By Gary Hemming CeMAP CeFA CeRGI CSP of ABC Finance Ltd (www.abcfinance.co.uk)
As we move toward the end of the pandemic and into a cost of living crisis, many businesses are struggling financially. While you’re not alone in this, it is only you who can turn things around for your business.
In this guide, we will be breaking down the options available to you, from reducing your debt repayments to looking at how you could get a cash injection to provide that crucial buffer.
Refinancing your commercial property
If you’re struggling with debt and have equity in your commercial property, refinancing your commercial mortgage can be a smart move. Businesses in the hospitality trade can borrow a maximum of 75% of their property value, so if you’re in need of a cash injection and have more than 25% equity in your property, consider remortgaging.
The big advantage of commercial mortgages is that they can be taken over longer terms than most other types of finance, often up to 25 years. This allows you to reduce your repayments, by spreading them over a longer period. In addition to this, commercial mortgage rates are usually lower than those offered on unsecured loans such as business loans and overdrafts.
The simplest way to approach commercial remortgages is either through your own bank (although they might not offer the best deal), or through a fee-free commercial mortgage broker.
Refinancing business loans if you don’t own your business premises
If you’re struggling with your finance repayments, but don’t own your business premises, there are still options available. The simplest way is to look at alternatives is either through your own bank or online. Business loans are no longer the domain on your own bank exclusively, there are now many online business loan lenders who offer great deals.
Reviewing your options can lead to big savings on your interest costs, or on your monthly payments if you’re able to extend your term.
If you’re a homeowner, but don’t own your business premises, you may be eligible for a secured business loan. These loans are usually offered on a second charge basis, behind your existing mortgage and allow you to raise money against the equity in your home.
As the loan is secured, you’re likely to benefit from much lower interest rates than would be the case with unsecured loans. Secured business loans can usually be offered up to a maximum of 70% of your property value.
If you’re struggling to refinance and are facing cash flow difficulties
If you’ve tried the above options and can’t find a solution, or have already fallen behind with payments, making it difficult to refinance, the key is communication with your existing lenders. Whilst lenders will eventually expect payment regardless of your communication skills, you will be given a lot more time if you work with your lender.
Some lenders may even be willing to renegotiate the terms of your agreement, or give you a payment break to steady the ship. If you’re proactive in dealing with your problems and letting your lender know exactly where you stand, they will usually be flexible in return.
Remember, you’re not the first borrower who has fallen behind with payments and although it’s not ideal, most lenders will be sympathetic as long as you’re honest with them.