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Company directors of SMEs should exhaust all other possibilities before resorting to "rip-off" commercial mortgages to fund property purchases, according to Norwest Consultants.
Remortgaging their home, purchasing property through a pension fund or go business owners going through their own bank are all preferable options to commercial lenders, the independent adviser advised.
Commercial mortgage lenders can often charge small business owners practically anything and because they are commercial, "they think they can get away with it".
The charges for arranging a mortgage are usually one per cent or sometimes more and commercial lenders also charge higher interest rates for a shorter lending period.
Research from Yorkshire Bank indicates that 19 per cent of small business company directors would take more business risks if they were free of their mortgage repayments.
Some 22 per cent would like to pay off their mortgage early to aid growth in their business, while 26 per cent felt that repaying their mortgage would help them expand.
Harry Katz, principle financial adviser at Norwest Consultants, said: "If you have to go to a commercial lender, youre usually not in good shape. Generally speaking, the best deal youll get is from your bank.
"If you cant get a good deal from your bank, it means that youre not terribly credit-worthy, which means that youve then got to go to the commercial mortgage market – and get ripped off."
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