Articles
This page is regularly updated with business and commercial finance related articles:
Commercial Mortgages
A commercial mortgage is similar to a residential mortgage in that funds can be borrowed over a long period of time, usually a maximum of 30 years, secured by a first charge on the property being bought. The property is known as security.
In taking first charge, the lender is first in the queue to recover any outstanding debt should the property ever have to be sold. This may happen because the mortgagee wishes to move on and sells, or perhaps has defaulted on the repayments causing the lender to foreclose.
If a first charge mortgage already exists, it is quite common for another lender to advance funds secured by way of a second charge which puts that lender as second in the 'security queue'.
Development Finance
Commercial finance, for property development purposes, is available through a number of major banks, some of which are more prominent in the market than others. This is probably due to the fact that it is perceived to be riskier business because developers sometimes mismanage a project and run out of money before it is finished. In such circumstances the bank would have to step in to rescue matters at a cost.
Someone seeking such development finance might either already own a property and/or piece of land, or have identified a plot for sale to suit their purpose. This could involve the conversion of a building (e.g. a large country house into a hotel), the development of a single dwelling on a small plot, or the development of a large block of flats perhaps on a derelict site. In all of these cases, the developer would need staged funding over a limited period rather than a long term mortgage.