Setting up a mortgage for your business
Just as the majority of people will need a mortgage to buy a house, a company will most likely need a business mortgage to purchase the physical structure for their business. There are many types available, but the right business mortgage loan for you will depend on both your current financial position and your future plans for your business.
Types of Corporate Mortgages
Any business mortgage will give you capital to finance your office, restaurant or other place of business, but not all mortgages are created equal. A mortgage term can last from 5 to 30 years, but often requires a total payoff after a certain number of years. Since your business itself will act as collateral in exchange for the loan, you will want to make sure your mortgage has terms and conditions that you can handle; late or missed mortgage payments can be disastrous to your credit rating.
Some corporate mortgages are classified as non-recourse, meaning that the mortgage lender will be able to confiscate your collateral (and nothing else) if you're unable to repay the loan. The benefit of this type of mortgage is that it will protect your personal assets; however, business mortgages frequently include a clause that allows the lender to pursue the full value of the original loan if the building itself is not enough.
Mortgages fall into two main categories, and the nature of the interest payments in a fixed-rate mortgage for business will differ from those of a variable mortgage. A fixed-rate mortgage will have a set interest rate that will remain the same throughout the repayment period, while a variable rate will fluctuate according to the rise and fall of the market. Much of your decision will depend on the market trend when you apply for your mortgage: if the rates are on the rise, a fixed rate is probably the better option.
Applying for a Business Mortgage
Although it is similar to a residential mortgage, a business mortgage will typically require much more paperwork, due to the intricate financial history of an existing business or the considerable amount of planning involved in starting a new business. For you to be eligible for a mortgage, most lenders will require evidence of your positive personal credit history. Emphasize personal and professional stability in your business plan to increase your appeal in the eyes of the lender.
Depending on your credit history and the extent of your assets, you may be able to negotiate an attractive deal on your mortgage. However, just like when applying for corporate credit cards, you should shop around. After all, if you have a good financial history, lending institutions will offer a variety of rewards and reductions to get you to do business with them.