Lenders will consider finance up to 60% of the purchase price or 50% of total ingoings (whichever is the lower) using the business as the sole security and with the loan repaid over two-thirds of the unexpired period of the lease subject to a maximum loan repayment period of 10 years.
Leasehold Case Study on how the business
finance works
The client is looking to buy a newsagency
business with 10 years unexpired on the lease. The purchase price is £80,000
plus £10,000 stock at valuation, £2,000 for the first quarters rent and £4,000
for the newsbill deposit. Total ingoings amount to £96,000. Lenders are usually
happy to advance £48,000 (50% of total ingoings) which coincidentally is also
60% of the price itself. This would be made available over a period of 7 years.
The client has £48,000 as a cash deposit plus
funds to cover purchase expenses.
Had additional collateral been offered by way of
a charge on freehold property, a loan of up to £80,000 would be available,
subject to proven repayability, and could be repaid over 10 years which is the
maximum period of repayment on leasehold lending.
Purchase a Freehold Business:
Lenders will consider finance up to 70% of the purchase price using the business as the sole security and with loans repaid over a period of up to 20 years.
Freehold case study on how the business
finance works
The client is looking to purchase a freehold
convenience store. The purchase price is £500,000 plus £35,000
for stock at valuation. However, the property (bricks and
mortar) value is only £300,000 and the client is looking to
borrow £350,000 which is in excess of the vacant freehold value.
The lender agrees a facility of £350,000 (116% of
bricks and mortar value) over a period of up to 20 years secured
solely against the freehold business. The client has the
remaining £185,000 cash plus sufficient funds to cover purchase
expenses.
Had additional collateral been offered by way of
charge on freehold property, a loan of up to £500,000 would be
available, subject to proven repayability.
Additional Security:
In both Leasehold and Freehold cases, loans of up to 100% of the purchase price can be made available subject to additional supporting security.
Costs of payment:
Repayment costs per month, per £1,000 borrowed, to include both
capital and interest.
