How Brexit could affect commercial loans

And buying a practice

Perhaps you have plans this year to buy a dental or medical practice. If so, are you concerned how Brexit may have an effect on your ability to source commercial loans? There are a number of possibilities that could affect business loan rates and finance costs, which in turn could have an impact on your transaction.

This does not constitute advice and advice should be sought in all instances before acting on it.

Your property may be at risk should you be unable to maintain any agreed mortgage payments over the term agreed. 

The possible negative effect on commercial loans

The UK’s credit rating has already taken a tumble, with the value of Sterling decreasing dramatically following the Brexit results, and also in the weeks leading up to, and following the decision.

On the whole, the UK is now viewed as a less secure place for investment. Also, other countries will be acting with caution when it comes to lending the UK money.

This negative effect on the countries’ credit rating is likely to filter through to commercial lending and could therefore play a part in the process if you are buying a practice this year.

Banks are likely to have to pay more themselves to borrow money from other lenders. Therefore, to maintain their own profit margins, these extra costs could well be passed to the borrower.

The possible positive effect on business loan rates

The Bank of England were considering raising their base rate in early 2017, however the chances of this happening following Brexit are now slimming.

Generally, through times of economic uncertainty, the interest rate is likely to remain the same, or reduce, rather than rise. This is to keep a flow of money in the economy so as to protect against drastic effects of inflation.

So on this note, the interest cost of borrowing regarding commercial loans could remain stable, or, you may even see a small discount in the near future.

The UK, at least for now, has good banking liquidity and an underlying strong financial background. Whilst there is turmoil in the marketplace due to current conditions, there is a high probability that lending will continue to be accessible and at a reasonable rate, if you know where to shop and how to apply.

How to get a business loan

If you are in the process of buying a dental or medical practice, or indeed refurbishing an existing practice, you may require a business loan. There are a few things to consider:

• BUSINESS PLAN – Have you updated your business plan to include possible scenarios following Brexit? A business plan needs to be up-to-date to present to the bank or lender, ideally showing that you have factored in for various rate fluctuations.

• TIMING – If you are already signing on the dotted line, then it is likely you are already more than committed to buying your practice, Brexit or no Brexit. However, if you are in the early days of the transaction, or just browsing the market place, you need to carefully consider timing alongside everything that is going-on.

• SEEK HELP – A professional broker can help you to get the best commercial mortgage rates by using their expert knowledge of the available deals.

Need a commercial loan? Speak to Kevin

If you are buying a practice or it is on the cards, Kevin, our specialist finance broker can help you find the best business loan rates for your transaction.

Tel: 01403 780 770

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