Today I’m going to talk about the timescales involved for Tier 1, Tier 2, and Tier 3 commercial lending and commercial mortgages.
In terms of putting a case together, getting it submitted, getting a decision in principle, getting it credit backed (underwritten), and then the time it takes to go through the legal process in order to draw down the funds.
Timescales for commercial lending
The purpose of this is really just to give you an idea, if you’re looking to buy a commercial property, either as an investment, or for owner operation, or even a trading business, then these are the timescales that you are going to be looking at.
I’m going to break it down into tier 1, tier 2, and tier 3. This is slightly different to some other areas where tier 1 is actually going to be a Business Development Manager (BDM) that you’re talking to, so you are actually talking to a person, whereas tier 2 and 3 tend to be more portal based, particularly tier 2 – where it is either meeting criteria, or it isn’t. Tier 3 depends on the lender, but some lenders will be BDM and some will be portal.
So, on to the timescales. For a decision in principle for a tier 1 loan, using a BDM, you will most likely be looking at one to two days. For a tier 2, even though you would apply through a portal, you would still be looking at one to two days. If you were processing a tier 3 loan, you could have a decision in principle back in as little as four hours, though this could go up to two days. So, for all three tiers, it is best to err on the side of caution and plan for the process to take up to two days.
If you then want to get that decision in principle credit backed, because you are happy with the deal that’s offered, then that process can take up to 4-5 days, depending on how quickly an evaluation can happen, and then from evaluation and credit backing, the timescale to actually draw down the funds varies.
For tier 1, you can look at drawdown taking ten to twelve weeks, tier 2 can be eight to twelve weeks and for tier 3, you can expect it to take eight to ten weeks.
If you are thinking of going through this process, ideally, you should attempt to plan anywhere between three and a half to four months ahead of the time that you want the process to be completed. There is, of course, an option if you want to do it quicker.
You can look at Bridging Finance (which will be the topic of next week’s blog), so if you are unable to secure it within the time scale of the three and a half to four months, as long as the ability to refinance was there, you would be able to secure the asset quickly.
A lender for a bridge would want to know what your exit strategy for the finance was, and your exit would be to refinance. As long as you are able to show that you are able to refinance, then the bridge should be forthcoming.
If you want to discuss these or other business finance options, get in touch by filling out the contact form on this website and we can work out what solutions will fit your needs.