When starting their business project, most entrepreneurs use rented premises to accommodate production, retail, warehouse and office space, since the acquisition of their own real estate involves large investments of capital, which are not advisable at the initial stage.
After working for six months to a year in the chosen market and making sure that the created business has its own niche, and the activity covers not only costs, but also generates income, you should think about its application. A rational solution in such a situation would be to refuse to rent space and buy your own real estate , and a mortgage on non-residential premises, provided by an increasing number of banks, will help with this.
Is it possible for an individual to take out a mortgage on non-residential premises?
Banks in Russia have implemented special commercial mortgage lending programs. Since 2009, changes have been made to the legislation of the Russian Federation regarding the issuance of loans for non-residential premises for individuals. Several years ago, consumer loans with high interest rates created discomfort for many borrowers. Because of this, many were unable to take out a loan for a long period of time.
The acquisition of non-residential premises must be approached with special responsibility. Commercial or other non-residential premises are available to both individuals and individual entrepreneurs. Lawyers argue that in the process of carrying out any financial transaction related to the acquisition of commercial real estate, difficulties arise. Each buyer must take into account all possible nuances that must be carefully considered before making a purchase.
Everyone knows that purchasing a home with a mortgage is commonplace. But commercial properties and non-residential premises are not available to all citizens. Basically, a loan is issued if the property is pledged to the bank. When the collateral is a building built on a leased plot, then the banker must be presented with a written agreement from the owner of the land to enable the transfer of lease rights into a mortgage. Individuals can afford to purchase objects in the form of a garage, office, summer house and any other building.
There are a huge number of lenders who issue mortgages to individuals and legal entities. Programs have been developed that support small business ideas. Some banks issue a loan as collateral not only for the purchase of a mortgaged premises, but also for any real estate. This question mainly concerns individual entrepreneurs who have a good banking history.
Commercial real estate is primarily non-residential premises intended for doing business. There are businesses that register as individual entrepreneurs. Therefore, for small businesses, issuing a loan becomes a daunting task. This issue can be resolved in another way. For example, Sberbank offers clients to take out a mortgage for commercial real estate. Individuals can take advantage of the bank’s advantageous offer and purchase non-residential premises under the best conditions, which are presented below in the article. Owners of profitable premises can use the property for their own needs or rent it out.
Is it possible to get a mortgage for a business without a down payment?
One of the significant advantages of a mortgage is its similarity to leasing, that is, a lease, at the end of which the asset becomes the property of the payer. However, there is a difference: most often a down payment of a fifth of the property price or more is required.
This circumstance hinders many credit buyers. Large firms are forced to withdraw funds from circulation, while small enterprises and individual entrepreneurs may not have such money at all.
There are several banks in Russia that provide mortgage loans without a down payment under existing programs. Their terms provide for a wide range of contract parameters:
- amount – 150 thousand rubles. and more;
- repayment period – from 3 to 10 years;
- annual rate – 9–17.45%;
- bank commission for registration – 0–1.5%;
- opening a current account at a given financial institution (not always);
- collateral or guarantee (often).
To facilitate control, some banks provide mortgage loans for the acquisition of properties located geographically close.
Requirements for the borrower
In order not to make a down payment, a bank client most often needs to meet the following set of criteria:
- The company (IP) is registered and conducts business activities in Russia.
- The company has been operating on the market for at least six months (preferably a year).
- The age of the person authorized to represent the credited organization (manager, owner, individual entrepreneur) is in the “golden” range of 20–60 years.
- Positive credit history. Its absence is better than the presence of a bad one, but not by much.
- For individual entrepreneurs, many banks have restrictions on the amount of annual financial turnover. It is clear that it should not be lower than 400 thousand rubles - otherwise the individual entrepreneur may not be able to meet the monthly payments. But there is an upper limit - one billion, and it sometimes raises questions. This limit is explained by the fact that with such revenue, doubts may arise about the financial stability, and sometimes even the legality of the activities of a “modest private businessman.”
- The minimum staffing level is one hundred employees. This condition is not imposed by all banks and not always. The number of employees does not necessarily reflect the health of a firm's finances.
The general rule of lending is the excess of the probable sale price of the collateral over the amount of the loan issued plus interest on it. Since the purchased property itself most often serves as material security, the lender’s natural requirement is to provide additional guarantees to compensate for the lack of a down payment.
Information about the conditions of credit institutions offering mortgages without a down payment is formulated somewhat vaguely.
For example, Sberbank, Transcapitalbank, Surgutneftegazbank, FC Otkritie and some others seem to offer a similar program, but are ready to provide a loan of only 70–80% of the estimated value of the property. Plus a mandatory guarantee.
VTB can provide a commercial mortgage in full with a 15% advance at 15% per annum with a deferment of up to six months, but with mandatory additional collateral. The motivation is still the same - the desire to protect against non-payment.
The legislative framework
Issues of mortgage of business premises are regulated by the Law “On Mortgage (Pledge of Real Estate)” dated July 16, 1998 No. 102-FZ. The legislation of the Russian Federation does not address the procedure for obtaining a loan for the purchase of a commercial property. This question concerns only mortgaged property. The created act regulates the real estate pledge relationship.
Features of lending include:
- The high cost of a commercial property, which affects the very relationship of lending such a mortgage.
- The main feature of non-residential real estate lending compared to residential mortgages is the high interest rate. Unfortunately, due to the high rate, not everyone can afford to purchase commercial real estate.
- For commercial real estate, a loan is issued only for a short period of time. If, when purchasing a home, the borrower has the right to take out a loan and repay it within 30 years, in this case the debt will have to be paid off within 10 years.
- The initial fee is approximately (30%)
Before issuing a loan, the banker has strict requirements. In this case, the length of entrepreneurial experience, profitability and other characteristics are taken into account.
If a separate building is purchased as collateral, then the land plot is also registered.
Business lending
Getting a loan to purchase real estate for an organization has always been and will be more difficult than for an individual for obvious reasons, namely:
- a larger number of parameters affecting the solvency of an entrepreneur that require analysis, which means that initial reporting documents are required;
- a greater number of risks to which a business project is exposed compared to an individual entity;
- higher cost of commercial real estate compared to residential, which implies larger payments;
- a more complex structure for determining the value of non-residential real estate and a less well-established procedure.
However, banks are ready to provide their credit programs to conscientious entrepreneurs who are able to confirm their solvency and profess the ideology of “transparent” business, including for:
- Individual entrepreneurs and small businesses, if ready-made real estate is purchased;
- corporate clients wishing to build their own commercial facilities.
Terms of loan
Mortgages are issued to individuals only if they are individual entrepreneurs, major shareholders, current managers of a certain business, or small business owners.
It should be noted that non-residential premises can be purchased by persons who are citizens of Russia. The borrower's credit history must be reviewed. If an entrepreneur does not pay taxes to the state and does not keep good accounting records, then the chance of obtaining a mortgage is significantly reduced.
When applying for a loan, the area of the property should not be less than 150 sq.m. Mortgages for non-residential premises are issued to persons at least 21 and not older than 65 years. The object must be registered exclusively on the territory of Russia. A prerequisite is also that the company is located not far from the location of the lender. Before going to the bank to receive a loan, you must present your current account.
The purchase of commercial real estate is possible only in rubles. The loan period ranges from 1 month to 10 years. In this case, the bank includes a minimum annual interest rate for the use of borrowed funds. After reviewing the borrower’s credit history, an agreement is drawn up at the banking institution.
Large entrepreneurs are issued a loan of up to 5 million rubles. Borrowers are required to provide other real estate as collateral, but this condition does not apply to individual entrepreneurs. These conditions can be used by those persons who can document their solvency. Every Russian bank requires an initial deposit for a loan. The interest rate is 20%.
Mortgage project VTB 24
Another leader in the financial sector, VTB 24, is ready to provide slightly more attractive conditions compared to Sberbank. Its mortgage conditions are as follows:
- annual loan rate – from 14% ;
- the amount of funds provided – from 4 million rubles ;
- maximum mortgage period – no more than 10 years ;
- initial payment – from 15% or collateral in the form of other real estate;
- deferment of principal repayment for up to six months.
At the same time, the requirements for documents and business are comparable to Sberbank and can be clarified by remotely completing an online loan application, which is preliminary in nature and, after verification by a specialist, will require a direct visit to the office and clarification of details.
Which banks give loans?
Today, a mortgage for the purchase of a commercial property by an individual is issued in a number of financial institutions throughout Russia. We have prepared a special table for you:
| Bank | Bid | Down payment | Note |
| Bank Levoberezhny | 18,5 | 50 | if the certificate is in the form of a bank, then +1% |
| VTB 24 and Bank of Moscow | 18 | 20 | |
| Transcapitalbank | 18,5 | 50 | |
| Absalutbank | 13,25 | 40 |
The most interesting conditions for the average person to purchase real estate for business are a mortgage from Absalutbank. The bank is quite loyal to borrowers and can consider the situation individually. A certificate in the form of a bank is accepted for consideration, which is very convenient for people with unofficial income.
What does the law say?
The entire process of purchasing non-residential commercial premises with a mortgage is regulated by Federal Law 102.
However, even he does not indicate all the intricacies of the process of obtaining such a loan. Everything is considered in general terms. And even then, only regarding the issue of collateral.
102 of the Federal Law regulates only the issue of collateral of such real estate. This means that the requirements for borrowers, forms and lists of documents, as well as other conditions for issuing such loans are completely established by banks. And this may not be beneficial for the borrower.
Registration procedure
When applying for a mortgage for the purchase of commercial real estate, the history of the borrower is carefully considered. This rather complicated process is associated with the imperfection of the relevant legislation. It should be noted that a lien cannot be placed on the property until the transfer of ownership from the seller to the buyer.
When such a situation arises, the risk for all parties to the transaction increases significantly, including the financial institution that issues the loan. In order to minimize the risk to their own funds, financial institutions have developed a special mortgage registration scheme, which consists of three stages:
Initially, the purchase and sale transaction is completed, and then the pledge. The amount is given to the seller after the mortgage is registered in the name of the new owner.
First, a mortgage is issued on the object under the old owner, and then gradually the transfer of ownership and re-encumbrance occurs.
The transfer of ownership of commercial real estate to a legal entity is carried out after the acquisition of the right of ownership of this legal entity from the seller.
Sample of the concluded agreement
The mortgage agreement is concluded individually. Its clauses may vary depending on the terms of the loan, but basically, such an agreement should have clauses such as information about the borrower and the bank, the terms of the mortgage, the rights and obligations of the parties, as well as a mortgage repayment scheme (the possibility of early repayment is also taken into account).
A full example of a sample mortgage agreement can be found here.
Package of documents
Sberbank borrowers are required to collect a package of documents. First of all, the documentation should differ from individual entrepreneurs and small businesses. Papers are processed within 7 working days. The main condition is the successful running of an entrepreneurial business. If there are no unnecessary problems when maintaining accounting and tax records, then the borrower is freely issued a loan. To apply for a mortgage, you must come to a banking institution with:
- application for a loan,
- a questionnaire indicating that the borrower is not a legal entity,
- documentation indicating the borrower’s activities and financial history,
- paper indicating the borrower’s credit history,
- income certificate,
- a copy of the mortgage valid at the time of registration,
- legal documents.
What documents must be provided to an individual entrepreneur or organization?
As soon as a potential borrower applies for a commercial mortgage, the bank will immediately check his financial security and the legality of the company. As part of the verification, the bank will require the following documents:
- Application for a mortgage.
- Borrower’s questionnaire, where you must indicate the purpose, loan period and desired interest rate.
- The charter and other constituent documents that can become evidence that the company has the right to conclude investigations and issue loans.
- Financial documentation that shows the financial condition of the company. Thanks to this, the bank will be able to assess the client’s level of solvency and make a decision on lending.
Mortgage for a garage
Entrepreneurs as individuals can take out a mortgage for a garage. Financial institutions can issue a targeted loan for the purchase of a property or construction of a garage. Such loans are not available at all banking institutions.
If desired, you can use consumer loan services. It should be noted that the “garage” object itself is not presented as real estate. First of all, a garage must have a foundation. Only in this case the garage is considered a real estate object.
Banks providing loans
Not every bank is ready to provide such a loan. Typically, such an offer can only be found from a major lender.
| Bank | Lending terms |
| Sberbank (Business real estate) | You can take out a loan in the amount of up to 600,000,000 rubles, and repay it no longer than 10 years. The interest rate along with this will be about 14.5%. |
| VTB 24 (Business Mortgage) | The minimum loan amount is 4,000,000 rubles, for a period of up to 10 years. The rate is not higher than 13.5%. |
| Revival (SME Investments) | The maximum loan amount is 150,000,000 rubles, for 10 years of lending. The interest rate is not more than 15.5%. |
| Gazprombank | For each borrower, loan conditions are established individually. |
| Bank of Moscow (Commercial mortgage) | You can borrow no more than 150,000,000 rubles for a period of up to 7 years. The rate will also be calculated on an individual basis. |
Mortgage for commercial premises
Many financial institutions offer favorable conditions. Clients are usually interested in obtaining a loan for commercial real estate for a long period of time. Many people want to own an office, warehouse, retail property, etc.
Sometimes this type of loan is issued to private individuals. Sometimes a unique opportunity arises to purchase an interesting object inexpensively. Owners of commercial real estate can always earn money by renting out a certain property.
Loans for the purchase of commercial real estate are issued to small business owners. Thus, the owners of the facility can provide the enterprise with the necessary premises. The loan is issued directly to the owner of the small business. It is important to note that legal entities do not have the right to obtain this type of mortgage loan.
What to consider when applying for a mortgage
Before submitting an application to a lender, you need to evaluate the following parameters:
- Rent cost. If rent and mortgage payments are the same, then purchasing your own space makes sense. It is better to give money for personal premises than to pay it to the tenant. If the monthly payment amount is too high, then it is better to sign a lease agreement for the retail outlet.
- The likelihood of termination of the lease agreement. If the landlord does not plan to terminate the contract and never raises this topic, then there is no need to take on additional credit burden. However, if the owner of the premises quite often mentions vacating the office, then taking out a mortgage can bring some stability to the businessman’s affairs.
