Finance for leasehold premises available

Last post: Jun 14, 2013

One lender will now lend against leasehold premises. Read here to find out more.

One clear feature of the credit crunch has been the dearth of unsecured lending. Now if you want a loan, most banks will look for security and that usually means bricks and mortar which is bad news for the hundreds of thousands of UK businesses in leased premises. Fortunately now though there is a lender who will provide finance for leasehold premises and this is available through Choice Loans. So what is available?:
  • Loans from £25,000 to £1m
  • Generally up to 50% LTV on the value of the lease (see below for how this is valued)
  • Terms of 2, 3 or 5 years (longer terms are available if physical security is offered)
What are the eligibility criteria and who is this aimed at?:
  • Minimum 2 years' trading record in the premises required
  • You do have to be a Limited Company but if you are not currently one then we can simply arrange for you to set one up for the purpose of this finance
  • Typically this is aimed at restaurants, pubs, hotels, takeaways etc
What is the procedure and what will this cost?:
  1. First we need to take details of your business and determine if you may be eligible
  2. If you are, and you are happy with an indicative quote, then you are asked to have a professional valuation done on your business. This will cost £1,000
  3. Based on this valuation up to 50% of the leasehold LTV can be extended
  4. The loan will cost 3% per month (2.5% per month if you can offer additional physical security)
  5. Lender's Legal fees to arrange the loan will cost £1,000 + VAT (which the borrower pays) plus you will probably want to retain your own solicitor at your cost
  6. The borrower will also need to take a life insurance policy out
  7. The business will also need to have a commercial insurance policy (it is likely they will have this already anyway)
So this isn't the cheapest form of finance out there but when it comes to getting finance for leasehold premises, borrowing options are extremely limited. The issue of valuing the leasehold is quite a specialised area and probably worth a mention in this blog. A good rule of thumb when looking at what a leasehold business is worth is to use 20 x weekly revenue as a guide. A restaurant taking £4,000 per week, for example, is probably worth about £80,000 and may therefore be eligible for a £40,000 loan. But it's worth remembering too that there may be other options available to the business owner. If the business is a limited company then a peer-to-peer loan of up to £100,000 may be an option and there are other lenders that will do short term loans to limited companies as well. If the business is a sole trader or a partnership then we can look at the owner's/partners' assets and perhaps arrange a loan against them. To discuss your options of finance for leasehold premises please call us on 0845 1260350.