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What can I offer as security for a commercial mortgage?

Because of the risks involved with lending large sums of money, commercial mortgages are secured loans – that is, they are ‘secured’ against an asset, usually real estate, that the lender can sell in order to recoup their losses should you default on your debt.

So if you are taking out such a loan to expand or purchase premises or boost your business’s cash flow, you will need an asset against which to secure it.

For a commercial loan, this will invariably be the commercial property you are buying or refinancing. Your commercial lender will take a share, or ‘charge’, of up to 75% of the property value, and you must provide the remainder up-front.

In doing so, you can fund the purchase of a variety of business premises: buy-to-let properties, offices, retail units, industrial units, semi-commercial or mixed use properties, nursing and care homes, B&Bs, hotels, public houses, land, building developments and more. In many cases, a commercial lender will require you to have relevant experience in the type of business your premises will be used for.

If you cannot afford the cash deposit, your lender may also accept additional security. This could be another mortgaged property you own, but lenders will be far more receptive if offered a charge over unencumbered property. Undeveloped land will be more viable if you have obtained planning permission for it.

Commonly excluded property types

Some lenders will not fund certain types of property. This could be because they are esoteric in terms of planning law and therefore difficult to develop or adapt (e.g. petrol filling stations or scrap yards), or it could be because repossessing the property, should it prove necessary, would attract negative press (e.g. religious buildings or hospitals).

Commonly excluded property types include:

Leasehold property with fewer than 70 years left on the lease
Heavy industrial property
Properties that are considered uncategorised within the Town and Country Planning (Use Classes) Order 1987
Drinking establishments (e.g. pubs and bars)
Residential institutions (e.g. care and nursing homes)
Secure residential institutions (e.g. military barracks and prisons)
Leisure facilities (e.g. concert calls and gymnasiums)

Note that these are merely examples of properties that some lenders will not accept as security; this does not mean that no lender will accept them. Check with an experienced commercial advisor to see if the property you wish to buy will be accepted.

Written by Ben Gosling for Commercial Trust, the specialist buy-to-let, bridging and commercial mortgage broker.

Your property may be repossessed if you do not keep up repayments on any debt secured against it.
The FCA does not regulate some forms of commercial mortgage and bridging loan.

Commercial Trust charges a £995 fee for its buy-to-let mortgage service and the greater of £995 or 1% of the loan value for its bridging loan and commercial mortgage service. This fee is payable only on completion.

Corporate Insolvency Statistics - July-September 2014

Infographic from Insolvency Service and Companies House. Please read our news piece on the latest insolvency figures released today.

Is your business behind with VAT or PAYE payments?

If your business is struggling to keep up with tax payments, then it is likely the company is insolvent. You may have already missed payments when they fall due or you know you won't be able to pay the next VAT or PAYE bill. 

While this is a problem, it doesn't mean there's nothing you can do about it. The quicker you act, the better. If you just let the debt build up, HMRC could take legal action against the company.

So what are the options? 

Time to Pay deal (TTP) - This is an informal arrangement with HMRC, giving you the opportunity to spread debt repayments over a few months up to a year. We can call to arrange on your behalf (we talk with HMRC every day!) or you can contact their Business Payment Support Service.

HMRC will need certain information, including tax references, contact details and reasons why you can't pay on time. Judging by how much you owe and how you will be able to make future repayments, HMRC will assess your position. 

Company Voluntary Arrangement (CVA) - This is a formal deal between the company and its creditors, allowing you to repay debt over three to five years as well as restructure the business. A CVA can stop legal actions and help to turn around the company, cut costs and improve finances. 

Pre-pack administration - This is very quick and effective process where the company is sold to to a third party or new company on the appointment of administrators. A pre-pack ensures the business continues running and jobs are safeguarded, keeping the reputation intact.  

If you're not sure what to do next, contact us on 0800 9700539 and we'll talk you through all available options for your business. Don't ignore VAT/PAYE payment problems, they will only get worse.  

KSA Group Manchester Office Opening Party


KSA Group has great pleasure in inviting you to a Business and Networking Event

to celebrate the launch of the new KSA Group Manchester Office

Tuesday 2nd December 2014

6.00pm – 9.00pm

Hosted by JLT Specialty

St. James House    
7 Charlotte Street, Manchester,

Dynamic Solutions for

Distressed SMEs

An evening of presentations and discussions focussing on

Professional Support for SME Companies and their Advisors


Keith Steven     Founder & CEO, KSA Group Ltd

Corporate Turnaround & Restructuring Solutions

Jane Shelmerdine   Partner, JLT Specialty

Insurance & Risk Solutions for Distressed Business

Alison Loveday    Managing Partner, Berg

Creative Solutions to Financial Mis-selling Claims 

Following the presentations and Q&A’s, there will be ample time

for networking, during which food & drink will be provided.

Please RSVP to robertm@ksagroup.co.uk

Two disqualified directors sent to prison

Following an Insolvency Service investigation, Mark Brafman and Bulbinder Singh Sandhu have been jailed for eight and five months respectively. 

They were both sentenced on 16th October after it was revealed they had been acting as directors while disqualified. Brafman had been directing four companies at the same time he was banned from directing and at one point, bankrupt. Sandhu had directed two companies whilst being disqualified. 

As well as their sentences, Brafman and Sandhu have been banned for a further 12 years as directors.

Liam Mannall, from the Department for Business Innovations and Skills, said “Mr Brafman and Mr Sandhu were both experienced businessmen who were clearly aware of the responsibilities involved in directing companies.”

“Both had been disqualified from doing so, yet over a number of years Mr Brafman chose to ignore the restrictions placed on him, as did Mr Sandhu for a lesser period.”

The two had directed retail companies, including Atlantic Fashions Limited, Acton Farm Ltd and Jet Star Retail Ltd. Jet Star purchased the assets from Northworld Limited which traded as Mark One. 

Decline in North East company insolvencies

According to the latest research from insolvency body, R3, businesses in the North East are out-performing the rest of the UK in the retail, transport, manufacturing and marine sectors. 

The number of companies showing a ‘high risk’ of insolvency is in fact falling in the North East region, with signs of month-on-month progress in various sectors. 

R3 Chair, Allan Kelly has said, “While there's still little room for complacency about our economic position, the general picture across the North-East is one of increasing optimism and improving performance, and the enhanced stability that our latest survey suggests provides good evidence to back this up”.

“Given the particular importance of the manufacturing, construction and property industries to the North-East, it's especially good news to see the insolvency risks being faced by firms in these areas falling, and it's hopefully a trend that we'll see sustained”.

While things are improving, it is important that businesses know what to do in case the financial situation takes a turn for the worse. Seeking legal and insolvency advice is always best when faced with debt issues or legal action. 

Was Bredbury Hall forced into insolvency?

An interesting report has been released today detailing the circumstances leading up to a business entering insolvency early this year. 

According to the report to creditors, the hotel and nightclub venue was pushed into insolvency when investment firm, Promontoria Holding 87 BV, bought the company’s debt of £11.2 million from Lloyds bank. 

Promontoria immediately decreased the overdraft from £500,000 to £266,767, claiming it would be withdrawn in March this year. Directors failed to secure credit from other lenders and decided to appoint administrators. Once Promontoria found out, they chose to appoint their own administrators from Duff & Phelps. 

Administrators are looking to release assets (approx. £9 million) while the business continues to trade, leaving a £2.3 million shortfall to Promontoria and nothing to unsecured creditors.

Lenders can be aggressive but we don’t know the full story - for example, why did no other lenders wish to take the business debt on?  Also who had the directors brought in as administrators.  It is not unusual for the major secured creditor to appoint their own administrators as is their right.  In the end it looks like they have lost out anyway.  Would the business have succeeded if the actions of Promontoria not been carried out?  We will never know.

However, the withdrawal of any overdraft can be tough on a company that has been used to dipping in and out of a pool of money when they needed it.

Rise in high street shops closing

According to research by PwC and the Local Data Company, the number of shops closing on the high street is increasing. In the first half of 2014, shops were closing at twice the rate of the same period last year. A staggering 16 shops were closing every day, a total of 3,003 over the six months. 

Despite betting and discount shops doing well, clothes and shoe stores are shutting up shop across the country, along with pawnbrokers and building societies.

Looking at regions, the North West, East and West midlands have seen the most store closures while London and the South East show a fall in the number of high street retailers closing.

With online shopping booming and well-known firms entering administration, it’s no surprise high street shops have taken a hit. This has left a large number of vacant properties in high street across the UK, with many retailers opting to move to retail parks outside of towns. 

PwC retail leader, Mark Hudson said, “This data shows that we are now really starting to see the full effects of the digital revolution and consequent change in customer behaviour play out on the high street.”

Let’s not forget that Phones 4u, La Senza and pawnbroker, Albemarle Bond, have all been in serious financial trouble, resulting in hundreds of store closures across the country. 

With more traditional retailers closing or moving away from the high street, it seems independent shops and discounters are taking up the space instead. Richard Jenkings from Experian commented the high street has “clearly become a more social environment”, indicating that restaurants, gyms and salons could also expand in city centres. 

Specific issues in your industry

We have launched a new section on the Company Rescue website designed to help visitors find case studies specific to their industry, such as construction, haulage or retail. Not only that, we have also identified the key problems and potential issues in each sector.

Financial problems are common in all industries, however the ones listed here have particular issues that are unique to their sector. 

Take a look here: http://www.companyrescue.co.uk/case-studies 

Wherever you see the 'choose your industry' yellow box, you can click and hover over the drop-down list of industries. Once you have selected the industry you wish to read about, a box will pop up with the relevant information.

We have worked with a wide range of businesses in different sectors so we know the problems many industries are facing at the moment. These pages are only a guide but If you would to discuss your company's specific situation, please do not hesitate to call us on 0800 9700539.

Whatever industry you're in, we can help. 

Birmingham Launch Party 30th September Review

Over 40 people attended our launch party at the Hotel Du Vin in Birmingham.  Attendees included solicitors, asset based lenders, insurers, finance directors, accountants and alternative lenders.  Whilst chatting over wine and nibbles it was a good opportunity to meet the professionals who operate in the UK's second biggest city!

Keith made a brief speech about our expanding business and why we have targeted Birmingham.  

For those unable to attend, we will also be co-hosting with Wragge Lawrence Graham & Co and Nucleus Commercial Finance a seminar on Redefining Restructuring at the offices of Wragge Lawrence Graham & Co on the 9th of October. This will be held at Wragge Lawrence Graham & Co's offices who are in the same building as us at 2 Snow Hill, Queensway.  Again, there will be an opportunity to network and have a few drinks and nibbles. 

If you would like to come along to that event then please email me at robertm@ksagroup.co.uk



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