More options finance commercial real estate
For many entrepreneurs a dilemma: continue to rent or buy a business property? Starting entrepreneurs often choose to rent. This gives more flexibility. In addition, traditional banks are less willing to provide business loans to start-ups than before. Especially after the new European regulations in which banks are bound by stricter rules, financing a business property has become more difficult. Financing small business premises is no longer interesting for banks because it has become unprofitable. In addition, as an entrepreneur you will have to deal with the fact that often only the first 50 to 70 percent is financed. The rest must be collected with your own money.
What are the benefits of buying?
That is why quite a lot of own money has to be invested to finance a business property. In most cases, starting entrepreneurs do not have this capital, which makes it difficult to obtain financing . Entrepreneurs with a track record or with a lot of their own money can more easily take out a mortgage for business premises. There are important advantages to this. The biggest advantage of buying a commercial property is investing in your own company in the long term. An increase in the value of the property can lead to a possible capital accumulation. And this capital can be reinvested in the company. In addition, the monthly costs are considerably lower than renting. And there is no need to take into account all kinds of conditions of the landlord. Keep in mind that with a purchased business space you sacrifice flexibility and are responsible for maintenance yourself.
How is a commercial property financed?
Real estate - which includes the business premises - is financed with a mortgage. This is a business loan with a relatively long term, such as 10 or 20 years. Many mortgage lenders finance 'only' 50 to 70 percent of the market value of the business space. Does an entrepreneur want to buy business premises? Then 50 to 30 percent must be deposited yourself. The ratio of the business loan (in this case the mortgage) to the value of the business premises is called the loan to value (LTV). In many cases, a mortgage does not cover the full purchase price of the business space. Suppose a commercial property costs € 300,000 and the mortgage lender finances 70%. In that case, the entrepreneur himself must still invest € 90,000. You can also opt for stack financing. Various financing arrangements are combined to complete the business financing.
Alternative financiers for commercial real estate
As an entrepreneur, do you have little money of your own and no additional collateral? Then financing a business property through the traditional bank can become difficult. Fortunately, there are extra options. Today there are many alternative financiers that focus on financing commercial real estate. Because the business financing market is hugely divided, each provider applies its own conditions. For example, one focuses on investment properties and the other focuses on buying small business premises. By comparing, a solution can certainly be found for financing a business property without a traditional bank. Always pay close attention to the differences in costs and conditions. Interest rates, repayments, commission fees and any repayment penalties can vary widely. Keep in mind that in most cases alternative financiers also ask for your own contribution. In addition, financing outside the bank is often more expensive.