If you have been refused a commercial mortgage application, you may be able to obtain a mortgage from another lender. Before you apply again, it helps to understand why lenders turn applications down and what you can (or cannot) do about it.
Poor credit
If you have skipped payments for a loan, then this will negatively affect your credit rating and could be why you have been turned down. If you are behind on your current loans, pay the arrears to make sure that you are not behind on any payments.
You can talk to a new lender to explain why you fell behind on past payments, and why this is unlikely to happen again. The lender wants to know that you have enough money to repay the mortgage.
You can check your credit score by applying to a credit scoring agency. Sometimes, there are mistakes on the credit report that you can rectify.
Proof of income
A lender needs to assess your financial situation. You will need a year’s bank statements and detailed financial records that prove that your business is profitable. If the lender feels that your records are not detailed enough, or show that you do not have enough income to qualify for a mortgage, they may turn the application down.
If you are turned down because of lack of income, the remedy is to increase your income, but this is not always easy. With effective marketing though, or by launching new products and services, you can put your company in a position where it is able to qualify for a commercial mortgage.
A messy building
Sometimes, a business wants to purchase premises from its landlords instead of renting it. If the building is not well maintained, awnings are ripped, or signs have missing letters, this can give the impression that you do not care about the building. The valuation report on the building will probably include a description of the current condition. A messy building could put off lenders, so work on its appearance and facilities.
Does the loan make sense?
The reasons you need a loan should make financial sense. If buying property to rent out, your business plan should show how the rental income less your expenses will make a good profit.
If you a buying property for your work premises, this could save you money. Owning a building is an asset to the company and will be part of your business valuation. The mortgage payments should be less than the rent.
If you purchase property that is too large for your current operations, do you have realistic expansion plans, or could you lease a portion of the property to a commercial tenant?
The benefits of using a broker
If you know why you have been turned down for commercial mortgage finance and can do something about it, talk to Ascot Mortgages. We can find a lender likely to approve your commercial mortgage application.
