Commercial Mortgages

Farming may be defined as cultivation or production of crops, fish, or livestock. It includes the cultivation of land for producing agricultural crops, raising of poultry, production of eggs, milk production, production of fruit or other horticultural crops, and grazing activities or the production of livestock. Farming is the mainstay of an agrarian society. Most of the modern day farming involves heavy use of machines for the different farming activities. The heavy use of mechanical power in farming is referred to as industrial farming. Most of the modern day farming falls under this category. This makes farming a capital-intensive activity.

Modern day farming also requires substantial capital investment into the heavy equipment and the allied technology that finds ample use in this activity. A farmer undertakes the farming activity. Industrial farming requires substantial capital investments by the farmer into the farming activity. The costs associated with using the heavy farming equipment, fuel to run those equipment, setting up modern storage facilities, setting up poultry and livestock rearing facilities require considerable investment. A commercial mortgage for Farming and Fields for Agriculture helps meet all these financial requirements by providing mortgages for farmland and fields for agriculture.

The farmland or the agricultural field is a fixed asset that can be used to raise a loan. The immovable property can act as security or collateral for the farming loan required by the farmer to meet the costs involved in carrying out the farming activity. This way, a farmland can meet both short-term as well as the long-term capital requirements of an owner. This makes commercial mortgages for farming and fields for agriculture very useful for raising considerable loan amounts with longer maturity periods. A farmer may require considerably large sums of money for undertaking a variety of farming and allied activities. The farmland mortgage process provides a means to raise large amounts of finances coupled with an option of easy repayment over extended periods of time that may span into many years. It also allows a farmer to get all the required funds at the beginning of a farming season and repay them in the form of the loan installments after getting the proceeds of the produce. Hence commercial mortgages for farming and fields for agriculture prove to be a boon to a farmer who requires funds for the farming activity.

A Takeaway is a type of a restaurant or an eating joint that does not have a seating capacity. The customers pay up for the foodstuff and carry it along. A Takeaway joint does not have any provision for seating. A Takeaway joint provides a wide variety of foodstuff to the customers. The Takeaway cooks prepare these foodstuffs and the sales staff takes care of the sales counters. The joint owner has to bear all the cost involved in the foodstuff preparation and the staff salaries. Establishing a Takeaway may also require considerable amounts of working capital. It may include any major or minor refurbishing of the preparation area from time to time. All these activities require periodic investments into the business by the Takeaway owner.

A commercial mortgage for takeaways involves taking up a loan for which a property is pledged or kept as collateral with the lender. If the borrower fails to repay the loan or defaults for some other reason, the collateral can be salvaged to recover the dues. A commercial mortgage usually has a commercial property pledged as a collateral. The interest rates in case of a commercial mortgage are slightly higher than in case of residential mortgages.  

A Takeaway owner can meet all his financial requirements no matter how large or small in an easy and convenient way by utilising the true potential of the commercial property owned by the business such as a Takeaway joint. A Takeaway joint can effectively act as a collateral to secure any medium to long-term loan. A commercial mortgage for takeaways acts as a win-win situation for both the Takeaway joint owner and the loan financier who has extended a business loan. The Takeaway joint owner can get all his financial requirements fulfilled by pledging the Takeaway joint premises as a security for the loan amount. The financier, on his part can offer a secure loan to the Takeaway joint owner and earn by way of interest on the loan amount. In case of any default by the borrower the financier can proceed to recover his dues from the mortgaged property, which, in this case is the Takeaway joint premises.

Therefore, a Takeaway joint owner can effectively use a commercial mortgage for takeaways to make the fixed asset raise the necessary finances for setting up and running his business in a smooth way without any financial hiccups.

The commercial mortgages are offered on a wide variety of properties which are for commercial use, for example, retail stores, office buildings, hotels etc. The retail industry is one of the fastest growing industrial sectors in the world and involves the maximum number of entrepreneurial activities. In the recent years, the range of businesses on which commercial mortgage is available has become so diverse that somebody who wishes to set up even a chemist shop can seek a commercial mortgage for chemists. In contrast to residential mortgages, where the lender retains the title of the property in question till the loan is repaid as a security against any default in repayment of loan, in a commercial mortgage, the loan is extended using the commercial property as the security or collateral. 

A chemist shop has certain positive points that attract lenders. First and foremost, a chemist shop in the market area is just a shop. It does not require too much of readjustments in the property or building plan to convert it into another retail outlet. Retail industry, especially health and pharmaceutical sector, is relatively less sensitive to economic downturns. People will fall ill; they will go to a chemist shop and buy medicines, irrespective of the fact whether the economy is going through a stage of expansion or contraction. It is this nature of stability of business that attracts the lenders mostly to commercial mortgage for chemists.

The location of the property is undoubtedly the most important criteria for valuation of commercial mortgage for chemists by the lenders. If it is in an upmarket area, the property will appreciate much faster. Sometimes, a chemist shop can even be set up in residential areas where the top floor can be used for residential purposes and the ground floor can be used as a chemist shop. The range of products that the outlet is likely to store will be another important criterion for the lenders. For start-up businesses, the likely projected sales for a few years, the credit history and the financial strength of the entrepreneur will be the other important requirements to be furnished to the potential lenders.

In recent times, commercial mortgage is being extended to a wide variety of sectors in the economy, including the service sector. Thus a firm of solicitors or barristers trying to seek financing for setting up their office or business premises can also look for the option of commercial mortgage for solicitors. The commercial mortgaging activity is becoming very specialized in recent times. As a result of this, the mortgage services are offered at competitive rates and terms. For a specialised mortgage service, it is essential that the nature of business is properly understood. There are a class of commercial mortgage lenders who provide loan to solicitors, because they can better understand their business and make better valuations about expected income flow.

It is sometimes very difficult to obtain long term loans for setting up office premises for various such businesses by professionals. Commercial mortgage for solicitors provides a good opportunity, as it not only offers long term soft loans, generally extending up to 15-20 years, but to consolidate expensive short-term finances. No doubt, a number of factors will decide the valuation of a solicitors’ firm’s business. The quality and quantity of its professional manpower, the age of the firm, the area of operation are some of the important factors that lenders are interested in, apart from the details regarding clientele information, like percentage of corporate clients, income history in the past, profile of all the partners, etc.

High potential earning prospect for professional services firms is the most important reason for mortgage lenders to look at this sector quite favourably for extending mortgage credits. This is the reason why they are interested in firms operated by Chartered Accountants, MBAs, Solicitors, Tax Consultants, Investment and Financial Advisors, etc. With increasing awareness among general population as well as ever-increasing number of corporate and small businesses, legal issues arising in such businesses are not going to face any adverse impact of the slowdown in the economy, and these factors work to the advantage of these firms when they are looking for commercial mortgage for solicitors.

Commercial mortgage for franchise is an effective means to purchase a franchise. The franchise operation appears to be very attractive for lenders because of their high success rate. Almost eighty percent of all start-up businesses fail within five years, but if we look at the success rate of businesses modelled on the concept of franchise, about ninety percent of them succeed. 

One of the main reasons for such higher success rate in comparison to start-up businesses is because they are modelled on a business concept that has already been tried and tested. Majority of the franchise businesses also have the advantage of the brand image of the parent firm. As a result of that, they do not have to go through struggle during the initial years, which are full of problems of insufficient or uneven cash flow; a situation experienced by most of the start-up businesses. They have been found to be running a profitable business right from the first year of operation. In fact, there is a huge demand of franchisees, as franchisors are often on the lookout for them to help them expand the size of their business. Franchise businesses save a lot of money as they do not have to spend on building a brand image, finding the potential customers etc. They also save substantially on marketing efforts.

It is not surprising, in view of their higher profitability in comparison to start-up businesses, that getting commercial mortgage for franchise is much easier compared to getting commercial mortgage for a new start-up business. Generally, loans are available for up to eighty percent of the purchase price or sometimes even more depending on the brand image of the parent firm. However, it is also important to keep in mind that even though the investment risks may be lower in a franchise operation because of association with an established business, the investor loses significant control over the business because of the need to fulfil various contractual obligations. Commercial mortgages for franchises are available for both making an initial down payment, if one is purchasing an existing outlet, or if one is developing his own facilities and entering into a franchise agreement with the parent firm.