Below is a collection of the most frequently asked questions about raising finance, along with clear and concise answers.
We require your authorization to allow any lender we apply to on your behalf to conduct independent background checks to assess creditworthiness and financial standing.
This authorization is valid solely for Andrew Wattsford or any lender they deem appropriate and suitable for your needs. It covers the provision and verification of information related to any loan application you may submit.
An e-signature document will be sent to the lead applicant only.
Dual representation occurs when the same law firm represents both you and the lender. To proceed, you will need to instruct a solicitor from that firm and provide the following details:
Firm name
Name of the instructed solicitor
Instructed solicitor’s email address
Instructed solicitor’s telephone number
The instructed solicitor must be registered with the Solicitors Regulation Authority (SRA), which you can verify at SRA Register.
If you prefer to use your own solicitor, you must provide the same information and ensure that the solicitor is listed on the SRA Register.
EBITDA is a key metric used by banks to evaluate a business’s performance. It stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation.
ERC stands for ‘Early Repayment Charges’ – typically applied to longer-term Commercial Mortgages to safeguard the lender’s expected margin on the funds. These charges are incurred if the loan is paid off early, often within the first three to five years. Many lenders impose ERCs on a reducing scale, but they can be as high as 5% of the mortgage amount if the loan is repaid in the first year.
The support provided by Wattsford Commercial Finance is customized to your needs. We assist you throughout the entire application process. For instance, some lenders may request supporting documents, such as a business plan, as part of their lending decision, and we’ll help you prepare them.
If potential lenders wish to meet with you, we will attend the meeting with you whenever possible.
The amount of property development finance available will depend on the type of project, the total borrowing need, and the estimated Gross Development Value (GDV) upon completion of the project.
As part of our regulatory obligations, we are required to conduct ID, PEP (Politically Exposed Person), and Sanction list checks on the lead applicant. These checks are performed when we send out Fact Finds as part of your funding application.
ID verification is applied only to the lead applicant, as follows:
Indicative terms give you an estimate of how much you may be able to borrow and the associated terms before making a full application. These terms are also referred to as a ‘Mortgage in Principle,’ ‘Decision in Principle,’ or ‘Mortgage Promise.’
For example, with mortgages, it serves as a document you can present to an estate agent or property seller to demonstrate that you may be financially capable of purchasing the property. For asset finance, business loans, and invoice finance, it provides a preview of the financing terms available to you.
When an underwriter reviews your loan application, whether for a mortgage or business loan, they will assess your ability to repay the loan.
LTV stands for Loan to Value and is commonly used in reference to mortgages.
For example, if a property has a market value of £100,000 and you need a mortgage of £75,000, the LTV would be 75%.
When applying for credit, either personally or through a business, a credit check will be conducted by any potential lender. Your credit score can influence the lenders we are able to connect you with. For more information on how to check your personal credit score, please visit our Credit Check webpage.
The following items are generally acceptable forms of evidence to verify a customer’s identity and residency. These documents should be valid, up-to-date, and display the applicant’s full name (not just initials). Proof of ID and residency must be certified by an FCA-regulated broker, licensed conveyancer, or solicitor. The documents should be of good quality, with photos clearly visible where applicable.
The Town and Country Planning (Use Classes) Order 1987 (as amended) categorizes the use of land and buildings into different ‘Use Classes,’ which are outlined on the Planning Portal.
An increasing number of business owners are establishing small, self-administered pension schemes to benefit from a rule that allows companies to borrow from pension assets to purchase commercial property, either outright or through a mortgage.
A detailed article on the website, SIPP or SSAS Commercial Property, explains the differences between the two options.
SPVs (Special Purpose Vehicles) are limited companies established specifically to own and manage residential or commercial investments.
An SPV is used to isolate financial risk, securitize assets, and carry out distinct financial transactions.
Stress tests assess whether a borrower can meet their monthly repayments, along with other necessary budgeted expenses, if mortgage rates were to rise to a certain level. Typically, the stress test is calculated using the following formula:
(Mortgage required x Stress Test % x Rental Cover) ÷ 12
Rental cover is expressed as a percentage. For example, a typical Limited Company and basic rate taxpayer will have a rental cover of 125%, while a higher rate taxpayer will have 135%, and an additional rate taxpayer will have 139%.
For instance, if the mortgage required is £150,000 and the stress test rate is 6.5% (which is often the lender’s interest rate) for a Limited Company:
(£150,000 x 6.5% x 125%) ÷ 12 = £1,016
This means the rental income received would need to be at least £1,016 per month to pass the stress test.
If you earn income outside of PAYE, banks and lenders may require proof of your earnings when applying for finance.
The SA302 and Tax Year Overview are both summaries of your total income and tax payments submitted to HMRC for a specific tax year. The SA302 provides more detailed information, including the full tax calculations for that year, while the Tax Year Overview only shows the tax return totals and any payments received by HMRC.
You or your accountant are likely responsible for filing your tax return, and the SA302 will provide evidence of your earnings. If you use an accountant, you can request the SA302 from them. If you file your own return, you can download it from HMRC Online Services.
Lenders use the Tax Year Overview to verify the data provided by the SA302, and it includes the following details:
You can access up to the last 4 years of Tax Year Overviews by logging into your HMRC online account.
If you are purchasing a trading business with freehold premises, a professional valuation report will determine the total value of the business, including the property, fixtures and fittings, and goodwill, if applicable. Once confirmed, it may be possible to secure financing based on the overall business valuation.
When the sale of the trading business also includes assets such as machinery, vehicles, equipment, and stock, it is typically more appropriate to arrange a separate loan to finance these assets through short-term leasing or stock finance.