How to Know for Sure that You Need a Property Loan

It’s great knowing that you, as a business owner, are doing well in this incredibly competitive economic climate. Every entrepreneur wishes to grow their business to its fullest potential, but when you’re growing, how do you know it’s the time to seek finance and take out a property loan to help expand your business?

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How Much Debt Do You Have?

First and foremost, a loan is a form of debt. You will eventually have to pay this back. Therefore, make sure you don’t currently have any outstanding debts, as committing yourself to more debt, may hinder the expansion of your thriving business.

 Return of Investment

To determine whether taking out a property loan is the right method to help expand your business, it’s beneficial to understand your return of investment. How much profit do you realistically anticipate to make after taking out the loan? Will taking out a property loan, to purchase another property, add value to your business?

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The Value of Your Assets

A great way to determine if you need a property loan is to calculate your assets; could you possibly sell one of your assets to invest in the property yourself? You can save yourself a lot of money and hassle if you can afford to purchase a property with one of your own assets, without the need of a loan, even potentially reducing future overheads.

Also, think about how much capital do you currently have. Can you afford to pay off the loans with the capital you’re currently making, or will make, in the future? Will taking out a property loan hinder or improve your overall capital?

 The State of the Your Industry

It’s beneficial to examine the current trends within your industry. Where is my industry heading? Is it heading towards an industry where it’s more online, than it is face-to-face? If you’re a retailer, in which the industry is heading to towards a heavily E-Commerce future, then perhaps taking out a loan to purchase another property may not be the best decision. Also, it is worth analysing whether the current upturn in your industry is down to a brief external factor, and therefore the increase in business isn’t likely to be sustainable. If it is only a temporary increase in profit, then a new property – and therefore property loan – could potentially be hasty.

Whether you arrange for a property loan is down to the overall performance of your own business, but also down to the potential profitability of the market within which you work. It’s important to analyse both to help you accurately extrapolate this information to potential future performance, and how the cash injection of a property loan could help your business to achieve this.

With the advice of our property and finance experts, you can make this educated decision. If you need advice on taking out loans to purchase commercial property in the London area, then please don’t hesitate to contact our commercial property consultants.


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