The Recovery Loan Scheme is fairly well known. What is less well known is that you can use the Recovery Loan Scheme for commercial mortgage borrowing.
This means businesses who own their own trading premises as well as commercial property that is held as an investment and let out. The scheme works for both purchases and refinancing existing lending.
So, what do you need to know?
Better Priced Commercial Mortgages
This almost sounds too good to be true but it isn’t. As with all borrowing, it needs to make sense and be affordable. You will also find a limit on the loan to values, but given this applies to all commercial mortgage lending, so nothing major there.
The key details are:
- The Recovery Loan Scheme for commercial mortgages will run from June through September
- Terms can be obtained now
- The scheme is likely to be limited and a high demand will likely see the scheme close earlier
- Works for owner-occupier commercial mortgages and commercial investment property lending
- Always subject to affordability as you would expect
- Secured by first charge over the commercial property, so the borrower will always be liable for the lending
The reason why the scheme looks set to work well is how it fits for the lender. Bear in mind that the lender:
- Has nicely secured lending with property as security and a Government guarantee
- Because the lending is well secured the price of borrowing should come down
Applying for commercial mortgage lending using this scheme
It is reasonable to expect the scheme to be oversubscribed, that is what we saw with commercial mortgages on CBILS, so a similar position is expected here.
Lending does not have to completed by September, rather the mortgage lending needs to be agreed and accepted during this time. That said, it makes sense to get things moving sooner rather than later in case the scheme is oversubscribed and closes early.
As with all lending. Please make sure you know what you are committing to and understand your risk. This is secured lending. Please also make sure you are comfortable with the repayments and they are affordable to you.
After that, if you have a commercial mortgage and are paying over 4/4.5% then it may be worth looking at this scheme. Typically, a commercial mortgage is the largest single piece of debt on a company balance sheet so reducing that cost will have the largest single impact.
By Dave Farmer