For every need of a small business owner, there is also the need for financing
Small and micro enterprises (SMEs) have various needs; there’s the popular coffee shop that’s growing in clientele, tea and soap manufacturers who need to expand their business quickly and are thinking about purchasing equipment to mechanize their operation, and the artisan baker who wants to have their own bakery instead of delivering their products.
For every need of a small business owner, there is also the need for financing. The key is finding the right form of financing for the business. SMEs can consider a commercial mortgage to cater to their various needs.
WHAT IS A COMMERCIAL MORTGAGE?
A commercial mortgage is usually a long-term loan secured by property that generates an income for the business. This can include factories, warehouses, store fronts and shopping centres. A commercial mortgage can also be used to build a property, renovate a building or purchase equipment for the business.
There are two popular types of commercial mortgages currently trending in Trinidad and Tobago:
THINKING ABOUT EXPANDING
While growth in a business is important, it should be measured and calculated. If a business expands without a solid plan or expands too rapidly, it may not be beneficial to the business and cause it to incur a loss. This occurs when expanding attracts more customers than a business can handle which causes the quality of the product or service to decrease.
Expanding using a commercial mortgage is an exciting option for entrepreneurs. Once careful thought and planning is done, it can lead to incredible opportunities for the business.
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Many entrepreneurs already own property and have no desire to purchase another to grow their business. Instead, some choose to invest in equipment and/or technology that will increase output/ sales and improve efficiency. If this is something that might work for you, Republic Bank offers business loans that can be secured by the property you already own!
Additionally, to supplement your daily operations, business expansions or managing uncertain events, Republic Bank can provide a small commercial business with overdrafts, credit cards or other short-term financing options. In some instances, up to 90% of the cost can be financed. The financing options for small commercial businesses are numerous. We can help you with the purchase of machinery, equipment, acquisition of office facilities, working capital needs, purchase of property (land or land and building) for business occupation/use and construction or renovation of the building used in the business. All of which can be tailored specifically to suit your business needs.
Cons of buying your own property are:
The decision to lease versus rent typically boils down to your business needs and whether the asset is required long-term or for shorter periods of time. If the asset is required all the time, leasing may be the better option. For short-term periods where the asset is not required year round, rental may be a best.
Expanding your business is an exciting, but difficult decision to make. The demand from your customers will determine if expanding your business is ideal. If you are a coffee shop with more people crammed in your parlour, it might be a good indicator that you need more space. If you are a beauty product manufacturer that just made a deal with a large-scale distributor you may need factory or a warehouse space. An artisan baker experiencing an increase in sales may want to invest in outfitting their kitchen with a larger commercial oven and state-of-the-art baking equipment.
The directors of these SMEs have the option of using a commercial mortgage to buy new property or invest in the equipment.
At Republic Bank, a commercial mortgage can be granted for up to 90% of the cost/value of the property, and for a maximum of 20 years. Unlike residential mortgages, a commercial mortgage does not have a specific interest rate, but the rate is negotiated based on the amount of your down payment, value of the property and use of the property. In cases where you are constructing a building, there is a moratorium on principal repayments up to one year where you are only required to pay the monthly interest generated on the loan.
When your building is complete, the monthly mortgage payment (principal and interest) is calculated on an amortised basis over the agreed term of the mortgage, e.g., 20 years. Provisions for periodic, defined lumpsums on the mortgage is also permissible on our mortgages. Acceptable insurance is required for commercial mortgages where there is a building on the property.
Commercial Mortgage Application Process
If you are ready to apply for a commercial mortgage, the following financial information will be required to begin the application process:
Making the decision to apply for a commercial mortgage isn’t an easy one, but it also doesn’t have to be complicated either. Our experienced Account Managers are available in each branch to walk you through the process and help you to make the application as simple as possible.