It’s been a difficult couple of years for SME’s, there’s no denying it. Commercial mortgages have significantly dried up as banks find the risk of investing in small business too high in the current economic climate. The fall in “Loan to Values” (LTVs) has led to huge media coverage of the banks so-called ‘negative’ lending policies.
While there are questions surrounding bank commercial lending, there are all the signs for a positive year ahead for small businesses in the UK. The Government have suggested that they expect a significant increase in lending in 2011, with some inside individuals believing the rise will be as much as 10% over the next 12 months.
Has your small business struggled through the recession? Or are you a bidding entrepreneur who is desperate to kick start a business? If either of these situations apply to you, then now could be that perfect opportunity you’ve been waiting for. Considering a commercial mortgage could prove to be extremely beneficial to your business circumstances.
More money in the banks equals more Commercial Mortgages: It has been speculated by numerous media reports that all the major UK banks are currently in some rather heated talks with the Government Treasury over commercial loans and mortgages. By all accounts, the Government is pushing banks to lend more by giving them a target of over £2bn to lend this year alone. The Chancellor has expressed particular interest in the subject, showing a willingness to counteract the effects of the recession on small businesses.
MP’s are concerned though that it’s another empty promise from the banks; they’ve already reneged on promises on bank bonuses. Opposition MP’s in particular are calling for the agreement to have force, with sanctions for banks that fail to keep their word. “It would be total nonsense unless there are sanctions for failure” said Lib Dem treasury spokesman Lord Oakeshott recently.
With this Governmental pressure, surely 2011 can only mean good things in commercial lending? It all rests on the banks cooperation in these debates; should they pull together, business loans and commercial mortgages could soon become readily available on the market. This means a loosening of lending restrictions and an increase in the “Loan to Value” amount; all positive signs that our economy is improving.
Encourage the growth of your business as the economy improves: Expanding your business or commercial property portfolio is definitely advisable in the upcoming year. With the factors mentioned above taken into consideration, now is the time to grow your business. Commercial mortgages in particular are a fantastic way of raising much needed funds to buy machinery, vehicles or the property required to expand your business, and in turn, your businesses income.
For example, buying, rather than leasing, a property has many advantages and you can obtain a commercial mortgage to help you purchase new office space. New offices, a new factory or a new warehouse may enable you to increase your staff levels, your turnover and your profits. The interest you pay on your commercial mortgage is normally tax deductible and you will own the property, making it a valuable asset to your business.
Take advantage of record low rates: For just over the past year, the Bank of England base rate has reigned at a historic low of 0.5 per cent. While there are inflation worries out there among economists, all the data suggests that these rates will remain low for the majority of 2011. In order to benefit from this though, now is the time to obtain a commercial mortgages, it’s certainly not something to beat around the bush over.
The bank interest is higher than the base rate and has been this way since the credit crunch, despite this the rates are still low on business loans and commercial mortgages compared to pre credit crunch times. With fixed rates also as low as they are, it’s not out of the realms of possibility to secure a good fixed rate deal with your bank. With these low rates available on commercial mortgages, it’ll be much easier for businesses to meet repayments through and beyond 2011.
Tags: commercial mortgages, governmental pressure, opposition mp, treasury spokesman, uk banks