Buying a commercial mortgage is a complex and time consuming process, every stage takes longer than a residential mortgage as there are many more factors to take into account. For this reason alone the most important thing to getting a commercial mortgage right is getting the right solicitor.

Consequently, finding an experienced, reliable and affordable property solicitor is an important part of the purchase process. A commercial property deal throws up many legal issues and so it is vital that you have the right team on board. Our guide will help you find the right property solicitor for you.

Red Tape: Make sure you get a solicitor who is under the umbrella of the Solicitors Regulatory Authority, those that are in the RSA are regulated and fully insured members. This is advantageous as you know they’re not a stereotypical shady solicitor, as they’re insured it means you as the client are protected during the mortgage process as well as having an official outlet for complaints through the RSA if you feel the need to take that route.

Locals: While you might feel more important and reassured having a large national or international law firm representing you, they are very rarely the best choice. Turning to a smaller, local practice will mean you have solicitors who are very experienced in the local property market, they will know which searches to do, local rates and bye laws to be aware of and know the regions property market inside out. They will see all the problems two steps ahead as they know the area better than any big name law firm ever could, no matter how brilliant the solicitor could be.

Fees and Costs: It’s all about value for money, naturally you don’t want to go for the cheapest solicitor no matter what they offer, yet at the other end of the spectrum the most expensive solicitor isn’t going to be ten times smarter and worth the fees either. Talk to each firm and see what services they do and don’t offer, look at what to expect rather than what they will cost.

Depending on the complexity of the deal, legal costs are going to range from a the hundreds to thousands of pounds. Plus you can expect added/separate costs known as disbursements for things such as VAT or Local Authority Searches, so budget accordingly.

When you appoint a solicitor, they are obliged to provide you with a schedule of costs and an estimate for how much your specific transaction will be. So, make sure that you understand how a solicitor’s fees work and what you can expect to pay in total. Even large solicitors are prepared to discuss fees with you and so don’t be afraid to thrash out the issue of fees before you formally appoint a commercial property solicitor.

Experience is Key: As we touched on before, experience is key, not just in the local area and region, but as a solicitor in general. Many specialise in certain deals and areas so always ask what they have specialised in and about any extra qualifications they might have. On top of this, years as a solicitor, how many commercial mortgages have they done recently or in the past and ask if they are accredited with the Law Society.

As well as sorting out costs and services, always make it a point to ask who exactly you will be dealing with. Even in a small local law firm there could be a few solicitors working in the practice, when you go to meet them you might just end up talking to the guy in charge and mistake him for the person who will be doing the work. You don’t want to end up with the graduate straight out of university being the lead on such a complex and expensive deal.

There’s never a shortage of commercial property solicitors and many commercial mortgage firms will have recommendations for you. Taking the time to find who’s right for you should be a top priority as it’s possible this will be the most expensive part of the mortgage to handle, (outside of the deposit of course!)

No matter if you’re just looking to invest in commercial property or run a business which you want to add value to, at some point in time you’ll finally figure out a commercial mortgage is the best option for your needs. Commercial mortgages and other types of commercial finance are designed to fund large amounts of capital for property purchases such as factories, retail units, warehouses etc.

There are of course some similarities between commercial and residential mortgages, all mortgages will have the same core DNA - a lender will lend you the capital to buy a property and use the same property for security if you cannot keep up with repayments. Yet the differences and complexities between the two are wide, out guide below highlights the five major essentials to be aware of when securing a commercial mortgage.

1. A higher deposit than normal will have to be paid for a commercial purchase: Ordinarily, when you are buying a residential property, you will have to find a deposit of about ten to fifteen per cent of the price of the property. Some lenders will demand higher deposits, especially to secure the very best interest rates.

When you are taking out a commercial mortgage, the rules are different. It is quite common for a buyer to have to offer between 30 and 40 per cent of the purchase price, this is a reflection of the increased risk that the banks feels it is being exposed to (as we all know, banks are increasingly risk averse these days). Investing in commercial property may therefore require you to commit a significant amount of your own cash.

2. The personal touch may be required: Commercial mortgages are normally offered to individuals and partnerships, not just companies. If you are looking to borrow on behalf of your company, perhaps to buy business premises, it is more than likely that the directors will have to offer ‘personal guarantees’ to a lender. This obliges directors to intervene and offer payments to the commercial mortgage if the business fails to keep up with the payments.

3. Mortgage payments are generally tax deductible: Every year, you or your business will have to prepare company accounts or a Self Assessment tax return. One of the advantages of a commercial mortgage is that your interest payments are an allowable tax deduction. HM Revenue and Customs will generally allow you to claim the interest payments on your commercial mortgage as a permitted business expense.

4. Commercial mortgages may be cheaper than your existing business borrowing: Commercial mortgages are secured on property, meaning the lender has the security of the property should you default on your loan. This therefore means that commercial mortgages are cheaper than other forms of borrowing such as unsecured bank loans, overdrafts or company credit cards.

Often, companies will use commercial mortgages not just to buy premises, but also to consolidate other short term debts that are on high interest rates, in much the same way that home owners have done in recent years.

5. Commercial Mortgages have a different structure to residential mortgages: Even though there are some similarities between the two kinds of mortgages, commercial loans are often structured in a slightly different way. You are unlikely to find a commercial loan on a pure ‘interest only’ basis. A lender might allow you to have interest only payments for a year to eighteen months, a loan will generally have to be repaid on a standard capital and interest basis eventually.

Another main difference is that commercial mortgages can be set up on a ‘quarterly payment’ basis. Instead of making a payment each month as you would on a residential mortgage, the lender may instead require that you make payments once every three months.

Not long ago I was contacted by a company that had been unsuccessful in acquiring a new Operating Line of Credit from its bank in Toronto, Canada. The company is in the Import Business.

Their customers are all across Canada and they have plans to expand into the US market and due to growing orders they had been maxing out their Operating Line of Credit consistently. Their bank had then capped at $50,000 and would not increase it.

As you may know, the typical terms when dealing with China are 30% payment with the order and the 70% balance before they are shipped.

The company was selling on average about $125,000 worth of goods per month, and with the Accounts Receivable sitting at about 45 days to collect, the $50,000 Operating Line of Credit was of little good to them. The average open Invoices were $200,000.

In their industry, it is expected that the goods that are ordered by their customers are to be shipped within 7 days which required the Importer to carry inventory as their source of goods was in China.

As you can understand, the owners tied up their personal assets to get personal loans to aid in the cash flow crunch so they would have sufficient inventory to operate.

The solution to this problem was to set up a new Operating Line of Credit for the company using the Invoices for delivered goods as security in an Accounts Receivable Factoring facility.

Now the company has access to $170,000 for their operations which allowed the owners of the company to pay off the personal loans they had taken for operations, pay off the bank Line of Credit they had and still have sufficient funds to carry the required inventory to service their customers.

To make it even better, the Operating Line of Credit they have now will grow with their outstanding Receivables. So as their sales grow, so does their Line of Credit.

In another bold move to assist the economy the US Government released its intention to start Factoring US Auto suppliers invoices to the automotive sector.

As seen in today’s NY Times (03/19/2009):

DETROIT ” The Obama administration moved on Thursday to stabilize the American auto industry by creating a $5 billion fund to support troubled parts suppliers.

The program will provide supply companies with much-needed access to liquidity to assist them in meeting payrolls and covering their expenses, while giving the domestic auto companies reliable access to the parts they need, the Treasury announcement said.

So what does this mean for the industry? Until the details are rolled out is hard to say specifically, but the announcement to get into the Accounts Receivable Factoring business is the latest installment of how far the US Government will go to get the economy back on track.

I had predicted that Accounts Receivable Factoring is going to be a major financing method of our economy revival and this proves how accurate that is.

For those of you that are not familiar with Accounts Receivable Factoring it is essentially a Line of Credit for Businesses that use the Invoices that are outstanding as security for the advances received by the company which generated the Invoices.

In an average Accounts Receivable Factoring facility, the company that is financing their receivables will be eligible to receive between 80% and 90% of the invoice face value. One the end customer pays they will receive the balance of the funds less the finance fee,

Most Factoring facilities will charge from 2% to 4% per month depending on the industry, credit rating of the customer and the advance rate,

A counterpart to the Accounts Receivable Financing is Purchase Order Finance. This is essentially Factoring or borrowing against future orders. There are strict guidelines to how this works, but if you sell a product that you purchase in finished condition and then sell it to a third party you may be a candidate for Purchase Order Finance.

This option works best for distributors but Accounts Receivable Factoring can work for companies in nearly any sector. If your company needs financing like this, the best option is to speak to a Professional Commercial Finance Broker because they will be up on all the trends and latest programs available through the various lender channels.

Best of all, in most cases the services of a Professional Commercial Finance Broker will not cost you a fee because the Broker will be compensated by the lender for them preparing the deal for them so it really is in your best interest.

No one has to tell a business owner that getting access to much needed cash flow is a difficult task today. It matter not if you are in Canada or the United States, if you have gone to the bank to inquire about financing, there is a good chance you were turned away. For this reason many companies turned to Angel Investors for that all important cash injection.

Be aware that Angel Investors typically look for a ROI of 5 ” 10 times their investment in under 5 years. This is accomplished by looking at many aspects including the salvage value of your company. They will create an exit strategy to recover the funds from your company in the predetermined time frame regardless of consequences to your company.

Angel Investors have now increased their threshold for their ROI to a minimum of 10 times to as much as 50 times their investment because of the failure rate and the length of time that the investor will be tied into the company. When you consider the bigger picture, the effective return on investment for the Professional Angel Investor is usually around 20% to 30%.

Because of this high return on investment, Angel Financing is very expensive, but the lesser costing funds such as banks and credit unions are rarely available for new business start-ups. This is because the traditional financiers have a high threshold for accepting young companies for Business Loans.

So you are declined at the bank and you can not afford Angel Investors now what?

It is irrelevant if you are in Canada or the United States, the story is the same but there are options. This is a real life deal that I just completed recently. It is a Distribution company in Alberta Canada that had a unique product that it wanted to market throughout North America. The owner went to the usual banking institutions and was denied the loan. He then spoke to a few Angel Investors who gave him proposals which he did ponder over but shortly after continued to search for options. When I spoke with him I suggested a combination Accounts Receivable Factoring and Purchase Order Finance facility.

At the time when we had initially spoken, he had just shipped out nearly 70% of his stock and had an order to fill the following week that would exhaust his inventory. At this point he would have to wait until the customers paid for the orders prior to ordering more inventory. Biggest problem with that is that he had other orders to fill, but no stock and no money to get more stock.

In a matter of 7 days after the application was returned to me he was ready to fund and now has access to the much needed cash he needs to grow his business.

In short, if your company has been turned down by the banks and credit unions plus there is no comfort for you in dealing with an Angel Investor due to their terms, be sure to check with a Professional Commercial Finance Broker so they can put together the proper financing for your business.

Ever worked on getting that big customer for months, chasing after then, long drives or flights to see them so you can win them over with your service and determination? Then have the worst thing that can happen in a situation like that you get the order and now you have to figure out how you can possibly fill it because the order larger than your total Operating Line of Credit.

That did happen to a Telecommunication Company in New York State, USA. In one order, their sales had increased to over 3 times the size of their entire Line of Credit at their bank. The owner went to the bank to get it increased so they could take on the order but the bank refused to increase their limit.

With this order, the customer had to have terms on the invoice of 30 days, and to make it worse the supplier required payment prior to shipping. The time to deliver the goods from the time it leaves the supplier dock is 10 days. In this case we have a 10 day delivery time plus a 30 day collection time from the customer, so we have a 40 time span of where we do not have the financial capacity to handle the order. So what now? Decline the order?

The owner of the company did speak with some Accounts Receivable Factoring Companies but they were not able to help out due to the time lag between the timing of the advance requirement and the delivery of the goods to the customer. They could not Factor the Accounts Receivable until the product was delivered, and they could not deliver the product until they received an advance to pay for the product.

The owner of the Company was then referred to a Commercial Finance Brokerage who immediately assembled a Purchase Order Finance and Accounts Receivable Factoring facility. Now the order was able to be processed and now the door is open for future orders from and large buyers.

The bad four letter word ” Taxes. No one ever likes taxes, never have and never will, and why should we like taxes? Unfortunately, as much as we all hate them, they are necessary and no two people agree on how the format should be set up to be fair.

One of the biggest hurdles politicians deal with are tax generation and government spending. In times like we are in with increased government spending, this has to mean increased taxes, but who will be saddled with the majority of the burden?

Those that own businesses will want the consumer to carry more of the tax burden as the current status of many companies is not stable to support additional taxes, and the people who still do have employment do not want the added taxes as many people have taken pay cuts plus inflation has increased, so they are not in a position to carry additional tax burdens either.

While the individual taxation does affect everyone, business owners will more often see it that they are in business and are already faced with many obstacles in todays market with wages, property taxes, payroll taxes and everything else that they are paying out monthly and if they have anything left for themselves, they would like to be able to pay their own bills.

Because of the general attitude of the general public, feeling that individuals that own businesses are rich and well off, people think that companies have lots of expendable cash. This, we all know now, is very far from the truthso who will pay the taxes needed to cover the debt we are incurring with Obama?

After all is said and done and the taxes are collected, now, how will these funds be spent to best serve the taxpayers in general? Do we want to support bailouts for major corporations and banks or do we want to assist small to medium sized businesses? How about covering healthcare costs for those without insurance? Foreign aid or civil projects?

So which is it to you? Are you More Concerned with Where the Tax Dollars Come from or Where they go?

Not long ago I was contacted by a company that had been unsuccessful in acquiring a new Operating Line of Credit from its bank in Toronto, Canada. The company is in the Import Business.

The company imports goods from China and has been experiencing strong growth over the last year which lead them to outgrow their current Operations Financing and their current Financial Institution would not increase their limit of $50K.

As you may know, the typical terms when dealing with China are 30% payment with the order and the 70% balance before they are shipped.

The company was selling on average about $125,000 worth of goods per month, and with the Accounts Receivable sitting at about 45 days to collect, the $50,000 Operating Line of Credit was of little good to them. The average open Invoices were $200,000.

The company had to carry inventory since their customers expected orders to be shipped within 1 week of receipt and the fact the main supplier was in China meant they had to have sufficient stock to carry them for a months sales at any given time.

As you can understand, the owners tied up their personal assets to get personal loans to aid in the cash flow crunch so they would have sufficient inventory to operate.

The cash flow crunch was cured by my office setting up a new Business Line of Credit for the company using Accounts Receivable Factoring.

With an advance rate of 85% against the $200,000 open invoices, the company now has $170,000 available to them which allowed them to order sufficient inventory to support their growth, pay off the bank Line of Credit and pay off the personal loans they had taken to support the business.

Because the new Funding Line was based on outstanding sales, the Line increased as the sales increased. So as sales grew, so did the availability of funds.

Ever dreamed of that bug sales? You know the one I am talking about, the one that would put your company on the map in your industry as a player. Be careful for what you wish for. Many companies have wished for that very thing until it actually happens. What would you do if you received that order and it was for more than you entire last 2 yeas of sales in one Purchase Order?

This has happened to other companies and it can happen to you to. After you get over the initial rush of the big order and you think of all the cash that will be coming in, then you think How can I possibly pull this order off? You will need to hire staff, buy equipment, pay for materials and you do not have the money for that. That is exactly what happened to a company in New York State USA. The owner of the company just figured he would go to the bank and they would lend him the money he needed, but the bank declined him.

The customer in this case had to have 30 day terms on the invoice. To make it worse, the suppliers needed to be paid before they would ship the goods. Big problem. If you look at a 10 day delivery time on top of the 30 day sale terms, he would have 40 long days that needs to be gapped. With the though of having to refuse the order in your mind, consider this. What if there were a way to finance this gap in funding that would not involve major financial statements, appraisals and other types of documents?

The owner of the company did speak with some Accounts Receivable Factoring Companies but they were not able to help out due to the time lag between the timing of the advance requirement and the delivery of the goods to the customer. They could not Factor the Accounts Receivable until the product was delivered, and they could not deliver the product until they received an advance to pay for the product.

The owner of the company spoke with a Professional Commercial Finance Broker who knew exactly what to do. He put together a Purchase Order Finance facility with a lender that specialized in the product that the company was selling. In a very short period of time, the financing was approved and the transaction was completed without an issue, and now the company was in the position to take any size order without the fear of not being able to afford to take the business.

Imagine this: You are the Ops Manager at a Trucking company doing about $1.0 million dollars in sales per month, you have kept your receivables under 60days for the most part, you are making your financial obligations and you get a registered letter from your bank calling your Line of Credit.

This is a real event for a Texas based Freight Carrier recently. After a brief panic attack, the CEO called his bank and the account manager told him that due to revisions of the banks risk structures are laid out, he has no choice but to pull the financing. He has 2 weeks from the receipt of the letter to repay the loan of $1.0 million. Upon dealing with a Professional Commercial Finance Broker, not only was the loan paid off at the bank on time, but the trucking company had a new Line of Credit of $1.75 million now.

This is a popular scenario today with the tightening restrictions on lending today. Even with the announcement of Presidents Obamas grand plans, banks are still pulling the plug on companies that are making it, forcing some to close down and put people out of work.

Most companies do not need more debt; they usually have enough of that. What they do need is cash flow. If this sounds similar to your situation, please, speak to a Commercial Finance Broker. They are trained professionals whose career is based on keeping on top of the new finance options coming out and knowing which lender does what deals the best.

It really does not matter if you are in Canada or United States; it is the same story all over. Commercial Lenders do vary in regards to the products they carry and the strengths they posses in the various industries. Just because a lender is good in Commercial Equipment Loans does not mean they can handle you Line of Credit in your trucking company. Commercial Finance Brokers have the experience to know who does what the best.

Commercial Finance Brokers are up to date with the latest changes and options available. Many Commercial Finance Brokers can handle Financing options ranging from Accounts Receivable Factoring, Purchase Order Finance, Export Finance, Commercial Equipment Loans or Commercial Mortgage.