Buying business premises can be a good investment. Owning a property gives you business stability and the property itself can become a significant asset. Alternatively, you may be buying a business that is tied into the property - for example a hotel, public house or caf�.

Business mortgages are designed to help you:-

• purchase a premises
• raise capital
• refinance

Advantages to buying:

• Business mortgage repayment is likely to be similar to a rental payment on the same property.
• You can avoid hefty rent increases.
• You may be able to sub-let any free space that you might have, however, you will almost certainly require permission from your mortgage lender to do so.
• Interest payments on a business mortgage are tax-deductible.
• Any gain in value of the property will increase your capital.

Disadvantages:

• If you own premises it's far harder to relocate your business, extracting yourself from a rental agreement is much easier than selling premises or finding a new tenant to take them over
• You are exposed to increase in interest rates.
• Owning a property means you will be responsible for factors such as maintenance, fixtures and fittings, decoration and security.
• Any loss on the value of the property will decrease your capital.

The terms of a business mortgage will depend largely on the type of business you're running and the type of premises or land you want to buy. This is a complex area and it is essential you seek specialist advice from your solicitor and possibly a chartered surveyor. Your business needs to be on a relatively secure financial footing before you can apply for a business mortgage. You will almost certainly need a deposit of 20-30 per cent of the purchase price. Business mortgages carry higher interest rates than residential loans because you are considered a higher risk. The term of the loan is at the discretion of the lender. It will almost certainly be less than the standard 25-year mortgage for domestic property, and can be as short as ten years in some cases.

When buying a property for your business, you will probably need to supply the following information:

• audited accounts for the last two years
• indication of current performance
• a profit and loss forecast for the next year
• business bank statements for the previous six months
• profiles of each partner or director in your business
• asset and liability statements for each applicant

There are two interest rate options - variable or fixed. Most business mortgage schemes have variable rates. This means that the interest rate varies. Your repayments may rise or fall and you should budget accordingly.

There are various repayment methods available for business mortgage. With a repayment mortgage each month you repay a portion of the loan and the accrued interest. An interest-only mortgage means only the interest is paid off with each monthly payment. An endowment mortgage provides life assurance cover and a fixed payment for investment.

So when you are considering a decision as important as buying a new business premises or buying a business tied to another property, you need to be confident that the business mortgage you take out is right for you and that can only happen when you have a genuine choice.