Commercial
lending is a financial loan for business purposes.
Traditionally a bank may generally loan up to
70% LTV (loan to value) so the business would
put down 30% as a deposit. The bank will usually
want to see a lot of business records including
trading accounts, profit and loss, balance sheet,
monies outstanding, monies owed, trading projections,
bank statements and a business plan. The bank
may request that the directors of a company
if it where a limited company put up their own
houses as security to the debt. A minimum track
record of trading normally three years will
have to be demonstrated.
Business loans may be regarded as higher risk
than residential lending this is due to the
fact that a very high percentages of new business
will not be trading after five years and even
after five years many businesses cease trading.
Running a business is high risk and very vulnerable
to outside influences for example European regulation,
red tape, competition, changing markets and
channels of distribution.
A good example of this is over the last few
years trading over the internet has dramatically
increased and therefore has seriously adversely
affected shops' trading figures. Because business
is risky great care and business research should
be conducted before committing to commercial
finance to ensure success or reduce the risk
of failure. Another example is how the large
supermarkets have severely affected local shops'
trade, with massive buying power and household
branding.
More
recently commercial lending has shown to be
a developing industry with the arrival of new
lenders whom have a border view on lending to
business. For example they allow self cert,
85% LTV, no trading figures or track record
and adverse credit. This though comes with a
price of higher interest rates and longer tie
in periods.
|
