Can I get a commercial mortgage with no deposit?

Mortgages typically require borrowers to make large deposits. The industry standard for your deposits is 20 to 40 percent of the property’s value. Why? Because banks and lenders consider them risky. They increase the size of the deposit to reduce that risk.

As surprising as it may be, a higher deposit is not necessarily undesirable for companies either. It comes with its own set of advantages. It lowers the interest rate and repayments, thereby saving businesses a significant amount of money over the course of the repayment program. However, for cash-strapped businesses or high-growth businesses whose money is better directed at fueling that growth, a large deposit can be a huge pain point.

But, there is no escape from that. Companies have to pay a deposit to get one.

That said, businesses can take advantage of a commercial mortgage by paying a deposit that is pretty close to zero. That is how.

1. Type of Commercial Property
Every business and its industry has a certain degree of risk involved. This risk changes from one industry to another. Naturally, some commercial properties are considered riskier than others. For example, a business that is getting one for a doctor’s office may end up paying less than 5 percent of the property’s value as a deposit. On the other hand, most other properties, such as retail stores, office buildings, and the like, require businesses to pay at least 20 percent of the property value as a deposit.

Therefore, please refer to the existing industry standard for a commercial mortgage deposit on your property.

2. The type of lender
Banks have the lowest appetite for risk. Therefore, they make companies pay the highest deposits. On the other hand, private lenders tend to have a higher risk appetite. So if you approach private real estate lenders, you’ll likely end up paying a significantly lower deposit than you would have paid to the bank.

3. Business history
Commercial mortgage requirements change from lender to lender. However, lenders tend to trust companies that have been in the market the longest. New businesses may be required to pay a deposit of up to 50% of the value. So, if a business wants to take out a mortgage on a low deposit, then it should probably spend a couple of years in business first. In the meantime, renting may be the answer to your immediate needs.

4. Security requirements
This is one of the most effective strategies to reduce your loan deposit. Most lenders hold the property you are buying as the only collateral. However, some lenders are flexible on this. They may accept your equity in other properties or your other assets as collateral for the mortgage and reduce the deposit to a fraction of its former value.