Attempting to secure a commercial mortgage with bad credit may seem impossible, but that’s simply not the case, it is a possible proposition. There’s currently some great commercial lenders and specialist adverse lenders in the market. In some cases, commercial mortgages with bad credit can even be approved in as little as two days! So, what is the best way to be approved a commercial mortgage with bad credit?Enquire Now
How to get a commercial mortgage with bad credit
Securing a commercial mortgage with bad credit largely depends on:
- Your current financial circumstances
- Criteria of the commercial property/project
- The severity of your bad credit
- The dates of your bad credit
- The structure of your mortgage application
- The lender you approach
Having bad credit will of course make it harder to get a commercial mortgage, but that doesn’t mean it isn’t possible. There’s a number of bad credit mortgage lenders that specialise in commercial finance, but they will also have criteria which you’ll need to pass.
Applicants have varied criteria, so it’s recommended to speak to a specialist commercial broker who also has experience with adverse credit mortgages. A commercial advisor can then understand your individual situation in-depth and provide you with some viable options.
How financial circumstances can affect your application
Once you’ve applied for a mortgage, the lender in question will assess your financial circumstances. This article is about applying for a commercial mortgage with bad credit, so you’d assume your financial circumstances are poor. This is incorrect, as an individual can have a poor credit score, but have a stable income.
An individual can have a great credit score but have a very low income. On the other hand, an applicant can have a poor credit score but show a steady and secure income. Even if you’re not as financially stable as you’d like, some lenders may assess the potential income that your proposed commercial project may generate.
To summarise, financial circumstances will vary for each applicant. Lenders will consider your income, however they’ll also consider the reasons for your commercial loan, which brings us on to our next point.
Criteria of the commercial project
Lenders will assess the potential income that your commercial project may generate. If the numbers make sense to the lender, then this certainly gives credibility to your application. There’s a number of possibilities on what the criteria for your commercial project may be. This could be anything from simply purchasing a commercial property, to a commercial property with attached residential flats, development finance and so on.
The criteria of your commercial project will either add or deduct lenders that you can approach. It’s vital to get the numbers right and if you’re still unsure, our commercial specialists can always go through this with you before applying.
How severe are your credit issues?
Having severe credit issues will make it harder to obtain commercial finance, nonetheless, it may still be possible. If you’ve got light adverse credit issues such as late payments, then you may be able to choose from multiple lenders.
As bad credit comes in different shapes and sizes, it’s best to speak to a mortgage broker that specialises in adverse credit. A specialist broker can then give you tailored mortgage advice based on your own circumstances.
When did your adverse credit occur?
The dates of your credit issues will affect a lenders decision on whether or not they’d offer you a commercial mortgage. A lender will look at the severity of your credit issues, however the dates also play a vital part. This is because a recent default may be considered more severe than a historic repossession.
Generally speaking, credit issues that were over six years ago shouldn’t affect your application. This is because the majority of lenders will only check your credit score up to the last six years. Be warned, some lenders will ask you to declare certain adverse credit issues, such as whether or not you’ve ever had an IVA for example. Some lenders will also flat out decline you if you’ve been bankrupt.
It’s always best to download your credit report online. There’s a number of sites where you can download your credit file for free. Lenders will check your credit file, so knowing what’s on there is a smart move. Your credit score may not even be as bad as you think! Also, don’t worry about leaving a footprint, as downloading your credit score is harmless.
There are a number of specialist adverse credit lenders currently in the market. We’ve personally placed commercial mortgages for applicants with all different types of adverse issues and got them approved. This doesn’t mean to say it’s easy. Having a structured approach to your mortgage application can make all the difference.
Preparing a commercial mortgage application
In all honesty, a specialist commercial advisor is probably the best option in ensuring your application is structured in the correct manner. Often enough, advisors can also liaise with underwriters should there be any discrepancies with your application.
If you’ve ever needed a haircut, the chances are you would have visited hairdressers. Yes, you could ‘risk it’ and do it yourself, but what are the odds of the haircut being of the same quality?
The same could be said for when you’re applying for a commercial mortgage with bad credit. Even more so, if you get a haircut wrong, your hair will grow back. However, if your mortgage application is declined, this will more than likely hamper any further chances of being approved any time soon.
Commercial and adverse specialists place mortgages on a regular basis. A standard mortgage application is very intricate, a commercial mortgage application is even more so! Throw bad credit into the equation and your application needs to be watertight! Utilising the skills and experience of a specialist mortgage broker can save you time, money and frustration.
Commercial lenders that accept bad credit
Every lender is different. Each lender has their own criteria which can make them better suited to certain applicants. Depending on your own circumstances (all of the above), there will be better suited lenders than others.
Applying to the best suited lender is paramount, especially when applying for a commercial mortgage with bad credit. This is because a commercial mortgage is pretty much like a business proposition. The numbers need to be attractive to the lender. In addition, the fact that you have bad credit will make you appear high risk to lenders. A commercial lender will generally look at the balance of the proposition in relation to your bad credit.
An experienced broker should know each lender’s criteria. This enables the broker to place your mortgage to the right lender in the first instance. Commercial lenders will also lend on certain projects and not others, so do plan your approach.
Advice from a specialist commercial mortgage advisor
It’s important to note that you may be offered a commercial mortgage, but at a higher than average rate. This is due to having bad credit. The past years have seen an increase in bad credit mortgage lenders and as a result, bad credit mortgage brokers. As this has made the adverse mortgage field more competitive, lender fees and broker fees have also decreased in an attempt to gain more business.
2018 is a great time to secure a commercial mortgage with bad credit, simply because of the options available. When adverse credit mortgages were scarce, fees were astronomical with dodgy brokers taking advantage of applicants facing financial hardship.
Taking a commercial mortgage with bad credit can actually turn your credit score around. If you consistently make your mortgage payments on time throughout your mortgage term, it will only have a positive influence on your credit score. In essence, you could potentially make an income from your commercial project and turn your credit score around! This could then lead to further investments based on willing lenders to finance your future commercial projects.
A great mortgage advisor will always offer you impartial advice. This means they should only offer to place your application if your financial situation is likely to meet the demands of a lender. The last thing you’d want is a broker placing every application they’re getting, as it simply isn’t good practice!
You’re ultimately in charge of your finances, so do ensure you’re financially prepared to avoid further credit issues.