Commercial Mortgage Brokers: directory of firms

The 40 per cent test in the FCA's perimeter guidance decides it. A purely commercial building fails the test outright. A mixed property can pass it, which is why a shop with a flat the owner lives in may be regulated while the identical shop with a let flat is not. There is also an exclusion for second charge business loans above 25,000 pounds where the borrower is acting for business purposes.

Lending to a limited company is never a regulated credit agreement either, because the consumer credit regime protects individuals and certain small partnerships, not bodies corporate. Between the two rules, a company buying a commercial building sits outside both the mortgage and the consumer credit rulebooks.

Unregulated does not mean lawless. Contract law, the lender's own conduct standards and, for smaller borrowers, access to the Financial Ombudsman Service still apply. But there is no suitability report, no cooling-off, and no obligation on the lender to check the loan is affordable for you in the way a residential lender must.

Commercial underwriting is a judgement about the borrower, the property and the exit, in that order. Lenders look at serviceability, usually expressed as how many times the rent or trading profit covers the interest, and at loan to value against a valuation prepared for the lender, not for you. A valuer may report both a vacant possession figure and an investment value, and the lender may lend against the lower one.

Terms are shorter than residential terms and a facility often has to be refinanced at the end. That refinance risk is the thing to plan for at the outset. Ask what happens if values or rents fall before the term ends, and whether the facility has covenants that can be breached without you missing a payment.

Timescales are driven by valuation and legal work rather than by the credit decision. Environmental searches, lease reviews and planning enquiries take time, and on older industrial sites a contamination report can reopen the whole question.

A personal guarantee makes a director liable if the company cannot pay. Guarantees vary widely: some are capped, some are limited to a named facility, and some are all-monies guarantees that cover everything the company ever owes that lender. Several directors may be jointly and severally liable, meaning the lender can pursue whichever of them has assets.

A debenture gives the lender fixed and floating charges over company assets. Combined with a legal charge over the property it can leave very little free for other creditors, which then affects your ability to raise invoice finance or asset finance later.

Take independent legal advice on guarantees and debentures before signing. Some lenders require it and will want a certificate from the solicitor confirming the guarantor understood the document.

A relationship bank knows your account conduct and may move quickly on a straightforward owner-occupier purchase. It will also apply its own policy, and policy in commercial lending is narrower than most borrowers expect: unusual trades, short leases, heavy tenant concentration and short leaseholds are common reasons for a decline that has nothing to do with the borrower's strength.

Specialist and challenger lenders price for risk and take cases the clearing banks will not. Many deal only through intermediaries. A broker's job is to know which lender is currently writing which kind of business, and to present the case in the form that lender's credit committee expects.

Even where the loan itself is unregulated, many smaller borrowers can still complain to the Financial Ombudsman Service. For acts from 1 April 2019 a micro-enterprise qualifies if it has fewer than ten employees and turnover or a balance sheet not over two million euros, and a larger small business qualifies if its annual turnover is under 6.5 million pounds and it has either a balance sheet under five million pounds or fewer than fifty employees. Charities with income under 6.5 million pounds and trusts with net assets under five million pounds are also covered.

The Ombudsman is free. Complain to the lender or broker first, then refer the complaint within six months of the final response. Above those size thresholds, a dispute is a matter for the courts.