Commercial Finance FAQs

Below is a selection of of frequently asked questions on Property Funding, Funding without Banks and Healthcare Funding

Property Funding

What is the difference between a broker and a lender
As brokers we aim to source solutions for your requirements from our pool of lenders including challenger banks, high street banks and alternative funding institutions. Brokers do not normally lend money themselves.

What role do you play as the Broker?
We manage your application from initial enquiry to completion. We will liaise with lender(s) on your behalf and other relevant professionals to ensure matters go smoothly, keeping you advised of progress at all times.

Why should I choose a broker and why Sterling Capital Reserve Ltd
Sterling Capital Reserve Ltd is a well-established and professional commercial finance brokerage. We have recognised that healthcare is a specialist area, and consequently, we are one of the few brokerages in the UK that now have a specialist healthcare division.

We pride ourselves on:

  • Our service
  • Our expertise
  • Our contacts (including solicitors and valuers)
  • Our advice
  • Our ability to put a financial package together that gets you a very competitive deal

Do you charge a Broker fee?
Yes. However this is only payable if the business finance is drawn. We would agree our fee with you in advance on an individual basis and will be shown on any written illustration provided.

Will you help me with the form filling and other paperwork?
Yes we will. We will assist you in completing the application form and provide you with a list of other documents that the lender requires. We will then collate all the paperwork, check it and then package the information before submitting it to the lender with our summary report.

How much can I borrow as a percentage of my property value?
Current loan-to-value ratio is up to 75%, but this will depend upon other factors including the industry sector, experience and credit history of the applicant, their ability to service the mortgage and the quality and type of the property.

How much can I borrow?
If the property has a business with it and is being acquired on a going concern basis, the purchase price will include fixtures & fittings and goodwill. We can obtain up to 65% of the purchase price, or valuation whichever is the lower, depending on the industry sector.
If borrowing is restricted to the property value alone, we can obtain up to 75% of the valuation, again depending on the type of property and industry sector.
This can increase to up to 100% with additional security. All subject to serviceability.

What are the interest rates?
This largely depends on the quality of the property, the experience of the applicant, loan to value and the strength of the accounts. We can provide a written illustration on request.

What are the minimum and the maximum amounts that I can borrow against a property purchase brokered through yourselves?
Minimum: £75,000.
Maximum: £2,500,000 (see product criteria's for more information).

How long can I have to pay the commercial mortgage back?
Minimum term: 2 Years.
Maximum term: 30 Years.

What’s the minimum property value that will be considered?
The minimum value is £75,000.

I am self-employed; can you look at sourcing a Commercial Mortgage for me?
Yes, Lenders they are able to advance monies to self-employed people who are sole traders or part of a partnership or a director of a limited company. They will need to see tax returns and accounts to confirm income.

What security is required for a commercial mortgage?
A lender will require a legal charge over an acceptable property and personal guarantees from directors of limited company applicants.

Will I need a deposit to obtain a commercial mortgage?
Yes. A lender will look at lending up to 75% with no additional security, depending on the type of property and industry sector. However if you are able to provide additional security i.e. your home or an investment property, then they could arrange a loan up to 100% of the value.

REMEMBER ANY PROPERTY USED AS SECURITY, INCLUDING YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBTS SECURED ON IT.

Can you help with a deposit?
The maximum loan we can achieve is usually up to 75%, depending on the type of property and the industry sector and you need to contribute 25% plus costs. These costs will be Lender Arrangement Fee, Stamp Duty Land Tax ( if purchasing a property), Legal Costs and the cost of the valuation plus a Broker Fee, if applicable. If you can provide additional security, then 100% may be achievable. See question above.

Can I get a commercial mortgage on my commercial property to consolidate my debts?
Yes, if you own your commercial property and wish to arrange a commercial re-mortgage to consolidate your business debts, then we can look at this option as long as the additional funds are required for a legal purpose.

How long does it take to complete a commercial mortgage?
Typically the time scale is 6 – 8 weeks to include submitting the application, the offer being issued, the valuation being done and the respective solicitors completing their work.
Pleased be assured that we will endeavour to complete your commercial mortgage application as quickly as possible and will keep you fully updated from the start, all the way through to when your commercial mortgage funds are released.

Are fixed rate commercial mortgages available?
Yes, Fixed Rate Commercial Mortgages are available. Please ask us for full details and a written illustration.

Are Interest Only Commercial Mortgages available?
Yes. Please ask for full details and a written illustration.

What costs are involved?

  • Valuation fee of between £300 and £1,500 (plus vat). The variation is due to the type of valuation, value of premises and location.
  • Bank arrangement fee will be between 1% and 2% of the loan. Often this can be added to the loan on completion
  • Land registry fees and disbursements in the region of £400
  • Legal fees (these will vary from firm to firm)
  • Stamp duty land tax (SDLT) will be payable on purchases. Please check with your solicitor
  • Broker Fees - Typically 1% but not payable until deal completes.

What are the repayment terms?
The term can be arranged to suit your circumstances, 20 years is typical, but we can arrange up to 30 years.

What are the timescales?
In most cases, we can obtain an agreement in principle within 72 hours.
A valuation will take up to 2 weeks to arrange.
The rest is dependent upon the speed of your solicitors (and Vendors solicitors if the proposition is a purchase).
This can be 2 to 3 weeks.

What do I do next?
Call us, email us, or submit an online enquiry request.
One of our experienced consultants will then contact you and discuss your requirements in more detail.

What can I use the money for?
Subject to the purpose being legal, the money you borrow can be used for any business purpose. As well as the usual purchase and refinance purposes, you may wish to carry out repairs and alterations to the property. Other alternatives would to inject longer term working capital into your business or restructure other business debt you have onto more favourable terms.

I am not sure what type of finance I need. Can you assist me with this?
Yes. We will talk your circumstances through with you and ascertain your long-term goals. We will then suggest a funding package that suits your requirements.


Funding without Banks

We arrange loans through a number of different Peer to Peer Platforms and other sources of Alternative Finance. Each source of funding works in a different way and has its own appetite for transactions of a particular type. We consider each proposal on its merits and approach the most suitable Platform/Lender.
The following information is generic and not specific to a particular Platform/Lender

How long does the process take?
It varies from deal to deal , we have completed straightforward unsecured loans in seven days but for a secured loan we would say allow 6 weeks from picking up the phone to us to receiving funds.
This timescale can be accelerated if you have a substantial amount of information already, there are no other lenders involved, and/or the business is relatively simple. Conversely it will take longer if taking security behind existing lenders and where security priorities have to be formally agreed/documented or where asset valuations are required and where land forms part of the security . Lack of financial information generally slows down the process.

What are the fees?
Unsecured Loans – The Peer to Peer Platform / Lender will generally pay part of its arrangement fee to us as a commission and in many instances it will not be necessary for us to make an additional charge. Arrangement fees vary according to Lender but often fall in the region of 3-6%.
Secured Loans – The information we are required to prepare for secured Lenders is quite extensive. Again arrangement fees vary according to Lender but typically fees can be around 3-6%

Any third party legal fees/costs are payable by the borrower.
Loans which default will often attract additional interest costs.

What are the redemption fees?
Loans can generally be repaid early without penalty, some loans can be reduced by one off lump sums without penalty.

How are Interest Rates decided?
The mechanism for setting interest rates differs according to the Peer to Peer Platfrom / Lender. Some Platforms operate variable rate auctions, some will specify the interest rate, while others let the borrower specify the rate (although if the rate is too low the transaction may not be attractive to Lenders).

Peer to Peer Platforms charge interest a fixed rate for the duration of the loan. This is in contrast to most banks that usually charge a margin over their Basr Rate or LIBOR (variable rates).

How much can we borrow and over what period?
Loans range from £50k to £10m, repayable over periods from 6 months to 5 years.
Interest only loans can be arranged, but we need to be sure where the bullet repayment is going to come from.

What types of businesses can we assist?
We are seeking established businesses that can demonstrate the ability to repay the loan and where appropriate provide adequate security. Peer to Peer loans are not appropriate in distress situations, early stage turnarounds or as a substitute for equity finance.

How Confidential is our Business Pack?
Some Peer to Peer Lenders will not disclose any information to Lenders. However others will disclose the name of the borrower and most unsecured Platforms will share information with Lenders. We will advise Clients on the extent of disclosure as part of the process of deciding which Platform will be approached.
Sterling Capital Reserve Ltd will treat all information provided by you as confidential. As the Client you will have control of what information is disclosed. Borrowers must exercise care not to reveal any commercially sensitive information and Sterling Capital Reserve Ltd cannot accept responsibility for any misuse of information by the Peer to Peer Platforms or its member lenders.

Is the documentation complex?
While the Loan may be comprised by funds from many individual Lenders they are represented by a Trustee. There is one Loan Agreement executed by this Trustee and the Borrower. A single monthly Direct Debit effects rerpayment. The loan and security documents are similar to those used throughout the banking and finance industry.

Secured Loans - What level of Security is required?

What constitute adequate security may include:

  • Debenture over the business, whilst this is a standard requirement in some cases a debenture would encompass significant levels of security over business assets; in other cases it may be worthless from a security point of view.
  • Charges over certain business’ assets by way of a chattels mortgage.
  • Charges over property held within the business (1st charges will obviously be preferable).
  • Personal guarantees of the business’ principals possibly with additional supporting security when required.e.g.such as charges on property.

The better secured propositions invariably receive greater interest from lenders and lower rates.

Secured Loans - At what point should I provide a valuation of my assets?
We would urge borrowers not to incur the cost of professional valuations before approaching us. In due course we would expect to agree an appropriate valuer with you and obtain a fee quote for their work. It is essential that we issue the valuation instruction.

Can loans be drawn in stages?
In some instances the Loan can be drawn in stages while other Platfroms raise the total funding at thevoutset but release the funds in agreed stages., In case of the latter it follows however that interest is paid to lenders on the total agreed loan balance from the outset not just the amount drawn.

Can new starts be funded?
Not normally, as we are unable to prove serviceability of the debt at pre revenue stage and in most new businesses, limited security is available. If for any reason an established business is transferred to a new corporate entity – depending on the circumstances this can be acceptable.
We would usually define an established business as one with two years accounts registered at Companies House.

Does it matter where the business is based?
Generally the business has to be based in the UK.
From our perspective we can fund businesses anywhere in the UK, but common sense and our own geography dictate that we will generally fund deals where we can provide a full service for our client, which as a rule of thumb is usually a maximum of a 2 hour drive.

I am an adviser and would like to discuss a client proposition
Please call or email us. We would be delighted to chat through (on a no names basis initially if that suits you at this stage). Approximately 50% of our deal flow comes from Accountants, Banks or other financial advisors with ad-hoc deals.

 

Healthcare Funding

Why should I choose a broker and why Sterling Capital Reserve Ltd
Sterling Capital Reserve Ltd is a well established and professional commercial finance brokerage. We have recognised that healthcare is a specialist area, and consequently, we are one of the few brokerages in the UK that now have a specialist healthcare division.

We pride ourselves on:

  • Our service
  • Our expertise
  • Our contacts (including solicitors and valuers)
  • Our advice
  • Our ability to put a financial package together that gets you a very competitive deal

Are there any specialist lenders in this sector ?
Yes - There are a number of specialist healthcare sector lenders. Some are strong in lending for one /two and perhaps three businesses, others perhaps not so strong at that level but have a greater appetite for 3 to say 7 plus practices / businesses.
Some are strong in doctors, dentists etc. whilst others have greater appetites say forcare home funding, vets and pharmacies. This is where our experience and expertise benefits you, as we will know the right lenders for your deal.

What do you charge?
This will depend on what we are being asked to do.
Having said that, we would generally expect to be paid by the lender out of the arrangement fee they charge you and we would normally expect half of that fee.
Our fees are either paid direct by the lender out of the arrangement fee they charge you or, alternatively, the lender will reduce their fees and ask you to sign an authority to allow them to pay us direct. We would usually expect to receive half of the arrangement fee.
In any event, you will not be charged more for our involvement than you would otherwise have been charged.
We would expect to take an additional charge if you need a lot of help in preparing a business plan.

What will all this cost me?
That will depend on the transaction.
There will be interest, usually linked to base but depending on the amount and the lender, may be linked to LIBOR.
Arrangement fees: These can vary significantly from one lender to another. You will be expected to cover your own and the lenders solicitor and security costs (don’t forget stamp duty on property). Where the transaction is sufficiently large or a company is purchasing the share capital of another company, the lender may well want to put in their own solicitors and you would have to cover these costs, which could be expensive.
If you are looking at a significant new build, the lender is likely to ask for monitoring surveyors and you would have to cover their cost.
Valuation costs: This may be property and or business valuation, and these can vary depending on the lender and valuers used. The list is not exhaustive.
Our costs are usually met by the lender, and where they are not, we will advise you of this up front. We earn our money by structuring a funding package that suits you best.

I have only recently qualified. Will a bank lend to me?
Experience is an important factor in evaluating a lending proposition. Lenders are not generally keen to lend to people inexperienced in the sector they are looking at.
However, depending on the proposition, level of contribution and security, we do have lenders who are prepared to consider lending to recently qualified professionals. Why not contact us and see what we can do?

I do not have any savings. Can I get finance?
Generally, subject to satisfaction with stress tested serviceability, levels of unsecured debt, experience and the individuals own level of commitments, doctors and dentists can expect to be offered finance with little or no contribution.
In some cases the funder will also lend to cover legal and other costs related to the purchase. Cash contributions are usually required for other healthcare propositions and these will vary according to the sector and satisfaction of the above. The banks may be prepared to accept a charge over property in substitution for a cash contribution.

What security do I have to give?
Depending on what you are looking to purchase, levels of serviceability, cash contribution, level of unsecured debt, experience and your own commitments, it is possible that no security, perhaps other than life cover, would be asked for.
However, if you are purchasing a property freehold or leasehold, the lender will always look to take a charge over this.

Do I have to put my home at risk?
Most lenders do not like to take charges over family homes and will generally only do so as a show of commitment and as a last resort where they want to lend but feel uncomfortable at the level of facilities sought.
Some healthcare sectors e.g. doctors, dentist are less likely to be asked for additional security than others.

REMEMBER ANY PROPERTY USED AS SECURITY, INCLUDING YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBTS SECURED ON IT.

I want to purchase and run a number of practices/businesses. Will a bank lend me the money?
We have contacts with lenders who have specialist healthcare sections where, for the right proposition and the right individual(s), they are prepared and willing to lend substantial monies, a significant proportion of which may be unsecured, for the purchase of more than one practice / business.

Will someone help me complete a business plan?
A detailed business plan is not always required and we can generally get away with detailed bullet points. We will be happy to help you with this at no additional cost.
However where a lender deems it necessary and appropriate, we will be happy to help you put a business plan together.
Generally, this will be produced by your accountant in conjunction with yourself. They will charge a fee for this
We also have in-house qualified chartered accountants that put together business plans and projections for our clients.
I have a bad credit history. Will a bank lend me the money?
In today's climate, generally lenders are very wary. Funding will depend on the reasons for your bad credit history, your current position and future prospects. Expect challenging questions. But contact us and let's see what we can do.

Will I need life cover?
Most lenders will make life cover, for the amount of the loan, a condition of the facility along with permanent health insurance and/or locum cover. As a general rule, the lender would expect to be able to quote for the business but would also allow you to arrange cover through your own broker.
We are not IFAs and do not sell insurance or investments, but we would recommend that you take advice from an IFA that is not tied.
We can refer clients to a small number of competent financial advisors to assist in this area.

Why are doctors, dentists, pharmacists and vets treated differently than other borrowers?
Lenders see doctors and dentists as supported by the NHS and therefore less likely to get into financial difficulties. Private dentists are also considered relatively safe, particularly in areas where there is a shortage of NHS dentists and/or they have a good capitation scheme in place.
Vets are seen as being partially protected from recession as pet owners will often prefer to spend on their pets than themselves.

Why do banks usually require larger cash contributions from care home owners?
The value of good care homes in general has increased by up to 9.5% over the last 3 years. However, changes in legislation have put ever increasing pressure on the levels of care provided and the need to ensure that not only is the building compliant, but also the maintenance of records are as well.
Shortage of funds has meant that in some areas social services actively look to support people in their own homes rather than put them into care. Any shortfall in the levels required can lead to a sudden fall off in residents and the potential for social services to remove their residents. Given the additional risks, it is not a surprise that lenders often seek additional contributions.

I am looking to buy a pharmacy. Are there any special schemes to help me?
Special wholesaler schemes are still in place but lenders prefer to lend direct if they can.

Do banks lend for pharmacy purchase without wholesaler support?
It is no longer the case that most lenders will require wholesaler support before agreeing to lend significant monies for pharmacy purchases. Most would prefer to lend direct, subject to a suitable customer contribution.
We are able to arrange finance of up to 80% of the goodwill value – although @ this level stress tested serviceability tends to become a challenge. 70-75% is probably more realistic.

Will a bank lend for a leasehold property?
Lenders in this sector are used to lending for leasehold property so the straight answer is yes, subject to the usual caveats regarding serviceability etc.
The lender would want to know the terms of the lease and may want any onerous clauses removing. They would also warn you as to your commitments regarding continuance of paying rental if you stop trading and cannot sell the lease on.
You also need to consider the term of the lease, and if you are the first lessor. Also, are there any commitments at the end of the term i.e. that may require the lessor to convert the property back to the condition and layout when the initial lease was taken.
Lenders will expect the term of the lease or the remaining period of the lease to match the term of the loan.
However, most lenders would not see any security value in a lease unless it was long term - over 21 / 35 years.

My accountant says that I should buy the property in my name and run the business through my company. Will a bank lend to me and my company?
This is not unusual. If the proposition is supportable and a lender would lend in one format it is likely to lend as proposed.
However, you should note that lenders may require a lease to be put in place. This in turn, may then make the property transaction fall within the lenders investment property criteria, where lending criteria is usually more strict. If the initial proposition stacks up you/we would expect to be able to put a supportable argument together.

Will a bank lend to my company and how will this be different from lending to me personally?
There should be no issue with lending to a company other than a potential requirement for a lease(s). The lender is likely to ask for directors guarantees which may or may not need to be supported.
This will no doubt depend on the strength of the proposition. Essentially the lender would not wish to weaken its position and would want to be in the same situation from a risk perspective as if it were lending to you direct.

What about my age?
Age should not be barrier. However, most lenders will look for any borrowing to be repaid by either “normal” retirement age or age 70.
If lending to a partnership, the lender will often look at the age of the youngest partner.

Will my wife/husband have to be included on the loan?
Generally a lender would expect all owners to be part of any facility including loans.

How can I be sure that I am getting a good deal?
We at Sterling Capital Reserve Ltd, upon receipt of your instructions, will assess your proposal. Once we are comfortable with it, we will approach a number of lenders whom we know should be interested in lending for your proposition.
We are aware that some lenders prefer to lend for single transactions and others for more than one. We also know the lenders general, and in many cases specific, appetite for different types of deals and their pricing, contribution and security levels required.
We will come back to you with details and discuss the best way to move forward including timescales. This will save you trawling the market yourself (and allow you to continue earning), and be comfortable that not only will we have contacted the obvious, but are likely to have approached specialist lenders that you are unlikely to be aware of.
We look to source the most appropriate financial package in terms of contribution, interest rate and fees, level of security and term. Lenders are aware that we will be speaking to other lenders and expect to have to offer their best package. It is not unusual for lenders to offer better lending margins when approached by us.
We are paid by the lender out of the arrangement fees they charge. These are not inflated to cover our cost, and clients should pay no greater fees because of our involvement.

I may want to repay early. Can I do this?
You should always be able to repay your loan/facility early. However, in certain circumstances early repayment may trigger early repayment penalties e.g. where you have a fixed rate, or where your interest rates/fees at start up or in the early years of the facilities are at a discounted rate.
Generally there are no penalties for early repayment of variable rate facilities. However, some lenders do impose penalties and you should always read the facility agreement before signing it. If unsure, you should ask the lender and/or consult a solicitor.

I may want fixed rates!
Fixed rates and interest rate management products should be available from most lenders, but these may vary depending on the amount and term you borrow over.
You should be aware that there are likely to be penalties, possibly significant penalties, for early repayment of all or part of the facilities under a fixed rate agreement.

What information will I have to provide to proceed?

  • A personal financial profile – including details of asset and liabilities
  • Curriculum Vitae
  • Income and expenditure breakdown
  • 6 months personal and business bank statements
  • 3 years audited accounts or tax returns
  • The lender will look for a clear credit search
  • Depending on the proposition you may be required to produce a business plan including cash flow forecasts and profit projections (we can assist with this).