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Commercial mortgages are a type of lending product that allows individuals and businesses to buy property for business purposes.  Here is a top ten list of advantages to taking out a commercial mortgage.

1. Owning always beats renting: In business, ownership is everything; the very nature of our economy rewards it. If you take out a commercial mortgage to purchase a building, you then gain ownership of that property as an asset. As a trend property prices normally rise over the long term in Britain. This means that by simply holding on to a property for a period of time you will normally be able to realise a profit when you sell it in the future.

2. Repayments are tax deductible: When preparing your company accounts or your own Self Assessment tax return, you need to work out what expenses you are allowed to claim.  HM Revenue and Customs (HMRC) generally consider that interest payments on a commercial mortgage are allowable expenses and so they can be deducted from your profit for tax purposes.

3. Stable payments: Commercial mortgage payments are generally structured in order that they remain stable.  This means that it is easy to manage your business expenses as you know what you are paying.  Rent payments can be volatile and can rise significantly on an annual basis when your rent review is carried out.

4. Cheaper than a credit card: Some companies take out commercial mortgages to consolidate other business debts and liabilities that they may have accrued.  Start up businesses with few assets often has to pay high interest rates on an overdraft, bank loan or credit card.  It may be more sensible to take out a commercial loan to repay these unsecured borrowings.

5. Potential to generate income from sub-letting: Buying a commercial property often leaves you with more floor space than you actually need.  So, with your lender’s permission, you may be able to sub-let some of your shop or office to another company. This will help generate useful income that can go towards meeting your monthly commercial mortgage payment.  And, you can always use the space for your own purposes when your company expands.

6. Less unpredictability: When you take out a commercial mortgage, the structure of payments will tend to extend for a number of years. This gives some stability in terms of repayments, allowing you to focus on profit and loss instead of worrying about a unpredictable cash flow.

7. You retain control: An alternative to a commercial mortgage would be to sell a share of your business or property to an investor.  However, such an investor would then expect a return on any growth in the property value.  By using a commercial mortgage, you retain full ownership of the property and a lender has no interest in the property value itself.

8. You Keep The Capital: A commercial mortgage by its nature is not a black hole that will bleed you company dry of every last penny of capital. You will need some capital for the deposit, but the rest obviously comes from the mortgage lender, leaving you with capital now and in the future to use to expand your business.

9. You Control The Property: As a tenant, there are no doubt many do’s and don’ts from the landlord you have to abide by, it can be stifling for your business and working practices. Furnishings, decorations, parking might all be restricted; it won’t be if your business owns its own premises.

10. Cut out the landlord: The final advantage of a commercial mortgage over renting a property is of course, cost. It is the most important consideration: that your repayments will often be lower.  Without regular rent increases, you might actually pay significantly less on a monthly basis on a commercial mortgage than you would on rental payments, buy cutting out the middle man.

Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

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