn serves delicious food, while the seven double bedrooms and one single are light and airy, each with a luxurious modern bathroom. The entire inn emanates Cotswolds charm.

 

The Grove, Narbeth, Pembrokeshire

Hotel finance
Given an – in our opinion – ungenerous 8/10 by the Telegraph, The Grove is a stunning country house hotel which is nestled in a four-acre glade close to the Preseli Hills. With numerous accolades to its name, The Grove was restored from dereliction in 2007 and prides itself on sustainability. There are 14 immaculate rooms situated in the house itself plus several cottages, each one sumptuously decorated and furnished.

 

Kemp Townhouse, Brighton

HOTEL FINANCE
Chic and luxurious, the Kemp Townhouse is the epitome of elegance. A grade-II-listed building situated in one of Brighton’s most cosmopolitan areas, it is beautifully presented and deserving of its enjoyEngland.com and TripAdvisor accolades. Each of the rooms, ranging from the extravagant Four-Poster Feature Room to the Cosy Single, have been decorated to an extremely high standard.

 

The Zetter, Clerkenwell, London

Hotel Finance
Located in London’s east end is a former Victorian warehouse which has been reborn into an eco-friendly oasis of 59 ‘quirky vintage-modern style’ rooms. Choose from stunning rooftop studios or perfect rooms which feature smart TVs, a ‘rain dance’ shower and mood lighting – there are even hot water bottles and umbrellas to use, should you need. The Zetter is place with buckets of style and a lot of class.
 

The Fitzwilliam Hotel, Belfast

Hotel finance
Full of character and thoughtfully designed, the Fitzwilliam Hotel is vibrant, modern and that little bit extravagant. The suites are super-stylish with mini sound systems and plush, comfy beds, all featuring top quality furnishings from the distinctive purple and yellow colour palate. With its own bar and restaurant, it’s the ideal place from which to start your Belfast adventure.

As you can see, there are some beautiful examples of boutique hotels out there; more important is the fact that there’s a demand for such lovely accommodation. Yours could be the next big thing!

If you’re interested in opening your own bijoux boutique and would like to find more out about hotel finance, please get in touch, we’d be delighted to chat through your options.