Who offers these mortgages

To qualify for and be eligible to be offered, accounts based business mortgages the applicant company must be able to meet strict reduced-risk criteria set down by the lenders.

At a minimum, the applicants will need to provide historic business accounts, usually covering the last 3 years of trading. If the lender perceives these to be incomplete the application will be rejected.

If the trading profitability and cash worthiness of the business is not deemed to be substantial enough the application will either be rejected or the loan risk and therefore cost adjusted upwards.

Credit-worthiness and the financial history of the principals of the applicant company can also be taken into account by a potential lender.

In some cases the accounts may need to be accompanied by business strategy documents, business plans and financial forecasts.

A valuation of the property and the business, within the context of the overall economic outlook and its own commercial sector performance, is often required.

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How much does a status mortgage cost?

Status mortgages can be less costly to arrange and maintain than non-status loans. There are several reasons for this.

Firstly, this transaction may well be part of much wider and longer term financial arrangement between the applicant company and the lender and there may be trade-offs of costs between the various products and services offered and committed between the two.

The lender is able to minimise its risk and avoid loss by altering the strictness of its lending criteria and therefore restrict its applicant base. The lender is also able to mitigate its liability to risk by having an in depth understanding of the applicant’s full business worth.

The lender can adjust the Loan To Value down to further reduce its risk and therefore the cost of the reduced mortgage loan. Mortgage rates and arrangement fees will vary dependent not only on the assessment of risk but also on the lender’s willingness to lend at all.

Individual lenders including the retail banks will be more cautious in lending to some sectors and projects than to others. The attitude of the Government of the day to certain commercial sectors and activities will also impact a lenders willingness to participate.

Lenders may also request additional securities to further reduce the risk profile of the loan.

Each lender will have its own individual method to calculate, classify and reach a cost profile for any given Status commercial mortgage application.

Even within this context its willingness to offer the loan and therefore the cost it wishes to charge for the loan will be subject to outside conditions, external instructions, financial obligations it has already made and market conditions it perceives to apply.

Large corporations tend to seek finance not from a single source, even if they have a long standing relationship, but from a number of differing sources because it is cost effective for them to do so.

The same could be true for small and medium sized companies although their internal resources probably restrict their ability to monitor the market widely.