Commercial Property loan guide

Commercial Property loans are available for:

UK-based businesses
Property or properties located in England and Wales
First Charge security over the property
Up to 70% LTV (Loan to Value)

The borrower must be one of the following:
Limited company
LLP
The loans can be secured on:

Commercial property
Industrial property
Residential property (not owner occupied)
Buy-to-let property

(If your property falls into the last two categories, you may be able to use a Business loan instead. Find out more.)

You can borrow from £250,000 to £5million with a maximum of 70% of the property value, known as Loan to Value (LTV).

Different repayment schedules can be arranged, including interest-only, interest roll-up or part-amortising.

The term of the loan can be up to 60 months depending on your requirements.

The interest rate you pay is dependent on two things:

1. The LTV
   The reserve rate set is linked to the LTV for your application. To give you an idea of the rates you might pay, please see the table below – these are indicative rates.

The monthly compound interest rates above are indicative and include our monitoring fees.

2. The loan auction

During the loan auction (which can last up to seven days) our investors bid to fund your loan at the interest rate they’re willing to offer. The bids with the lowest rates win. If there’s a lot of competition between investors, your rates could be lower than your agreed maximum rate.

You will be borrowing directly from a number of individual and institutional investors. Our secure online platform allows them to bid for a stake in your loan. Our investors will spend time comparing your and other lending opportunities on our website. The people who invest in your loan will be placing their trust in you and your project – and expecting to get their money back.

During a loan auction, investors who bid the lowest interest rates will win the opportunity to fund your loan. If the loan isn’t completely filled by these bids, FundingKnight has partners who make up the remaining amount of the funds – this provides you with certainty once your funding auction starts.

We charge an arrangement fee of 2%, which will be deducted from the loan amount. We also charge a monitoring fee – typically 0.25% per month – which is included in your overall interest rate. There is no separate exit fee.

You will need to pay for a professional valuation and for legal costs in relation to the loan.

While a loan is in default we are entitled to charge a fee of £5 per day as well as any costs incurred in protecting the investors’ interests. In addition, the interest payable to investors is increased by 4% during the period of default.

Funds are typically available 21 days from application. If you have all of your documents prepared and your solicitors act rapidly, it can be much faster – as little as 14 days.

You will receive your money when the loan auction finishes: typically the funds will reach your solicitors to complete the property transaction on the same day.

Please remember that property transactions always require legal work and more complex transactions may take longer.

For more information on the process, please see ‘How can we apply?’

Our Commercial Property loans provide short-to-medium term funding for businesses, property developers, investors or buy-to-let proprietors. You can use our loans for:

Purchasing a property
Refurbishment
Refinancing

Properties must be commercial, residential (not owner occupied) or buy-to-let and located in England or Wales. For more information, please read our eligibility criteria.

You decide the term of the loan in advance – up to 5 years. You’ll agree this with your property underwriter when you discuss your application and we will want to understand the proposed source of repayment.

You should note that once the loan has started, extending the term of the loan will not be an option, so you should ensure that the term you request adequately covers your needs.

Step one: Register and tell us some details

Once you’ve registered online, you’ll be able to sign into your FundingKnight account. Here, you can read and accept our Borrower Agreement and Terms & Conditions, and make your loan application.

Step two: We’ll respond within one working day

If your application passes our initial review, we will then agree the further supporting information we need and help guide you through the rest of the application process.

For more information, see ’What do you need from us?’

Step three: Heads of Terms

Once we are happy we have all the information we need, we will issue an outline of the terms, known as Heads of Terms, so you have a clear indication of our interest in your request before you incur costs on valuations etc.

Please note that Heads of Terms are issued once we have completed satisfactory credit reference agency checks.

Step four: Valuation and legal work

Once you have accepted the Heads of Terms, we will arrange for an independent professional valuation to be instructed. This is to confirm the current market value of the property and make an assessment of any risks associated with the property that would impact on its suitability for a Property Bridging loan.

You will need your own legal representatives to act on your behalf. We will arrange for our solicitors to liaise with your legal representatives to start completion of security over the property (or properties).

Please note that the costs associated with valuation and legal work will be payable by you. We will be able to give you an indication of those costs before the valuation and our legal work is started.

Step five: Your interview

We will arrange for an agent to meet you at the property to give you the opportunity to show them your plans for the property and talk about your experience in property matters.

One of our underwriters will also speak with you about the information in the valuation, the results of your meeting with our agent and talk you through the way your loan will be presented to our investors.

Step six: Documents completed

We will need our solicitors to confirm that all the security and loan documentation has been completed satisfactorily and you will need to provide us with details of the property insurance.

You are now ready to put your loan to auction.

For more information, see How do the loan auctions work?

If you have all the information required ready when you apply, it could speed up your application and give you faster access to funds. To help you prepare, this is what we’ll need:

• Application form
• Schedule of Tenancies (if appropriate)
• Personal Liability Statement for each borrower/guarantor
• Any recent valuation and/or estate agents particulars
• Disclosure of any other charges or loans that are currently secured on the property (if any), including:
  • Lender’s name and address
  • Account reference
  • Balance outstanding
  • Any break/exit costs
  • Any supporting information to demonstrate your background and experience with property

An auction is where our community of individual and institutional investors bid via our secure online platform to fund parts of your loan.

If your loan isn’t completely filled by these bids, we’ll make up the remaining amount of the funds. In other words, you will always be sure that our loan auctions will fill 100%.

The only factor not set in stone is the interest rate you’ll pay. While you will have agreed on a maximum interest rate, competitive bidding from investors during the auction could push down your interest rate and get you a better deal.

During the auction you’ll be able to sign into your FundingKnight account and watch as investors bid live on your loan. The investors who choose the lowest interest rates will win, and fund a stake in your loan.

Auctions typically last seven days, but they can be shorter if you choose. As soon as the auction ends, your solicitor will receive your funds via a bank transfer.

Unless we have agreed to provide you with rolled up interest, you will begin to make interest payments one month from draw-down. This means there will be a fixed amount of interest to pay to FundingKnight each month, which we will then allocate to each of your investors.

Repayment of the loan capital is due at the end of the agreed loan period.

Early payment

You can make an early repayment of any part of the loan, provided you give us at least 15 days’ notice and the repayment amount is the Minimum Repayment Amount. The current Minimum Repayment Amount is £25,000 capital, plus any outstanding interest on the capital amount to be repaid.

Simply sign in to your FundingKnight account and fill out an application. Alternatively, you can contact your dedicated underwriter or a member of our team and we’ll discuss how we can help.

The application process for a second Property Bridging loan is also much faster because we already have a lot of your information on file.