500k business loan

[spotpush]

Hi

Wondering if anyone can advise

I need to borrow upto 500k probably more like 350k to purchase property through a ltd company. The business has 200k to put down in conjunction with the required loan (350k to 500k) and currently makes a profit upwards of 100k per year.

What are my chances of securing funding?
Would I need to put down anything else as collateral?
What is the best way to secure funding, appoint a broker, lawyer or accountant?
In the current climate what sort of repayment terms, interest rates can I expect?

Also add that I don't currently own any assets as such. Have a reasonable cash flow to cover interest payments although tied up temporarily. And a good credit rating.

Any advice appreciated

Thanks
Spotpush

 

[businessfunding]

You have covered most of the basis, but are a bit sketchy on repayment ability, which is a key underwriting criteria.

Rates terms etc will largely depend on past financials, type of property and what it will be used for.

Whilst I don't personally advise on commercial mortgages, I do have an extremely well established & competent contact in the field if you would like to PM me.

 

[jim_price]

I'd make a few points:
- Find the suitable premises first and get an offer accepted in principle, that way you know what you're looking to achieve.
- If it's, say, £400K, you should be able to find a commercial mortgage (I'm assuming this is commercial property here) reasonably easily at a 60%-70% loan to value, meaning you'd need to find between £120K and £160K to cover the balance. You would also need to cover whatever the stamp duty and other fees come to.
- Interest only arrangements are unlikely to be accepted in this climate so you will need to demonstrate that the profit you make can generate enough cash to service both capital repayments and interest.
- You say cash is tied up but you also say the company has £200K of free cash to put down? I'd suggest you maybe reconsider whether that really is free cash and leave yourself some headroom.

If your business current account has been operating nicely in recent times, your bank will be the obvious first port of call, a broker or your accountant should be able to introduce you to alternatives.

You can get an idea on rates from Money Facts http://moneyfacts.co.uk/compare/business/commercial-mortgages/

 

[spotpush]

Thanks Jim,

I thought it might be easier to get the finance in place first so I know what I can go up to and also purchase at auction

Would it be a problem if it wasn't commercial property i.e. residential?

The plan is to pay it off ASAP, everything the business makes will draw down the debt

Without going into to much detail i would consider it free cash and this would act as a buffer to cover interest payments for a few years should the business hit a difficult patch

Previous accounts solid, profitable every year for 12 years

 

[jim_price]

There's nothing to stop you buying residential property no, but I think the sceanrio you have outlined is going to be a tricky one, banks want to know their security (ie the property) inside out, so maybe 7/8 years ago you could have got a facility to go out and buy any old residential property and just whack a charge on it at completion, but that's a thing of the past I suspect.

"Without going into to much detail i would consider it free cash and this would act as a buffer to cover interest payments for a few years should the business hit a difficult patch"
You've confused me here, what will act as a buffer, the £200K? You won't get anywhere near a mortgage without putting down a hefty deposit.

Might be worth speaking to a broker - this chap knows his stuff http://www.businessfinancequote.com/team1.aspx

 

[elaine@cheapaccounting]

Why are you buying a residential property through the business - just want ot make sure you have considered the tax implications

 

[jim_price]

Why are you buying a residential property through the business - just want ot make sure you have considered the tax implications

This as well

 

[spotpush]

No the 200k is a down payment the business has other funds which can be made available if needed

The property will be paid for with profits generated by the business so I can't see any other tax implications of buying it through the company which I own so will therefore own all it's assets.

 

[jim_price]

An obvious possible tax implication is if the property goes up substantially in value and you sell, the company will pay tax on the gain, you then have to pay tax getting the post tax proceeds out of the company. A double tax charge.

A less obvious and perhaps remote contingency is that you could inadvertantly turn the company into an investment company as opposed to a trading company thereby risking not getting entrerpreneur's relief when you come to sell the shares. As I say, remote, but if this is the first of a few property deals you will need to take into account.

 

[elaine@cheapaccounting]

No the 200k is a down payment the business has other funds which can be made available if needed

The property will be paid for with profits generated by the business so I can't see any other tax implications of buying it through the company which I own so will therefore own all it's assets.

Are you renting the property out or is it your home?

 

[spotpush]

Initially a home when working in london on business

 

[elaine@cheapaccounting]

So not your main residence then?

I think you said you had looked at the tax implications so assume you are aware of the tax implications when you come to sell it and the potential of a benefit in kind for you whilst you live in it.

Good luck with the purchase

 

[spotpush]

So if I can provide a different address as my "main residence" does that get me out of the "benefit in kind" if not how can I mitigate the tax implications of "benefit in kind"?

 

[paulstewart64]

Spotpush

Aside from the tax implications, which needed to be brought up, writing the business plan is relatively easy from what the initial data you have given.

All the business plan is a story, regards to what, why, how?

Clearly there are more questions to be asked but you certainly shouldn't have an issue with regards to writing the plan. The big issue is going to be getting the story right and having the correct data to back it up.

 

[elaine@cheapaccounting]

So if I can provide a different address as my "main residence" does that get me out of the "benefit in kind" if not how can I mitigate the tax implications of "benefit in kind"?

So it sounds like you do not have another address then. Inn that case I am at a loss as to why you would buy the property through the business with the tax implications therein and not purchase as you main residence with the exception from CGT on sale of main residence.

Have you sought professional advice on this? I am now sure I follow the rationale of your plan I'm afraid.

 

[spotpush]

Would i still be subjected to this "Benefit In Kind" on a home I buy in London through a company with a corporate mortgage if i also owned a property (personally, in my name) in Manchester?

What if i marketed the the London property as a Serviced Apartment just for the weekends since i plan to use it myself Monday to Thursday....?

 

[Tom McClelland]

Hmmm, I think the detail of the tax planning that you're asking about is more than is reasonable to expect from strangers on an internet forum. Presumably your Ltd company generating the profits and turnover that you mention has an accountant, and this kind of question seems perfect for your company's accountant who will have a much more detailed understanding of both your affairs and the company's affairs. If you're not confident that they can answer it, or if they don't seem helpful or knowledgeable enough, then it might be time to consider changing your accountant, or alternatively perhaps you should be referred for specialist advice.