Commercial mortgage lending criteria

• Limited companies and Public Limited companies
• Limited Liability Partnerships (LLPs)
• Partnerships
• Sole traders

We do credit searches on loan applications before our underwriters assess the loan request. The searches will be on the key individuals, and the business itself.

The credit searches will be on all the UK addresses that each applicant has lived in for the last three years.

We might also search undisclosed and linked addresses over the past three years. All the credit searches we do are valid for three months. After that, we’ll do new searches. If any further relevant information appears in that search, the application will be reassessed and we might change the product we offer or decline the application.

If the application is from a limited company, LLP or PLC, we’ll do a company search and we’ll also search any other directorships of all the directors and main shareholders.

If the application is from a group of companies (including Special Purpose Vehicles or ‘SPVs’) we’ll complete credit searches on all directors and shareholders of the business, including any parent company and any corporate shareholders. Our underwriters might run searches on any associated companies and may also request consent to search against connected individuals to make sure we know the identity of all business owners.

We will consider applicants with minor instances of adverse credit history where the likelihood of recurrence is assessed as low.

Defaults and CCJs

We will consider applications* with:

• Up to three credit-related defaults or CCJs of £500 or less in the last three years.
• One default or CCJ of more than £500 in the last three years.**

**Where the CCJ or default is more than £5,000, a certificate of satisfaction must be provided before drawdown.

Arrears on unsecured facilities

We will consider applications* with:

• Up to five arrears events within the last three years on unsecured facilities that are less than £10,000 each.
• Up to three arrears events within the last three years on unsecured facilities that are over £10,000 each.

Arrears on secured facilities

We will consider applications* with up to three arrears events within the last three years on secured facilities that are more than £10,000.

We will not consider applications* with any current personal or commercial mortgage arrears.

Adverse insolvency proceedings

We will not consider applications* with any current or historical adverse insolvency proceedings in the last 5 years such as (but not limited to):

• Winding up notices/petitions
• Administration orders
• Liquidation
• CVA
• Personal bankruptcy
• IVA.

We also will not consider applications* with other adverse notices, such as adverse CIFAS, in the last five years.

*The above rules apply to the borrowing entity, associated companies and key individuals (directors and shareholders with a 25% stake or higher).

VAT

Our guidance for commercial investment, commercial owner occupied and residential investment properties:

• Where a property is not VAT exempt, we will not lend to support the VAT associated with the purchase. If the property is VAT exempt, this must be highlighted in the application.
• We will not include the VAT amount when calculating the amount we can lend against a property.

Proof of borrower contribution

The customer contribution or stake can be provided either as cash or additional property security in lieu of cash.

We may request the following documents from business principles:

ID and Residence

This applies to commercial investment, commercial owner occupied and residential investment customers.

Summary

We use an electronic identity verification system that checks application data against a range of public databases.

If your client’s verification on this system doesn’t pass the expected threshold, then we’ll need proof of identity and residency.

Please provide one document from the proof of ID list and one from the proof of residence list.

Proof of ID acceptable documents

• Valid UK passport
• Valid UK driving licence – photo card (full or provisional)
• Valid non-UK passport or national ID card
• Identity card issued by the Electoral office for Northern Ireland
• HM Revenue & Customs correspondence relating to current tax year.

These are the documents that we accept for proof of residence

• Utility bill
• Full driving licence (including paper counterpart)
• Bank or credit card statement
• Latest council tax bill
• Current HM Revenue & Customs demand or notice of coding.

Please can you ensure that your client’s documentation is:

• Valid and in date. Statements and utility bills must be no older than 90 days
• Certified as true copy, and likeness if photo ID
• Signed and dated, with their name printed, by a lawyer, attorney, accountant or official from an FCA (or equivalent) regulated firm, (e.g. bank, building society, insurance company).

This section details specific policy requirements for existing customers coming to the end of their commitment term with Atom and looking to refinance with us.

Where no specific policy is detailed below, standard Atom lending policy will apply to customers including maximum terms and customer age.

Serviceability

Serviceability is assessed in the same way as for new to bank customers, but a lower threshold of 100% is required.

• Serviceability for variable rates: stressed interest rates are calculated using either margin plus 6.5% or margin plus current Bank of England base rate plus 1% (whichever is higher).
• Serviceability for fixed rates: assessed against the pay rate.

Minimum acceptable lease term

Commercial investment & Commercial Owner Occupied

Formal leases should be in place between the property owner/chargor and tenant. However, for existing customers, lease lengths shorter than the new commitment term can be accepted.

Residential Investment

Standard Assured Shorthold Tenancy (AST) lease agreements must be in place for all tenancies at the point the loan is completed.

Valuation or solicitor fees cannot be added to the loan. Procuration fees and arrangement fees can be added to the loan. Our tariff of fees for commercial mortgage customers can be found here.

Care home requirements:

We will consider:

• Facilities with a minimum of 10 beds.
• Homes rated as “Requires Improvement” considered only for experienced operators with a track record of delivering improvement or maintaining a higher rating, with a maximum 70% LTV.
• New operators will be considered at a maximum LTV of 70%, please contact your RBDM for any cases with new or less experienced operators.
• Enhanced LTV and debt service coverage requirements for experienced operators running homes rated Outstanding or Good by CQC.
• Debt service cover at 150% if the occupancy rate is 90% or more.
• A maximum of 75% LTV for children’s homes.

LTV limits for care homes

Experienced operator	Purpose built home	Rating	LTV limit
Yes	Yes	Outstanding or good	80%
Yes	No	Outstanding or good	75%
No	No	Outstanding or good	70%
Yes	No	Requires improvement	70%

Specialist care units

We will consider a maximum of 75% LTV for specialist care units with a minimum or four beds, subject to credit quality.

Healthcare (doctors, dentists, pharmacists)

Dentists and Pharmacists enhanced LTV:

• For loans up to £500,000, the maximum LTV for property element is 95%
• For loans up to £1.5 million, the maximum LTV for property element is 90%
• For loans up to £2.5 million, the maximum LTV for property element is 85%
• For loans over £2.5 million, the maximum LTV for property element is 80%.
• There is a maximum LTV against goodwill of 85% for Pharmacists (secured by a charge over freehold property, a charge over a lease and/or a debenture (if the entity is a limited company or a limited liability partnership)).
• There is a maximum LTV against goodwill of 100%* for Dentists (secured by a charge over freehold property, a charge over a lease and/or a debenture (if the entity is a limited company or a limited liability partnership)).

*100% goodwill is only available on loans up to £550,000. 100% goodwill loans also need to be repaid on a capital and interest basis, with a commitment term in line with NHS contracts.

Doctors enhanced LTV:

• For loans up to £500,000, the maximum LTV is 85%
• For loans up to £1 million, the maximum LTV is 80%
• For loans over £1 million, the maximum LTV is 70%.

We are prepared to consider applicants with single, isolated and minor instances of adverse credit history, and where the likelihood of recurrence is assessed as low.

What happens if my client has current, or previous, insolvency action?

We’ll only go ahead with the loan if there has been no insolvency action* in the last five years for any of the following:

• The borrowing company, parent or subsidiaries
• Companies connected by way of company ownership
• Companies with common directorships
• Significant shareholders
• The original company in phoenix situations whereby a business has been dissolved and replaced by a new company

*Including but not limited to:

• Winding up notices/petitions
• Administration orders
• Liquidation
• CVA
• Personal bankruptcy
• IVA.

What happens if my client has a County Court Judgement (CCJ)?

We treat business CCJs the same way as personal CCJs.

We will allow:

• Up to three credit related CCJs of less than £500 in the last three years
• One CCJ of more than £500 in the last three years
• Non credit related CCJs of up to £500.

Solicitors will be instructed from our legal panel - the costs for the bank’s solicitors will be payable by the customer.

The bank’s solicitor can also, in the majority of circumstances, act for the customer on a dual representation basis or the customer can appoint their own solicitor and advise us of their contact details during the application process.

We don’t allow dual representation where the transaction relates to the purchase of a business or share purchase therefore the customer would need to appoint their own solicitor for these transactions.

This applies to commercial investment, commercial owner occupied and residential investment customers.

We have a loan portfolio limit of £10 million in most circumstances. Please contact us if you’d like to discuss the loan portfolio limit for your client.

We have no limit of portfolio value with other lenders.

Type	Commercial investment	Commercial owner occupied	Residential investment
Interest only*	Available up to 75% LTV for up to five years with our standard secured business loans.	Available up to 75% LTV for up to five years with our standard secured business loans, and six years for Government-scheme loans. For loans with over 75% LTV: interest-only is available for up to five years.	Available up to 70% LTV for up to five years with our standard secured business loans. For loans with over 70% LTV: interest only is available for up to two years.
Purpose	Purchase, refinance or equity release
Capital and interest	Capital and interest will be payable over the commitment term by equal instalments, followed by a bullet payment.
Supporting security	In addition to Legal Charges over specified properties the following types of security may also be offered or requested by our underwriters: unsupported personal or corporate guarantees supported guarantees debentures postponement of directors’ loans
Commitment term	2 - 10** years
Amortisation period	Minimum two years, maximum of 25 years for commercial properties and 35 years for residential properties.
Minimum loan	The minimum loan we offer is £250,000***
Financial covenants	Financial covenants will be included for all loans of £1 million and over Financial covenants may be included for loans of less than £1 million where deemed appropriate by our underwriters

*Applications should provide details of the customer’s exit strategy. We will typically accept refinance or sale of property as an exit strategy for interest only lending.

**A 10 year commitment is available for variable rates only. The maximum commitment term for a fixed rate is 7 years, and 6 years for Growth Guarantee Scheme (GGS) rates.

***We will consider lower loan amounts where the application is either for refinance of a residual repayment on an existing Atom loan or for additional borrowing against existing Atom security.

• For loans up to £5 million we offer up to 75% LTV subject to credit quality and assessment of your application.
• For loans up to £10 million we offer up to 70% LTV subject to credit quality and assessment of your application.
• For loans to fund property purchase the LTV is based on the lower of the purchase price or market valuation.

For loans over £5 million, please contact the BDM team before submitting your application.

These are the minimum information requirements we’ll need to see if we’re going to lend to a business.

Type	Commercial investment	Commercial owner occupied	Residential investment
Businesses less than two years old Please note - we currently only lend to businesses that are less than two years old if they are part of an existing Atom customer’s business expansion.	Tenancy schedule for borrower’s entire property portfolio. Detailed business plan. Budgets & cash-flow forecasts.	Detailed business plan. Budgets & cash-flow forecasts. Year-end accounts.	Tenancy schedule for borrower’s entire property portfolio. Detailed business plan. Budgets & cash-flow forecasts.
Business over two years old	Tenancy schedule for borrower’s entire property portfolio.	Minimum of two years Financial Accounts. Management accounts, where year- end accounts are more than nine months old.	Tenancy schedule for borrower’s entire property portfolio.
All loans up to £5 million	Fully completed Secured Business Loan Application through Portal Asset, liabilities, income and expenditure (ALIE) statements for key individuals (to be filled in through Portal) Atom Consent to Search form (this can be found on our documents page)

This applies to commercial investment, commercial owner occupied and residential investment customers.

Individual applicants or key individuals must be UK nationals or have evidence of indefinite leave to remain in the UK (for full the full term of the credit facility). We are unable to lend to UK-based companies where 50% or more of the shareholding/ownership is registered with non-UK residents or entities.

For trading businesses, we can lend to entities with key individuals who:

• Are over 18 years of age
• Are under 80 years of age at the end of the loan repayment profile (subject to a viable succession plan if over 70)*

For investment cases, we can lend to entities with key individuals who:

• Are over 18 years of age
• Are under 85 years of age at the end of the loan repayment profile (subject to a viable succession plan if over 75)*

*Where there are multiple key individuals, these limits will apply to the youngest.

We can accept the following business types/entities provided they are domiciled in the UK*:

• Limited companies
• PLCs
• Limited Liability Partnerships (LLPs)
• Partnerships
• Sole traders

*Excluding Channel Islands and Isle of Man.

We won’t lend to applicants* who:

• Are under 18 years old
• Are disqualified directors, bankrupt or subject to current bankruptcy proceedings or are legally prevented from entering into contracts
• Are borrowing funds to satisfy CCJ, IVA and/or bankruptcy orders
• Have the potential to damage our reputation as a result of the transaction
• Have no reasonable estimate of their financial strength.

*In this instance, “applicant” also refers to any principal individuals associated with the applying entity.

Legal entities we don’t lend to:

• Trusts
• Pension schemes
• Charities
• Clubs/associations.

Sectors we don’t support:

• Defence, including the production of, or sale of, firearms or other weapons
• Sale or production of pornographic materials or any involvement with the sex industry
• Political, trade union or religious organisations
• Gambling businesses
• Businesses that could involve the mistreatment of animals
• Other lenders or businesses operating in areas of ‘sub-prime’ financing
• Building and development finance
• Nightclubs
• Mining
• Fuel filling stations.

Please note, this list is not exhaustive and can change at any time.

The property held as security must be insured against all risks for at least the full reinstatement value, as recommended by the valuer in their report.

• Commercial offices
• Warehouses
• Factories
• Industrial units
• Agricultural
• Retail units
• Purpose-built student accommodation
• Residential and commercial investment properties
• Food/accommodation led public houses
• Restaurants
• Hotels
• Care homes
• Children’s day nurseries
• Specialist care and learning disability homes
• Children’s homes.

Acceptable security property types:

• Commercial investment
• Commercial owner-occupied
• Semi-commercial
• Residential investment property

The following interests in property are acceptable as primary security for loan facilities:

• Freehold
• Long leasehold (minimum unexpired lease term on drawdown of the loan of the commitment term plus 21 years)
• In Scotland - feudal e.g. commonhold property (i.e. separate individual owners have a share in the property title but no separate legal leasehold title)

Acceptable property types:

• Commercial investment
• Commercial owner occupied
• Semi-commercial
• Residential investment property

The different types of security we’ll need from your clients:

Type	Commercial investment	Commercial owner occupied	Residential investment
The basis of our valuation	Market value	For valuations under £400k, we will calculate LTV using the vacant possession value. For valuations over £400k, we will calculate LTV using the business valuation.	Market value
Summary	The type of security that we need will be assessed on a case-by-case basis. This will need to include property and may also include guarantees and debentures. A second charge may be accepted if the discounted security value will cover all debts secured against the asset.
Location	The security must be located in the UK
Minimum acceptable lease term*	Formal leases should be in place between the property owner and tenant for the full commitment term although in some circumstances, shorter lease terms can be accepted. A minimum lease term of five years is required but should be set to expire as close to (if not beyond) the repayment maturity date as possible.		Standard Assured Shorthold Tenancy (AST) lease agreements must be in place for all tenancies at the point of loan drawdown.
Minimum total security valuation	£335,000** (based on a loan of £250,000 at 75% LTV)
Minimum individual security value	£50,000
Security we cannot accept	Any security where a satisfactory legal charge cannot be confirmed by the bank’s solicitors. A first legal charge over an individual’s home. Contaminated land where there are likely to be clean-up or other liabilities. Any property without appropriate planning permissions and consents for both intended and existing use. Non-property assets (plant and machinery, vehicles, marine and aviation).

*Long leasehold (minimum unexpired lease term on drawdown of the facility repayment term plus 21 years).

Short leases (we define these as a lease that has less than 65 years unexpired on the lease at drawdown of the facility) where there is a trading licence attached (for example, dentists or pharmacies).

Commercial leases should cover the full loan commitment term, though shorter leases may be considered depending on the financial strength of the customer, tenant and sector.

**Minimum individual property purchase price / value is £50,000. Multiple properties can be taken as security.

How we assess serviceability:

Type	Investment	Commercial owner occupied
Serviceability explained	This is calculated using 90% of the valuer’s gross market rental figure or the passing/paid rental – whichever is lower. The rental received can be used as an estimate until the valuation is received.	This is calculated against the EBITDA(R). EBITDA(R= (Net Profit before tax + (Interest) + Depreciation + Amortisation + (Rent)) (Interest is only to be added if we are refinancing current debt; rent is only to be added if the rent is not to continue, normally if moving from a leased property to a purchased property.)
Serviceability measures	Variable rates Net Rental Cover (NRC) for investment on variable rate must be a minimum of 125%* at a stressed interest rate of, the higher of; Margin + 6.5%; or Margin + current BoE Base Rate + 1% Fixed rates NRC for investment on fixed rate, min 125%* on the fixed (pay) rate	Variable rates Debt Service Cover (DSC) for trading businesses on variable EBITDA(R) must be a minimum of 125%* at a stressed interest rate of, the higher of; Margin + 6.5%; or Margin + current BoE Base Rate + 1% Fixed rates DSC for trading on fixed rate, EBITDA(R) (post drawings) at 125%* on the fixed (pay) rate
Minimum income	Applicants need to demonstrate that they have sufficient income to cover their existing personal expenditure.

*There are some circumstances where we are required to test serviceability at a higher (from 145% to 170%) or lower (120%) level.

Serviceability will be assessed on a case-by-case basis. We want to make sure that applicants have a sufficient proportion of their profits available, after taking account of finance repayments, to cover other business and personal commitments. We also want to make sure that these serviceability calculations account for potential interest rate rises.