How to secure a commercial mortgage for your restaurant

What are your first thoughts when approaching mortgages? Do you dread diving into the paper work? Have no idea where to start? Or do you enjoy finding the best deals?

Whether you’re looking to buy a new building or expand your current restaurant it’s important to secure the best possible commercial mortgage for your needs, here are a few pointers:

Where to start

It’s important to note that out of all restaurant proposals for commercial mortgages, nearly half are rejected by lenders. So, where is it all going wrong? There are three main reasons an application is rejected: your proposal isn’t presented in a professional and coherent manner, you’re application isn’t suitable to the lender’s requirements, or you present too much of a financial risk.

Preparation, research and presentation

There are so many lenders out there that some people think the best way to get results is to churn out applications fast and loose. Copy and pasting huge chunks from one lender to another and simply hoping for the best. This is possibly the biggest mistake made by anyone looking for a commercial mortgage to boost their restaurant – take your time! You will see much greater benefits from being selective about who you apply to, researching which lenders are most likely to provide you with financing and taking the time to make each application unique and targeted.

Selective lending

It isn’t common knowledge but different banks, building societies and other loan providers are very choosy when it comes to what they will financially back. There are some lenders who have invested too heavily in certain types of eateries, for example, fish and chip shops, and as a result no longer provide finance for restaurants of this type. Before you waste your time putting together an application make sure that the lender you’re focusing on provides loans for the type of diner you plan to have.

What types of finance can you get?

Businesses need money for a wide variety of reasons and as such there are a wide range of commercial finance options for restaurants. The four main solutions available are:

•    Commercial mortgages – allowing you to build and expand your business by purchasing new buildings or better equipment
•    Bridging finance – an instant loan to help with the purchase of assets which need to be paid for ASAP but you don’t currently have the capital for.
•    Re-mortgage – taken out to help reduce the cost of existing mortgage repayments or to provide extra finance to the restaurant.
•    Development finance – this type of finance allows you to buy land or run down properties in order to develop the area and build new eateries.

Make sure you know what type of finance you require, lenders are usually quite particular about the types of finance they provide and will only accept certain applications. When you are doing research into which lenders are most likely to support your type of restaurant it is a good idea to also find out what type of loan they usually provide.

Using brokers

All this research and planning can be very confusing and time consuming, adding extra stress that you could do without when trying to run your business. It can be very beneficial to use commercial mortgage brokers to get the best possible mortgage for your business. Brokers have a great understanding of a huge number of lenders, and know who is most likely to support your venture and how to present the application to increase your chance of acceptance.

Speak to us today to discuss your commercial finance options.

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