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Trading Business Mortgage

A Trading business mortgage focuses not only on the bricks and mortar value but also on the value inherent in the trading business itself. Furthermore, Trading Business is generally sold based on the value of three elements:

  1. the property including fixture and fittings,
  2. the goodwill value attributed to the business and
  3. the stock to be sold with the business.

All of these three elements can be treated as a separate type of commercial loan.

A commercial business mortgage focuses on bricks and mortar with fixtures and fittings, goodwill and sometimes stock.

Buying a trading business has the obvious benefit of purchasing a “going concern” with customers, a reputation and income available at a higher level from day one. However, the primary reason why a borrower wishes to take a commercial business mortgage is the ability to borrow a larger amount of money against the trading business.

Lenders will make lending decisions generally taking account of all aspects of the business valuation reports. The loan will be offered using a Loan to Value (LTV) either stated against the MV1 or MV3 figures.

Market Value (MV1)

This type of valuation will almost certainly always be the highest value given in a current trade assessment taking into account as it does the “best case” circumstances and values the business, as a fully operational going concern including all the three elements mentioned above.

This includes the freehold property in its present condition with audited financial account for the business as presented to the surveyor.

Market Value with Special Assumptions (MV2)

This still values the business as a going concern but sets limits on the time allowed to sell the business and presents a more “real world” scenario where full accounting information may not always be present.

The MV2 special assumptions normally being:

  • A sale of the concern has been required within a 6 months period,
  • Accounts or records of trade would not be available to a prospective purchaser,
  • The business is open for trade
  • The business is fully operational going concern, to include the freehold property in its present condition

Market Value with Special Assumptions (MV3)

This method almost indistinguishable from a standard commercial property valuation with the MV3 special assumptions normally being:

  • A sale of the concern has been required within a 6 months period,
  • Accounts or records of trade would not be available to a prospective purchaser,
  • The business has been closed
  • The Business Registration Certificate or operating licence has been lost or been breached.

The difference in valuation from a trading business with substantiated financial accounts to the same business in a closes state can be very significant. If a commercial lender is prepared to lend at 65% of the property value (MV1) this can have a significant impact on the account a client can borrow.

We at Dev Business Finance specializes in searching best possible lending options for our clients who want to either:

  1. To purchase the freehold of the premises used by a trading business
  2. For the expansion of existing premises
  3. To refinance an existing mortgage onto a more appropriate product.
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How Invoice Financing Can Help You Manage Your Business’s Cash Flow

Invoice Finance / Factoring

Having trouble managing your business cash flow? Invoice financing may be best option for you. In this blog post, we’re going to discuss invoice financing, invoice factoring and invoice discounting in detail. So read on to learn how it can benefit your business.

What is Cash-Flow Financing / Invoice Financing?

Invoice financing is an option for service providers to borrow funds against the amounts tied up in invoices. It helps businesses improve their cash flow, pay suppliers and employees, and reinvest in business operations and growth. It involves selling your invoices to a 3rd party company who will provide you with funds necessary to manage your business cash flow, and in return they will charge a fee. Invoice financing can also go long way toward helping you obtain other type of business credit.

Businesses That Can Benefit From Invoice Financing

Invoice Financing is an ideal choice for businesses that specialize in the following areas: Courier and Logistics, Construction, Wholesale, Transportation, Manufacturing, and Recruitment. However, it can also be used by any business that provides services or goods to other businesses.

The Difference between Invoice Factoring and Invoice Discounting

There’re two types of invoice financing: Invoice Factoring and Invoice Discounting. In invoice factoring, a factoring company is responsible for everything from collecting payments from your customers to managing your sales ledger. While the latter allows you to keep control of your sales ledger, and the facility is usually confidential from your customers.

Advantages of Invoice Financing

The financer manages your sales ledger and credit control.

You always know when you’re going to get paid.

It unlocks amounts tied up in invoices, improving your business cash flow.

And more…

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Banks are like the Wizard of Oz

Commercial Mortgages

People once believed banks were rock-solid institutions.  For example, the phrase “as safe as the Bank of England”. Maybe so since it is a central not a business bank! Not all banks live up to that reputation.  Like the Wizard of Oz they hide behind that curtain of respectability.

A recent “Which” survey of 26 banks has customer current account satisfaction at 84% for the best and 55% for the worst.  That said, it is only at 7th place that we meet what people would recognise as a normal bank (the Cooperative at 73%), the Barclays at 70%.  As far as Northern Ireland is concerned only 66% of customers are satisfied with the customer service of Danske bank and, bottom of the list, is the Ulster bank rating only 55% for customer satisfaction.

OK, nobody’s perfect but here’s what bothers us:  current accounts are pretty straightforward compared with the complexities of business banking and borrowing.  We don’t have survey material to hand but, given the above, how well do you reckon your bank performs when it comes, say, to short term support.  We have in mind such flexible devices as invoice finance – invoice factoring, invoice discount.  Cash flow is the lifeblood of business.  It matters that you should have more than 55% or even 75% confidence in your finance source.