Written by: Phil Kelly on Wednesday 06/07/2016
Whatever stage of business you’re at, there may come a time when you need to approach a financial institution to ask for a loan. In this case, you may be asked to offer security in the form of your commercial property. We look at loan security valuations and examine why getting it right is so important.
An accurate and comprehensive loan valuation on your commercial property will enable banks and other financial institutions to make an informed decision on whether any loan they make to you will be secure. Getting it right, therefore, is of vital importance both to you and to the future profitability of your commercial property business.
Obtaining a valuation by an experienced professional is essential. Reputable banks and other lenders will only consider a valuation report prepared in accordance with the Royal Institution of Chartered Surveyors’ (RICS) Red Book which takes into account such factors as the property’s location, condition and quality, whether there is any demand/supply in the area for your specific property and what the current market conditions are in the area, how much income you derive from it, whether your tenants are reliable, if there is potential for an alternative use, if there is any planning permission in place which will affect its future value, how energy efficient it is, and whether the property is sustainable over the period of the loan, amongst other things.
A loan security valuation is not equivalent to the value of the property on the open market, however. The purpose of having a loan valuation completed is to establish whether the amount of the loan can be secured against the value of the property and, should you default on the loan, whether the lender can realistically recoup the amount.
If you’re considering raising money and need a loan security valuation, you should approach an experienced and professional RICS-qualified chartered surveyor who has undergone thorough training and has enhanced their knowledge through a regular programme of Continuing Professional Development (CPD). This will not only give you peace of mind that the figure they arrive at is accurate and validated by RICS, but also that, should something go wrong further down the line, they have professional indemnity which will offer legal protection.
Look for a firm that will offer you extensive local, national and international knowledge combined with experience of a broad range of property types and which can provide insight and analysis based on accurate and current information.
If you’re looking for a valuation with which to secure a loan on your commercial property, talk to the Eddisons team. Our experts have built up their experience and knowledge from valuing hundreds of properties over many years and have the insight to determine local market factors which may affect the eventual valuation figure.