Mixed-Use Properties Enters Top Five Commercial Broker Searches, But What is a Mixed-Use Property?

Knowledge Bank’s latest round-up of commercial product search terms makes for interesting reading, as ‘mixed-use properties that are part commercial’ enters the top five for the first time since January. No movement was noted in the top three search terms for May, with semi-commercial ‘properties’, ‘maximum TV’, ‘maximum LTV’ and ‘minimum loan amount’ topping the table once again.

Meanwhile, there was no major movement whatsoever in the top three broker searchers within the bridging sector for May. Identical to April, the top searches for the month came out as regulated ‘bridging’, ‘minimum loan amount’, and maximum LTV’.

Over in the BTL arena, the top three search terms were ‘first-time landlords’, followed closely by ‘lending to limited companies’ requirement to be a homeowner’. All of them featured in the top five in April, having held their positions consistently for some time.

What is a mixed-use property?

New and established investors across the UK are increasingly setting their sights on mixed-use properties. By definition, a mixed-use property is a property that occupies two or more ‘use classes’ over different stories or areas of the structure.

For example, one of the most common mixed-use properties is a building that occupies one or more flats in its upper areas and a shop or commercial unit of some kind on the ground floor. Larger developments that comprise homes, offices, and commercial spaces in any number are also considered mixed-use properties.

The vast majority of mixed-use properties feature a vertical configuration, wherein residential units occupy certain floors and commercial/business units are based on other floors. There are exceptions to the rule where residential and commercial units may be configured horizontally, but this tends to be less commonplace.

What are the benefits of mixed-use properties?

From a resident’s perspective, living on a mixed-use property can be advantageous in many ways. Some people appreciate the proximity of their home to the amenities within the property, which could be anything from a supermarket to a gym to a bar or restaurant.

In addition, mixed-use properties are usually situated in fairly central locations and are likely to have excellent public transportation links. For those renting or buying commercial space in a mixed-use property, there is typically the benefit of high footfall in a busy urban centre.

From the investor’s viewpoint, mixed-use properties have the potential to combine the best of all worlds. Where an investor owns the property in its entirety, they can bring in potentially high rents from residential occupants and commercial tenants alike.

Savings can also be made on tax obligations, as buying a mixed-use property typically means paying stamp duty for the structure as a 100% commercial property. This can be cheaper than paying the equivalent stamp duty for a solely residential property, making for an attractive investment opportunity.

Specialist funding

Perhaps the only downside to mixed-use property investments is the lack of specialist products available on the High Street. A standard buy-to-let mortgage from a major lender cannot be used to buy a mixed-use property, and many lenders do not issue loans or mortgages for these kinds of properties at all.

Investors must therefore consider the options available away from the High Street’s biggest banks and lenders. The UK’s independent lending sector is typically a more accessible and cost-effective option for mixed-use property purchases, with a wide variety of options available.

Examples of these include bridging finance, specialist development finance, commercial buy-to-let loans, and other types of secured business loans.

For more information on any of the above or to discuss mixed-use property finance in more detail, contact a member of the team at UK Property Finance today.

COVID-19 Cripples High Street Retailers, Causing Problems for Commercial Landlords

Commercial landlords and private commercial property investors have become some of the forgotten victims of the COVID-19 pandemic. Having been forced to close their establishments entirely or seen businesses slow to a crawl, countless retailers have found themselves struggling to pay their monthly rents.

Worse still for those affected, the events of 2020 massively accelerated the shift to online retail for a major proportion of UK shoppers. This has led many to conclude that even when the COVID-19 crisis is a thing of the past, previous footfall levels and the popularity of traditional retail may never return.

Landlords set to take a hit

While it is usually the plight of struggling tenants that is highlighted in the press, landlords and commercial property investors are warning of a stark future for their own businesses without governmental support.

For the vast majority of commercial landlords, no grants or financial support have been available throughout the crisis. Funding their business activities purely on the basis of monthly rent payments by their tenants, many gradually found their income and cash flow drying up over the past 12 months.

Even before COVID-19 arrived in the UK, more people than ever before were shopping online, reducing visits to the High Street. According to one study conducted by Springboard, average UK High Street footfall was already falling by approximately 1.3% every year during the period between 2011 and 2019.

By the end of this year and heading into 2020, the consultancy expects footfall to be down by as much as 15% compared to pre-pandemic levels. Although this is a national average estimate, it is inevitable that some areas will be hit much harder than others.

Along with a tendency to shop online, Springboard cited working from home as one of the major reasons for a significant fall in traditional High Street foot traffic. No longer commuting by way of public transport or working from offices away from home, millions of workers no longer “pop out” to the shops before, during, or after their shifts as they used to.

Mounting rent arrears

Surveys conducted throughout the COVID-19 crisis have painted a picture of commercial and residential landlords being more lenient with struggling tenants than ever before. The government even introduced legislation to prevent private residential landlords from evicting tenants for several months in cases where rent arrears were caused by COVID-related complications.

However, agreements reached between tenants and landlords (commercial and residential) regarding deferred payments have resulted in many tenants facing elevated or insurmountable rent arrears. An issue highlighted on numerous occasions by those affected, though one that the government has so far done nothing to address, with no support being offered to those affected.

While the COVID-19 crisis alone cannot be realistically blamed for the death of the High Street, it could nonetheless result in a wave of commercial landlords and retailers going permanently out of business.

How Bridging Finance Can Benefit New Business Start-ups?

New business start-ups in the UK are increasingly turning to alternative lenders to help fuel their growth and development. Bridging finance in particular is growing in popularity among the small to medium enterprise (SME) community within the UK.

Certain major banks and lenders consider new business start-ups “high-risk” so they are reluctant to provide finance. This means that despite employing close to 16 million people in the UK and contributing 47% of the total annual turnover for the private sector, new businesses are gaining little access to traditional conventional funding.

In fact, less than 40% of SME companies reported successfully receiving loans from major banks and lenders.

The flexibility of bridging finance

Companies unable to obtain mainstream finance can be helped by the bridging finance sector. Bridging finance is a specialist type of borrowing that secures short-term loans against existing assets. Bridging loans are rarely dependent on income, as often no monthly payments are required, but they are dependent on the equity within the security asset(s) and the strength of the exit, i.e., how the loan will be repaid at the end of the chosen term. Bridging finance is designed to be repaid within a matter of months; however, depending on the situation, the loan can be taken over several years.

For smaller businesses in particular, the immediate benefits of bridging finance are relatively obvious:

  • Bridging finance is typically available from £10,000 upwards.
  • From application to completion, it can take as little as a few days to access the money needed.
  • The most competitive monthly interest rate for a bridging loan is less than 0.5% per month.
  • Bridging finance specialists will not automatically discount applicants with an imperfect financial track record or credit history.
  • Bridging loans can be used for almost any legal purpose.
  • A growing SME, for various reasons, can often need significant funds quickly.

Even when eligibility on the high street is no problem, there are advantages to bridging finance that make it a better option than conventional business loans.

An example of bridging finance in action

A new business start-up is growing faster than expected and has received an influx of sales way beyond its current capacity and infrastructure. The new company needs to expand and develop quickly, recruit new staff, upgrade to larger premises, and purchase new equipment.

The company applied for bridging finance of £200,000 to be repaid at the end of a six-month term. The money was received within a week, and the upgrades were immediately initiated, enabling the new business start-up to operate at a much higher volume. Over £500,000 in sales revenues was generated over the subsequent six months, way beyond the amount needed to repay the £200,000 loan, interest, and fees, and now the company is in a position to handle the increased business volume without any further additional costs.

This is a typical daily scenario where traditional funders were unable to help, but a specialist lender stepped in to arrange the money needed. The now-growing new start-up greatly benefited from a simple and cost-effective bridging loan. The eligibility was assessed only on the basis of the borrower’s security asset along with evidence of a viable ‘exit strategy’ and not on the current or historic income of the business. The firm’s exit strategy was its clear plan for increased sales following cash input from the bridging loan.

Independent broker support

As a new business start-up or SME, it can be difficult to access affordable funding when needed. In addition, taking on any debt during the crucial early days requires careful consideration.

We recommend speaking to an independent broker, such as UK Property Finance, before deciding which path to follow. Whether it is bridging finance or another type of secured property finance loan, comparing the market holds the key to ensuring you get the best possible deal.

Commercial Finance Explained

If you run a business of any kind, there’s a good chance you’ve heard of commercial finance. There’s also an equally strong chance you’re not entirely sure what the term refers to.

In the sections below, you’ll find a concise overview of the functions, logistics, and potential applications of commercial finance solutions.

Commercial finance definition

Roughly defined, the term “commercial finance” refers to an extensive range of funding solutions that are offered specifically for business purposes. Commercial finance can be provided as a long-term or short-term loan, typically secured in all instances against the borrower’s business assets.

In accordance with the value of the collateral provided to cover the loan, commercial finance may be offered with no specific upper limits in terms of loan value.

What is commercial finance used for?

Commercial finance can be used to cover almost any business expense whatsoever. A typical commercial finance loan could be used by a business to take advantage of time-limited investment opportunities, introduce new products and services, expand into international markets, or perhaps relocate to a more appropriate location.

The idea is that commercial finance provides fast and affordable access to the working capital a business needs to grow, evolve, and diversify. Particularly for small and medium-sized enterprises (SMEs) with limited cash reserves, commercial funding solutions can offer an invaluable lifeline.

Commercial property finance explained

As the name suggests, commercial property finance is a specialised funding solution for property purchases and developments. Commercial property finance may be sought when a business needs to expand, improve, repurpose, or even build a new property from scratch.

Whereas most property development loans are secured exclusively on existing homes and business premises, commercial finance can be secured on a wide variety of assets. Flexibility varies significantly from one lender to the next, though it may incorporate assets such as IT equipment, vehicles, artwork, jewellery, and so on.

How to finance a commercial property

For today’s business owners, there are dozens of options to explore for financing commercial properties. Suitability will be determined by the requirements, preferences, and financial position of the applicant, with short- and long-term solutions to consider.

These include:

  • Specialist commercial finance loans.
  • Development finance solutions.
  • Business credit cards and loans.
  • Bridging finance.
  • Crowd-funding and P2P lending.
  • Commercial mortgages.
  • Invoice factoring.
  • Business overdrafts.

These are just a few of the funding solutions available for financing commercial property.

Which commercial finance option should you choose?

Contrary to popular belief, no commercial finance option is inherently ‘better’ than any other. There are significant differences from one product to the next, which should be taken into account before submitting an application.

In order to help your broker find your ideal commercial finance option, it’s a good idea to ask yourself a series of questions beforehand:

  • What exactly do you need the money for?
  • How quickly will you be able to repay the loan?
  • Have you carefully considered all applicable borrowing costs?
  • What kind of collateral can you provide?
  • How much can you afford to repay monthly?
  • Have you considered the risks of secured borrowing?
  • Will your business type or sector influence your eligibility?

Each of these considerations will help your broker pinpoint your perfect financial product from an extensive network of lenders. Speaking of which, the importance of commissioning a whole-of-market comparison on behalf of your business cannot be overstated.

Each of these considerations will help your broker pinpoint your perfect financial product from an extensive network of lenders. Speaking of which, the importance of commissioning a whole-of-market comparison on behalf of your business cannot be overstated.

In the right place and at the right time, commercial finance can be an absolute godsend. It’s simply a matter of establishing your needs, knowing where to look, and enlisting expert support as early as possible.