How do commercial mortgages work?

[alanharper]

What are they based on? Are they based on the value of the business you are buying, or on your personal assets or on a mix of both?

[loans123]

Hi,
Lenders will look at the value of the property used as collateral and both the operating and credit history of the business to determine how much money they are willing to lend to a business.

A prospective lender will examine your track record to find out if you are credit worthy - ie likely to be able to pay back the money. They will look at your previous debts and see whether there is a history of any problems. If you have had problems with credit in the past, talk to your lender about it. Some credit problems have extenuating circumstances, which will allow for a loan to be granted, and some lenders may accept applications from business owners who have an adverse credit history.

Most lenders need to see the last three years’ accounts and an accountant’s certificate to assess affordability and the health of the business. They may also ask for a business plan, including cash flow projections for the following 12 months and a curriculum vitae for each of the applicants so they can assess business experience. They may also apply for personal status references as well as those for the business.