£150k business loan needed to buy premises, impossible??
£150k business loan needed to buy premises, impossible??
Author
Discussion

Maverick007

Original Poster:

128 posts

166 months

Thursday 7th February 2013
quotequote all
Hi all

New to the forum.

We are currently paying rent to a landlord and have the option of buying the property from him instead. It is priced at £150k and we are currently paying £1200 per month rent so surely repaying a loan or mortgage would be a lot cheaper than that per month.

The problem is, where do we go to try and get that sort of cash? We've been trading for just over 3 years running a reasonably successful accountancy firm. Is that sort of cash available? Would it have to be secured against our houses??

Any advice greatly received.

voicey

2,494 posts

217 months

Thursday 7th February 2013
quotequote all
Speak to your accountants...

Tuvra

7,926 posts

255 months

Thursday 7th February 2013
quotequote all
voicey said:
Speak to your accountants...
They are an accountancy firm? Or am I missing something? scratchchin

ikarl

4,064 posts

229 months

Thursday 7th February 2013
quotequote all
Tuvra said:
voicey said:
Speak to your accountants...
They are an accountancy firm? Or am I missing something? scratchchin
Only a Whoooosh parrot.

ellroy

7,846 posts

255 months

Thursday 7th February 2013
quotequote all
You're accountants and have not considered buying through your pension funds?

BIRMA

4,273 posts

224 months

Thursday 7th February 2013
quotequote all
Is this a wind up?
If the firm of accountants I use posed a question like this I'd run a mile, surely if you qualified in accountantcy you must surely be able to sort this out amongst yourselves?

PurpleMoonlight

22,362 posts

187 months

Thursday 7th February 2013
quotequote all
Commercial property lending is looking for a 40% deposit these days.

A pension scheme could indeed purchase it, and can borrow too (within certain limits). How much have you all got in pension schemes?

Jer_1974

1,643 posts

223 months

Thursday 7th February 2013
quotequote all
Look into a SIPP. Last year I bought a shop unit for 53k, after kitting it out and starting a business in it has a rental value of £11k pa which gives the unit a value of 150K. I am in the middle of putting the unit into a SIPP, if my IFA is right I can borrow £75k of the SIPP (50%). I will get £60k + tax relief and the 11K pa that I pay in rent is tax free because it goes into the SIPP.

PurpleMoonlight

22,362 posts

187 months

Thursday 7th February 2013
quotequote all
Jer_1974 said:
Look into a SIPP. Last year I bought a shop unit for 53k, after kitting it out and starting a business in it has a rental value of £11k pa which gives the unit a value of 150K. I am in the middle of putting the unit into a SIPP, if my IFA is right I can borrow £75k of the SIPP (50%). I will get £60k + tax relief and the 11K pa that I pay in rent is tax free because it goes into the SIPP.
The SIPP cannot lend you money without creating a huge tax charge, and where is the cash to do it anyway?

You will only get £60,000 tax relief if your taxable income is £180,000 odd in the tax year of the in-specie contribution (the property).

Jer_1974

1,643 posts

223 months

Thursday 7th February 2013
quotequote all
I don't need to borrow the money but the 75k can be used to pay the bank back for the fit out. My taxable income was near that but as I understand it you can add pension contributions from past years if you have not paid the max.

Forgot to add I paid cash for the unit so would just be borrowing that back from the SIPP.

PurpleMoonlight said:
The SIPP cannot lend you money without creating a huge tax charge, and where is the cash to do it anyway?

You will only get £60,000 tax relief if your taxable income is £180,000 odd in the tax year of the in-specie contribution (the property).
Edited by Jer_1974 on Thursday 7th February 21:06

PurpleMoonlight

22,362 posts

187 months

Friday 8th February 2013
quotequote all
Jer_1974 said:
I don't need to borrow the money but the 75k can be used to pay the bank back for the fit out. My taxable income was near that but as I understand it you can add pension contributions from past years if you have not paid the max.

Forgot to add I paid cash for the unit so would just be borrowing that back from the SIPP.
You can bring froward unused contribution allowance from previous years to facilitate a £150,000 contribution in the current year (assuming you have some previoius pension arrangement), but you still need £150,000 taxable income in the current tax year to get tax relief on the lot. It's only the contribution allowance that moves forward not the tax relief.

I really dont understand what you mean with the £75,000! If you purchased the property for £53,000, borrowed £75,000 to refurbish it, and then put it into a SIPP as a £150,000 net contribution, the SIPP will reclaim £37,500 in tax relief so you then have a SIPP with a property and some cash. How can the SIPP repay your refurbish borrowing?

ajhflyer

3 posts

199 months

Friday 8th February 2013
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A commercial mortgage should be doable, approx 60% loan to value leaving you to find the shortfall. Is the £150k market value or has the vendor discounted it to take into account the rental stream they have enjoyed?
I source commercial finance so if you wanted to go further I will need a much better information base.

BlueNGT

709 posts

252 months

Friday 8th February 2013
quotequote all
Maverick007 said:
Hi all

New to the forum.

We are currently paying rent to a landlord and have the option of buying the property from him instead. It is priced at £150k and we are currently paying £1200 per month rent so surely repaying a loan or mortgage would be a lot cheaper than that per month.

The problem is, where do we go to try and get that sort of cash? We've been trading for just over 3 years running a reasonably successful accountancy firm. Is that sort of cash available? Would it have to be secured against our houses??

Any advice greatly received.
Depends on your Business performance, type of property, Asset/Laibilities/Commitments etc and decent Broker and/or Bank Manager....lots of variables.

Decent LTV's are doable for the right case. We've done Commercial deals at 50%, 70% and 80% for clients in the last 12 months.

Tim16V

423 posts

212 months

Sunday 10th February 2013
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Make sure you get that £150k price tag checked by a surveyor - it could be on the high side depending on what the type of premises is and where it is what your lease arrangement is etc. If you borrow from a bank they will need a valuation anyway so that could flush the matter out. They are extremely careful about their security these days.

The L is getting c9.5% pa return form you on the asking price(not bad with interest rates at 0.5% and cash ISAs at c3%). That is possibly fairly low (making the property expensive)as secondary commercial property values are on the absolute floor and the market could be demanding more return therefore pushing the price down.

I see secondary properties going for mid teen% return or higher. The way it works in broad terms would mean a price tag of circa £95k on your annual rent of £14,400 at 15% return.

Lots of variables and issues but the principle is you don't want to overpay and even if the L won't budge on the £150k at least you'll know what you're getting in to.

CaptainSlow

13,179 posts

242 months

Sunday 10th February 2013
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What about a secured loan through a Peer to Peer lender...Funding Circle etc?

What sort of rate are you expecting?

Maverick007

Original Poster:

128 posts

166 months

Wednesday 13th February 2013
quotequote all
Thanks for the replies chaps.

No money in pension fund so looks impossible.

Yes we are an accountancy firm but not in the true sense of the word and this is out of our comfort zone.

andy1108

4 posts

170 months

Wednesday 13th February 2013
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Bit of an alternative option but have you heard of merchant cash advances? If you're already traiding then this type of finance could work for you. They lend based on your monthly credit/debit sales you take. Depending on how much this is will answer whether or not they can advance as much as £150k. http://www.unitedkapital.co.uk/ advertise that they lend up to £150k but whether or not they would give you that will depend on your takings, from what I understand.

Sorry details are sketchy, it's a relatively new concept to me but hope it helps.