With a New Year under way, caution and a clearer understanding of commercial finance is a must to ensure any business, whatever size it may be; is free from financial strain and impending disaster. Independent business funding is, within today’s market, considered the leading option for all businesses; allowing a steady and secure repayment plan, tax deductibility, low interest rates, equity release and of course the end goal of property ownership. However; business owners can often find themselves stumped over the potential fees and charges their business may face.
Commercial mortgage fees and charges, additional or otherwise; will vary from lender to lender however, with a record number of businesses falling foul of surprise fees and hikes in 2012; a clearer understanding of all costs will ensure that in 2013; far fewer businesses suffer any disastrous financial consequences.
When choosing a business loan; the right lender will, at all times; discuss the entire process and all charges your business may face however, it is wise to ensure that, before you commence any form of agreement; you remain as educated as possible into the details of the finance option.
The common fees and charges associated with a commercial mortgage may include:
Administration Fee- This fee will be required to cover the cost of the administration work associated with the commercial mortgage process.
Arrangement Fee/Application Fee- This fee will cover the cost of arranging the commercial mortgage agreement and dealing with the entire application process. For many, this is often a standard fee however; high street lenders and banks have been known to manipulate this charge in order to cover any losses.
Valuation Fee- This fee will be required to cover the cost of the property valuation undertaken by your choice of business lender. A valuation is required to ensure that you will not be overpaying for the property in question.
Legal Fee/Conveyancing Fee- As with any vast financial agreements; legal work will be required. For the purpose of a commercial mortgage, legal work is required in order to complete the process of the business loan.
Booking Fee- This fee is often required to cover the work undertaken to secure a commercial mortgage with a specific interest rate (often required when securing a fixed rate mortgage).
Exit Fee- For those who chose to move their loan to a new lender or wish to remortgage their agreement, a fee may be charged.
Early Repayment Charge – This is a charge facing those who fully repay the existing balance of a commercial mortgage agreement; earlier than expected.
The above are the most common charges associated with a commercial mortgage agreement however; there are a few further factors that must be taken into consideration when opting for such an arrangement.
Loan Level- Keep in mind that a commercial mortgage is an agreement for a large financial sum. Take the time to determine the requirements of your business and also be wary of the minimum loan level offered by the lender.
Guarantee- Has the lender asked for some form of collateral? If the deposit of your commercial mortgage is lower than expected; you may be asked by your chosen lender to offer something as additional security. Many lenders may take the commercial property in question as additional finance but discuss your options before agreeing to anything.
Grace Period- It is not uncommon for many lenders to offer a period of grace; has your business been offered such? Some lenders may offer a certain amount of flexibility whilst others may refrain from such, again; be sure to discuss your options before committing to any agreement.
With the coming year still facing an unsettled economy, an unsure government and the threat of a looming triple dip recession; it is wise for all business owners to remain aware and as cautious as possible over any and all commercial finance agreements and the charges and fees they may face.
Are you aware of the charges that your business may face?