More UK SMEs expecting to purchase their premises in the wake of the pandemic and increasing interest rates.

In a recent article published by Allica Bank, it was found that commercial mortgage brokers expected to see a sharp increase in commercial property sales, with 42% expecting to see more SMEs consider purchasing their premises as opposed to renting.

With rising interest rates and hiking costs such as rent, energy and other charges, businesses are looking to acquire freehold assets. This is mostly in the form of purchasing their trading premises. 65% of brokers said they’d noticed more SMEs are looking to raise capital for this reason. For many business owners, this decision has been made in a bid to avoid navigating a fluctuating rental market and the uncertainty of tenure. Further, as a result of spiralling inflation, businesses may seek to manage rising costs by focusing on sustainability & energy efficiency projects.

The data (provided by Allica Bank), comes from a new survey that polled 161 of its broker partners. This research identified that many businesses were also taking measures to protect against the inevitable future interest rate rises. More than half of brokers say there is demand among their client base for 10-year fixed-rate mortgages. Meanwhile, 5-year fixed terms were in significantly higher demand than 2 and 3-year terms.

Although we’re seeing more businesses look to purchase premises, there’s plenty to think about before securing a Commercial Mortgage facility.

These considerations include:
  • The requirement for a deposit contribution towards the purchase price. This is typically a minimum of 25% of the value of the property. Should your business not have sufficient levels of spare cash, PMD may be able to help finance the deposit
  • The costs associated with deal such as Stamp Duty, Bank Arrangement Fees, Valuation & Legal fees.
  • Ongoing capital expenditure to maintain the upkeep of the property after purchasing.
  • Most funders will expect the property to meet a minimum Energy Performance Certification as a condition of mortgage. With the emergence of the Green Economy, many Banks & Specialist Lenders have allocated specific pots of capital to lend on energy efficiency and sustainability projects at advantageous rates & terms for borrowers.

Considering purchasing new trading premises?

If you’re considering purchasing new trading premises, PMD can help via our dedicated Property Finance Team. We have access to an extensive panel of funders made up of High Street Banks and Specialist Property Lenders. This allows us to secure the best deal for the business. We can provide Commercial Mortgage solutions to Limited Companies, Partnerships, Pension Funds & Sole Traders. Additionally, we can assist with raising deposit monies and costs associated with moving to new premises.

We recently supported a Derbyshire-based manufacturing business in purchasing new trading premises with a 15-year term Commercial Mortgage. The business was able to generate immediate cashflow savings with the monthly loan repayment working out to be more than £800 cheaper than their previous monthly rental costs!

If renewable energy and sustainability matters to you, you’ll be pleased to know that we have experience financing renewable & energy efficiency projects such as solar panels, wind, LED lighting and biomass.

PMD’s dedicated Property Finance team are able to source variable and fixed rate loans to suit your current needs. For more information, get in touch with John Platt on 07706311787.

Get in touch with us to get more information on our full service offering.

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