Commercial mortgages
Long-term funding secured on commercial property — buying the premises you trade from, refinancing what you already own, or releasing capital tied up in bricks and mortar.
Start the fact find- Typical amount
- £100,000 to £10m+
- Typical term
- 5 to 25 years
- Loan to value
- Usually up to 70%
- Timescale
- 6 to 12 weeks
Indicative market ranges at the time of writing, not offers or quotes. What is available to you depends on the lender, your circumstances and the security available.
How a commercial mortgage differs from a residential one
The mechanics look familiar — a loan secured on property, repaid over years — but almost nothing else carries across. Residential lending is largely standardised and priced from a published rate card. Commercial lending is underwritten case by case, and two businesses buying identical units can be quoted very differently.
The reason is that a lender is assessing three things at once: the property as security, the income that services the debt, and the borrower behind it. For an owner-occupier, that income is your trading profit. For an investor, it is the rent roll and the strength of the tenants paying it. Which of the two you are changes the questions entirely.
Loan-to-value sits lower than residential — around 70% is typical, sometimes 75% for strong covenants and less for specialist property. Terms run from five to twenty-five years. Rates are quoted as a margin over a reference rate rather than as a headline product, and the margin moves with how risky the lender considers the case.
There is no single commercial mortgage market either. Clearing banks are cheapest but slowest and most conservative. Challenger banks price higher and move faster. Specialist lenders will consider property and sectors the others decline. Knowing which of the three fits your case before you apply is most of the value in using a broker.
What a commercial mortgage is used for
These are the cases we see most often. If yours is not here it is still worth a conversation — commercial lending is not standardised, which cuts both ways.
Buying your trading premises
Ending the rent cycle and owning the building your business operates from. Often the payments are comparable to the rent, with the difference that you are building equity rather than a landlord's.
Refinancing an existing commercial loan
Moving to better terms at the end of a fixed period, or away from a lender whose appetite has changed. Worth reviewing well before the current deal expires rather than at the last minute.
Raising capital against property owned
Releasing equity from premises you already own outright or with low borrowing, to fund expansion, an acquisition, or a tax liability without touching working capital.
Buying an investment property
Offices, shops, industrial units or mixed-use buildings held to let. Underwritten on the rent roll and the quality of the tenants rather than on your own trading accounts.
Buying a business with its premises
Where a trading business and its freehold are being acquired together, the property element often supports better terms than the goodwill element ever could.
Portfolio refinance
Consolidating several individually mortgaged properties into one facility, usually simplifying administration and sometimes improving the overall rate.
How a commercial mortgage runs
- 1
You complete the fact find and we review the property, the figures and your accounts.
- 2
We approach lenders whose criteria genuinely fit and return with indicative terms to compare.
- 3
You choose; the lender issues terms and instructs a RICS valuation of the property.
- 4
Legal work completes and funds are released, typically six to twelve weeks from the start.
Ready to put the case together?
The fact find gathers everything a commercial lender asks for in one pass — property, transaction, occupancy, accounts and credit history.
What a commercial lender will want
Commercial underwriting is document-heavy and there is no way around that. Having these ready at the outset is the single biggest thing that shortens the process — cases stall waiting on paperwork far more often than they stall on credit.
- Two years of filed accounts plus current management figures for the trading business.
- Six months of business bank statements, read for the pattern of the cash flow.
- Full details of the property: address, tenure, condition, floor area and use class.
- For investment property, copies of every lease with unexpired terms and break clauses.
- Details of all directors and shareholders with a material stake, who will be credit-searched.
- An explanation of any adverse credit — raised now rather than discovered at underwriting.
- Evidence of the deposit and where it came from, which lenders must trace.
What it costs
The rate is only part of it. These are the components that make up the true cost of a commercial mortgage, and the ones to compare across quotes.
Interest margin
Quoted as a margin over a reference rate rather than a single headline figure. The margin reflects the lender's view of the property, the covenant and the loan-to-value.
Arrangement fee
Commonly a percentage of the facility, either paid on drawdown or added to the loan. Adding it costs more overall because you pay interest on it for the full term.
Valuation fee
A RICS valuation is required and paid by you, usually up front. Commercial valuations cost considerably more than residential ones and are non-refundable if the deal falls through.
Legal costs
You pay both your own solicitor and the lender's. Budget for both from the outset — this is the cost most often underestimated.
Our fee
We are paid by commission from the lender, by a fee from you, or occasionally both. Whichever applies is set out in writing before you commit to anything.
Early repayment charges
Fixed-rate commercial loans often carry break costs that can be substantial. Understand the exit terms before you fix, not when you want to move.
The words a lender will use
Commercial lending has its own vocabulary, and quotes are hard to compare until it makes sense.
- Loan to value (LTV)
- The loan as a percentage of the property's value. Commercial LTVs sit lower than residential — around 70% is typical, and specialist property can be considerably less.
- Debt service cover ratio (DSCR)
- How many times the income covers the loan payments. Lenders commonly want between 1.25 and 1.45 times, meaning the income must comfortably exceed what the debt costs.
- Covenant strength
- How reliable the income is — for an investment property, the financial standing of the tenants. A national retailer on a fifteen-year lease is a stronger covenant than a new local business on a rolling one.
- Unexpired term
- How long a tenant's lease has left to run. Lenders discount income from leases with little term remaining, because there is no certainty it continues.
- Owner-occupied versus investment
- Whether your own business trades from the property or it is let to others. This changes which lenders apply, how it is underwritten and often the rate.
- Debenture and personal guarantee
- A debenture is a charge over the company's assets; a personal guarantee makes directors liable if the company cannot pay. Both are common on commercial lending, especially below a certain size.
What is and is not regulated
A commercial mortgage on property used wholly for business purposes generally sits outside the Financial Conduct Authority's regulated regime. The consumer protections attached to residential mortgages — including recourse to the Financial Ombudsman Service in most circumstances — do not apply in the same way.
Mixed-use property can straddle the line. Where more than 40% of a building is used as a dwelling by the borrower or an immediate family member, the loan is normally a regulated mortgage contract and must be handled accordingly. A shop with a flat above that you live in is the classic example.
You should not have to work out which side of that line you are on. We confirm it in writing before you commit, along with how we are paid on the case.
Frequently asked
How much deposit do I need?
Usually at least 25% to 30% of the property value, and more for specialist property such as hotels, care homes or petrol stations. Some lenders will consider additional security over another property in place of part of the cash deposit.
How long does it take?
Six to twelve weeks is realistic from application to completion, driven mostly by the valuation and the legal work rather than by the credit decision. If you have a fixed deadline, tell us at the outset — occasionally a bridge is the sensible way to meet it, with the commercial mortgage following behind.
Can I get one through a limited company or SPV?
Yes, and it is very common, particularly for investment property. Lenders will normally want a debenture over the company and personal guarantees from the directors. Whether a company is the right structure for you is a question for your accountant as much as your broker.
Can I borrow if the business is newly established?
It is harder, because most lenders want two years of filed accounts. A strong deposit, relevant experience in the sector and a credible business plan can bridge the gap with the right lender, though expect a lower loan-to-value and a higher margin.
What if the property is in poor condition?
Term lenders want property that is usable and lettable now. A building needing significant work is often better funded with a bridge covering purchase and refurbishment, then refinanced onto a commercial mortgage once it is finished and revalued.
Will I need to give a personal guarantee?
On most cases below a certain size, yes. It makes you personally liable if the company cannot repay. Read what it covers, check whether it is capped, and take independent legal advice before signing.
Before you borrow
- Your property may be repossessed if you do not keep up repayments on a mortgage secured against it.
- A personal guarantee puts your own assets at risk, including your home where it is offered as security. Take independent legal advice before signing one.
- Valuation and legal fees are usually payable whether or not the transaction completes.
- Fixed-rate commercial loans can carry substantial early repayment charges. Check the exit terms before fixing.
- Figures on this page are indicative market ranges at the time of writing. They are not offers, and nothing here is a recommendation for your circumstances.
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Tell us about the case
The fact find takes a little longer than an enquiry form, and it means an adviser can approach lenders straight away rather than coming back with questions.
