Managing rejection for any credit you’ve applied for can be tough. If it’s a commercial mortgages, you might be concerned about whether you’ll be able to find alternative financing to support your business objectives.
Whether you’re applying for a first mortgage to get a new venture off the ground or need a mortgage to expand a trading company, a commercial mortgage can be a valuable low-interest financing tool to enable you to grow.
Today, mortgage advisors explains some of the common reasons for commercial mortgage rejections and what you can do to get your plans back on track.
Why Have I Been Turned Down for a Commercial Mortgage?
Every lender has a set of policies and rules it applies when considering new mortgage applications, so there are countless reasons they may have refused your loan.
In any case, you should be able to ask for information about why your application has been turned down if this hasn’t been shared with you already.
It’s important to know which part of your application, credit history or business plans have caused the issue, so you can make informed decisions about adjusting your application or finding a lender with policies compatible with your borrowing needs.
Common Reasons for Commercial Mortgage Rejections
While not exhaustive, we’ll run through some of the typical causes.
Credit Issues
All mortgage lenders will run through credit checks before making an offer. Depending on your trading structure, that may include credit assessments on shareholders and directors as well as on the business itself.
If you have bad credit, an adverse history or a low credit score, a mainstream lender will likely turn down your application, as they tend to have strict requirements.
A commercial mortgage broker can usually help, recommending niche bad credit lenders or commercial specialists who will be less interested in your credit score and more in whether you can afford the mortgage going forward and the business’s future stability.
Trading History
When you apply for a commercial mortgage, you’ll usually be asked for two or three years of trading accounts or tax returns.
Newer companies, those with insolvency history, or firms with several loss-making years may find it difficult to secure mortgage approval.
Again, a broker can advise on suitable solutions and alternative lenders that are comfortable lending to businesses in this scenario.
Security Available
Deposit payments in commercial lending tend to be high. So if you don’t have a significant down payment or don’t have collateral to offer in any other business assets, a lender may perceive your commercial mortgage as too risky.
Most will accept a director’s guarantee as a substitute for a business security agreement – but be aware this means your personal home may be repossessed if you default.
Cash Flow Assessments
The commercial mortgage assessment process includes looking at business income and debt and whether there is a stable enough cash flow to maintain the monthly payments.
Any doubts about your ability to repay, high debt-to-income ratios or a lack of forecasting can lead to lender rejection.
Sector Risk
Some business sectors are simply riskier than others – so a lender might turn you down for a commercial mortgage based on their policies about lending to specific industries!
There is usually an alternative by using a lender without restrictive policies.
Errors and Inconsistencies
Many commercial mortgage rejections occur because there are mistakes, errors or inconsistencies between the information on the application and the supporting documentation provided.
Expert Support to Manage a Commercial Mortgage Rejection
Being turned down by one lender does not mean you can’t apply elsewhere – either with an amended application or the same application but to a commercial mortgage provider better suited to your needs.
As an experienced commercial mortgage broker with a talented team of industry experts, Revolution Brokers can support you by comparing the mortgage rates available, assessing the strength of your application, and making recommendations if we feel another borrowing product would be to your benefit.
The first step is to look at why your initial application was rejected and use that knowledge to strategically evaluate your best chances of mortgage approval – whether that means offering more security, providing more detailed trading records, or applying to a niche lender.
We can also help you compile a more compelling application with context to mitigate any perceived risk that contributed to the original rejection.
Our role is to ensure you get your application over the finish line with the most competitive deals available, so we negotiate directly with mortgage lenders to agree on favourable terms.
Please give us a call on 0330 304 3040 or send an email to info@revolutionbrokers.co.uk for more information about commercial mortgage rejections and the next steps to get the funding you need in place.
