Securing a commercial mortgage can be a major project for any business, but if you have a County Court Judgment (CCJ) on your credit file then the task becomes all the more challenging. For UK business owners in sectors such as manufacturing, haulage, and wholesale, the need for warehouse space is critical to operations. This blog will explore the impact of a CCJ on your ability to obtain a commercial mortgage for a warehouse, the steps you can take to improve your chances, and the options available to you.
Understanding CCJs
A County Court Judgment (CCJ) is a court order issued in the UK against individuals or businesses who have failed to repay debts. It confirms that you have an outstanding debt which you have not satisfied according to the terms agreed with your creditor. A CCJ remains on your credit file for six years, significantly affecting your creditworthiness.
How a CCJ Affects Warehouse Commercial Mortgage Chances
Obtaining a commercial mortgage with a CCJ is challenging but not impossible. Lenders view CCJs as indicators of financial instability, which can lead to:
- Increased scrutiny of your application: Lenders will closely examine your financial history and current situation, while looking for proof that your situation has improved.
- Higher interest rates: Due to the perceived risk, lenders may offer less favorable terms. In addition many lower-risk lenders won’t lend to you, limiting your choice of lenders.
- Requirement for a larger deposit: A larger deposit can reduce the lender’s risk and improve your chances of approval.
It’s worth thinking through the pros and cons of buying a warehouse vs renting. You could consider taking a lease on a warehouse and negotiate an option to buy the warehouse for a set price in say 5 years. In this way you would allow time to elapse, giving your credit issues time to ease, and then revisit the propsect of purchasing in the future.
Lender Criteria
When evaluating your commercial mortgage application, lenders will consider several factors related to your CCJ. The age of a CCJ plays a significant role in its impact on your creditworthiness, with older CCJs tending to have a lesser effect. Additionally, the value of the CCJ matters, with smaller amounts being less of an issue to lenders. Laslty, the status of the CCJ is crucial; a satisfied CCJ, where the debt has been cleared, is viewed more favorably than an unsatisfied one.
Improving Your Chances of Getting a Commercial Mortgage
Despite the challenges, there are steps you can take to improve your chances of securing a commercial mortgage for a warehouse with a CCJ.
To demonstrate financial stability, you should show that you have managed your finances responsibly since the CCJ was issued. This can include providing evidence of regular savings, maintaining a stable income, and reducing your debt. Avoid missing any other payments or being late paying utility or finance payments.
Improving your credit score is also important – you can achieve this by paying off outstanding debts, avoiding new debt, and ensuring timely payments on all accounts. Additionally, saving for a larger deposit can increase your chances of mortgage approval, as it reduces the lender’s risk.
It’s well worth seeking professional advice from a commercial mortgage broker who specializes in bad credit can significantly improve your chances, as they are familiar with lenders who are more open to applicants with CCJs.
Specialist Lenders
Not all commercial mortgage lenders will consider applicants with a CCJ on their credit file. High Street banks in particular will be very unlikely to lend in this scenario. However, there are specialist lenders who focus on offering mortgages to businesses or individuals with adverse credit histories, including those with CCJs. These lenders may offer more flexible terms and be more willing to consider your application.
Case Study: a Success Story
To illustrate the possibilities, let’s look at a recent example of a commercial mortgage for a warehouse where the director had a personal CCJ:
Haulage Company
A haulage company in Essex faced difficulties securing a commercial mortgage for their warehouse due to an unsatisfied personal CCJ from a utilities provider. The company approached BIZL via their accountant’s recommendation in order to find a lender that could support them. Together they wrote up an explanation to the situation that led to the CCJ and highlighted how it would not be a repeatable situation. The commercial mortgage broker then found a specialist commercial lender and presented the full story to the underwriters. The lender approved the case based on the full supporting information.
Overcoming Obstacles
While obtaining a commercial mortgage for a warehouse with a CCJ can be challenging, it is not impossible. By understanding the impact of a CCJ on your mortgage eligibility, taking steps to improve your creditworthiness, and seeking professional advice, you can increase your chances of securing the mortgage you need. Specialist lenders and commercial mortgage brokers can be valuable resources in this process, helping you find the best possible deal despite your credit history.
Want Some Advice?
Talk to one of our Commercial Mortgage Specialists about your options.