Warehouse Mortgage And Warehouse Finance

Warehousing is not a business that can be looked at in isolation. Whoever owns a warehouse and whatever it is used for, a warehouse is part of some kind of supply chain.

When applying for a mortgage to purchase a warehouse, a potential lender will require information about the physical location and condition of the building. However, the way that the borrower intends to make effective (and profitable) use of the warehouse as part of the supply chain is likely to have a much greater bearing on whether the lender will offer a warehouse mortgage.

Warehouse mortgages are available from a number of specialist lenders who will normally offer loans of up to 80 percent of the property’s valuation, for a term of up to 30 years. The borrower will need to convince the financial institution that he / she will be able to make the regular monthly mortgage repayments.

Existing businesses will have to submit 2 years’ detailed trading figures and new businesses will have to provide detailed income projections.

Warehouse Position in Supply Chain
Whether the warehouse is being used as part of a manufacturing, wholesale or retail business, the would-be lender will want to know how the warehouse will function as part of the supply chain and how income will be generated. For example, a simplified manufacturing supply chain might function as follows:


1. Manufacturer buys components from suppliers and has them delivered to component warehouse
2. Manufacturer moves components from component warehouse to assembly plant
3. Manufacturer assembles components into finished products
4. Manufacturer sends finished products to central distribution centre
5. Distribution centre sends finished products to customers

As can be seen from this simple example, the manufacturer has warehousing requirements at steps 1 and 4 of this process. In addition, some form of warehousing may also be required at both suppliers’ and customers’ premises.

Summary

  • Warehouses need to be considered as part of a supply chain
  • Prospective mortgage lenders will want to know how a warehouse fits into the borrower’s supply chain and overall business plan
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