Commercial Finance Beyond the Mortgage: 5 Funding Conversations Brokers Should Be Having

For brokers, a conversation about finance does not always need to begin and end with a mortgage.

A client may initially approach you about buying a property, but their wider funding needs can quickly become apparent. They may want to purchase business premises, release capital from an existing property, acquire another business or raise funds to support growth.

Recognising these opportunities can help brokers support clients beyond their immediate mortgage requirement and build longer-term relationships.

The key is knowing which questions to ask. Here are five commercial finance conversations brokers should be having with their clients.

1 - “We Want to Buy Our Business Premises” – Commercial Mortgage

A business owner who currently rents their premises may eventually consider purchasing the property they operate from.

A commercial mortgage can be used to purchase a range of business premises, including offices, warehouses, retail units and workshops. Owning the property can give the business greater control over its premises and support longer-term planning.

For brokers, the first step is understanding both the business and the proposed property. Useful questions include:

• What does the business do?

• How long has it been trading?

• How will the property be used?

• How much deposit or contribution is available?

• What level of borrowing can the business comfortably support?

Commercial mortgages are assessed differently from residential mortgages, with lenders considering factors relating to both the property and the strength and circumstances of the underlying business.

The key is establishing whether the proposed borrowing is realistic and which lenders are most suited to the case.

2 - “We Need Funding to Grow” – Business Finance

Not every commercial finance requirement is connected to property.

A client may need funding for equipment, stock, recruitment, additional premises, working capital or a new business opportunity. Rather than asking only whether a client needs finance, brokers can ask what the client wants the business to achieve and what is currently preventing that growth.

Understanding the objective can help identify the most appropriate funding route. The type of business finance required will depend on factors such as the purpose and amount of the borrowing, the business's trading performance and the client's wider circumstances.

For brokers, the underlying objective is often more important than identifying a product at the outset. A clearer understanding of what the client is trying to achieve can help determine which funding solution is likely to be appropriate.

3 - “We Want to Release Equity from Our Property” – Commercial Refinancing and Capital Raising

Businesses may own commercial property with capital tied up in it. In some circumstances, commercial refinancing can replace an existing facility while also allowing a business to raise additional funds for an agreed commercial purpose.

The additional funds could potentially be used for refurbishment, equipment, expansion, restructuring or another commercial opportunity, subject to the lender's criteria.

Brokers should establish:

• The current property value

• Existing borrowing

• How much capital the client wants to raise

• The intended purpose of the funds

• How the proposed borrowing will be serviced

The presence of equity does not automatically mean the full amount can be released. Lenders will consider factors including the property, loan-to-value ratio, affordability or serviceability, the underlying business and the proposed use of funds.

A strong proposal should therefore explain both the security available and why the additional borrowing makes sense for the business.

4 - “We’re Buying or Expanding the Business” – Acquisition and Expansion Finance

Business growth can create funding requirements that go well beyond the purchase of a property.

A client may be looking to acquire another business, open a new location, purchase premises or invest in additional capacity. An acquisition may involve property, trading assets and goodwill, while expansion could require funding for premises, equipment, refurbishment or working capital.

Brokers should establish what the client is acquiring, how much they can contribute themselves and how the enlarged or expanded business is expected to generate the income needed to support the borrowing.

It is also important to establish whether the client needs funding for the acquisition itself, additional working capital after completion or both.

The requirement may not fit into a single product. Building a full picture of the funding need at an early stage can help avoid financing one part of the transaction while overlooking another.

Where appropriate, a specialist can assess whether the requirement is better suited to one facility or a combination of funding solutions.

5 - “Our Property Doesn’t Fit a Standard Mortgage” – Semi-Commercial and Specialist Commercial Finance

Some properties do not fit straightforward residential mortgage criteria.

A common example is a mixed-use property, such as a shop with residential accommodation above it. Other cases may involve unusual property types, complex occupancy arrangements or a property that is partly commercial.

Depending on the circumstances, semi-commercial or specialist commercial finance may provide a more suitable route.

Brokers should establish how the property is configured and used, including the proportion that is residential and commercial, whether the client will occupy the property, whether any part is let to a third party and what type of business operates from the premises.

These details can influence lender appetite and the type of finance available.

Recognising specialist cases early can open up commercial property finance for businesses whose requirements sit outside more straightforward residential or mainstream commercial lending.

The Broker Opportunity

These five conversations all start with the client's objective rather than a specific product.

An existing client may have wider funding needs that are not immediately obvious. They may need premises, want to release equity, be considering an acquisition or require finance to support business growth.

Asking a few additional questions can uncover opportunities to support the client more broadly while strengthening the broker relationship.

Where the requirement becomes more complex, speaking to Crystal Specialist Finance early can help brokers understand the available options and establish a suitable funding route before submitting an application.

Our experienced team review every case on its own individual merits, helping to identify suitable lending options tailored to your client's needs.

With access to 50+ specialist lenders across commercial mortgages, business finance, commercial property finance, bridging and other specialist funding solutions, we provide the ultimate speed, service and flexibility when it comes to completing complex cases.

You can choose to package a case yourself where you remain the client's point of contact, or refer it to us while we handle the client relationship directly. Either way, you will earn 50% of the procuration fee upon completion.

For more information, speak to our New Business Advisers on 01827 337710 email enquiries@crystalsf.com or enquire online through our CrystalHUB.

FAQs

What is commercial finance?

Commercial finance refers to funding designed to support businesses and commercial property requirements. Depending on the circumstances, this can include commercial mortgages, business finance, refinancing, capital raising and other specialist funding solutions.

What is the difference between commercial mortgages and business finance?

A commercial mortgage is generally used to purchase or refinance commercial property, while business finance can cover a wider range of business purposes, including equipment, working capital, expansion and other growth requirements.

Can a business release equity from a commercial property?

Potentially. Lenders will consider factors including the property value, existing borrowing, loan-to-value ratio, the business's circumstances, serviceability and intended use of the funds before determining how much additional borrowing may be available.

What is semi-commercial finance?

Semi-commercial finance is commonly used for properties combining residential and commercial elements, such as a shop with a flat above. The most suitable finance will depend on the property, how it is occupied and how it is used.

Can commercial finance be used to buy another business?

Potentially. Acquisition funding can involve several elements, including the trading business, property, goodwill and working capital. The appropriate funding structure will depend on the transaction, the business and the client's circumstances.

When should a broker speak to a specialist?

Speaking to a specialist early can be useful when the requirement sits outside of straightforward mainstream lending, particularly where the case involves unusual property, complex business circumstances, capital raising or multiple funding requirements.