The Top 10 Advantages a Commercial Mortgage Gives Your Business

Commercial mortgages are a type of lending product that allows individuals and businesses to buy property for business purposes. Here is a top ten list of advantages to taking out a commercial mortgage.

1. Owning always beats renting: In business, ownership is everything; the very nature of our economy rewards it. If you take out a commercial mortgage to purchase a building, you then gain ownership of that property as an asset. As a trend property prices normally rise over the long term in Britain. This means that by simply holding on to a property for a period of time you will normally be able to realise a profit when you sell it in the future.

2. Repayments are tax deductible: When preparing your company accounts or your own Self Assessment tax return, you need to work out what expenses you are allowed to claim. HM Revenue and Customs (HMRC) generally consider that interest payments on a commercial mortgage are allowable expenses and so they can be deducted from your profit for tax purposes.

3. Cut out the middle man: When renting a commercial property, the rent you pay is subject to regular reviews (normally conducted annually, and in theory, in line with inflation). At this time, your rent payments always go up and could increase significantly, making it difficult for you to budget. The commercial mortgage offers you more stable payment terms by cutting out the middle man. This means it is easier to manage your out goings..

4. Lower interest rate than other borrowing: Lots of businesses use overdrafts, credit cards and loans in order to provide the capital they need to expand their operations. However, the interest rates on unsecured borrowings can be high. So, using a commercial mortgage to consolidate other debts may be a great way of saving money.

5.Make sure you are the landlord not the tenant: IF you decide to buy commercial premises, you might buy property that is too large for your overall needs. Whilst you can use the premises to expand into in the future, it also offers potential space for sub-letting in the short term. This is a useful way of generating extra income to help pay the mortgage. This is something that you will need the permission of the mortgage lender for.

6. Cash Flow Eases: Touched on earlier in the list with stability, a commercial mortgage is going to be easier on the cash flow. With commercial mortgages being spread over decades there is little volatility in the mortgage payments, allowing you to focus solely on the profit/loss margins of your business.

7. You Have Complete Control: You don't have to consider ways of raising capital that would dilute control of your company, i.e. selling shares in your business. On top of this any investors would expect a profit on their money or a dividend payment, sucking money out of your company. A commercial mortgage lender will only gain the interest from the mortgage, which in itself is spread over the life of the mortgage. You will have a valuable asset in your company and retain 100% control, so you can decide the direction and plan of action for your business and the property.

8. Retention of your capital: When you are buying a commercial property and raising funds through a commercial mortgage, you are in an advantageous position. It means that you don't have to use up all the capital that you have available. Whilst the deposits are larger, you can still put down only a deposit and borrow the rest from the lender, giving you the freedom to put the remainder of your cash reserves to better use.

9. Control over the asset: If you lease a property, you are constrained in a number of ways to what you can do with the property, it never belongs to you. You might need to get permission to alter the layout, or to redecorate or to change usage. If you take out a commercial mortgage, however, it gives you the rights to the property, meaning you can make changes to it without having to seek a landlord's permission, within planning permission regulations, of course.

10. A good way to save money: Another key advantage of taking out a commercial mortgage instead of renting a property is that your repayments will be lower. You will normally pay significantly less on a monthly basis on a commercial mortgage than you would on rent payments, and you won't have the annual inconvenience of rent increases.

As you can see, the advantages are broad in scope and commercial mortgages save more money than they lose compared to the alternatives.

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