Many businesses that grow are faced with needing a much bigger warehouse to store their supplies and products.
Buying or renting?
The first consideration is whether to buy or rent a new warehouse. If a business is unsure about its expected future growth, then renting could be the best option and one that is cheapest in the short term.
Buying a warehouse is more financially sound in the long term, however. If a business cannot afford to purchase the building outright, they will need a commercial mortgage. A large deposit will be required if taking out a commercial mortgage, but the monthly mortgage payments may be cheaper than rental payments. After the commercial mortgages has been paid off, the business owns the building outright and it becomes a valuable company asset.
Due to the large expansion of online sales, warehouse property is in high demand, and the value of warehouse buildings is expected to rise. This means that a business purchasing its own warehouse is likely to see the value of the building grow. This is another reason why purchasing a warehouse is better than renting
When calculating how large a warehouse is needed, do not purchase one that is only just big enough for the current size of the business. A business should consider future expansion. If a business finds that, in a few months or a year’s time, the warehouse is too small, it means that the business may need to find a bigger warehouse, and this does not make financial sense.
If a business sends goods all over the country, then ideally their warehouse needs to be located near a motorway. It also helps to be close to bus or rail networks to enable workers to easily reach the warehouse using public transport. There should be adequate parking space for employees and easy access for large vehicles to load and unload.
Financing the warehouse purchase
The most common way to finance the purchase of a new warehouse is a commercial mortgage loan. Lenders will require the company to invest in the building by paying a large deposit.
The business needs to be certain that it can keep up with the mortgage repayments, so needs to be financially sound when applying for a mortgage.
Not all commercial mortgage lenders offer the same rates or have the same mortgage conditions. Applying for a mortgage through Ascot Mortgages makes sure that your individual requirements are matched with the best lender.
To qualify for a commercial mortgage, the business needs to have a clean credit history. The lender will require a number of documents about the financial status of the business – these include at least three years’ certified accounts, bank statements, and an asset and liability statement. The lender will also ask to see a business plan that includes cash flow projections that demonstrate how the new warehouse will financially benefit the business.
If you are considering buying a new warehouse, talk to Ascot Mortgages about all your commercial mortgage finance options.