Although suffering increasing competition from the Far East and Eastern Europe, in particular, the manufacturing sector still accounts for around half of the UK’s exports and one sixth of its Gross Domestic Product (GDP). The market for factory properties is still healthy in many areas, but regional variations do exist.
A factory unit mortgage can be used by both start-up and current businesses to purchase new premises or to refurbish, expand or refinance existing factory properties.
Factory unit mortgages are available from specialist lenders and sometimes from high street banks. Lenders will normally lend between 75 and 85 percent of the valuation of a factory unit and borrowers can expect to pay interest at between 1.5 and 3 percent above Bank of England Base Rate, for a maximum term of 30 years. Most lenders offer fixed rate and variable rate options and some offer the opportunity of capital repayment holidays for the first few years of the mortgage term. Some lenders will not offer factory mortgages of less than £100,000.
As with other mortgages, prospective lenders will require evidence that the borrower can afford the monthly mortgage repayments. Existing businesses will need to provide full details of their previous 2 years’ trading; start-ups will have to submit a business plan that includes detailed income projections. In addition, the lender will require the following information:
- Location of the factory unit
- Amount being invested from own resources
- Survey of buildings and land being purchased or refurbished, including clarification of issues regarding access to the property and any environmental concerns
- Any adverse credit history
New businesses will also need to provide a detailed business plan showing that they have sufficient resources and expertise to be able to operate in the manufacturing segment for which the factory unit is being purchased.
- UK manufacturing industry faces intense competition but the sector is still thriving
- Factory mortgages are available to buy new factory units and to refurbish existing properties
- New manufacturing businesses will need to provide prospective lenders with detailed business plans.