Commercial Mortgages

A commercial mortgage is borrowing secured against property used for business or investment — such as trading premises, commercial rental property or mixed-use buildings. Lenders assess the property, the business or rental income behind it, the deposit, the security and the repayment structure. Most commercial mortgages are not FCA-regulated, so advice and careful structuring matter.

Written by Payam Azadi, Director, Niche Advice Limited · Last reviewed July 2026

It might fund the premises your business trades from, an investment property you let to commercial tenants, or a mixed-use building with a shop below and a flat above. Commercial mortgages work differently from residential ones: lenders take a more bespoke, case-by-case view, and the central question is whether the property and the business behind it can comfortably support the borrowing.

This guide explains, in plain English, the main types of commercial mortgage, who they suit, and how lenders weigh them up — so you can get your bearings before you take advice.

This page is information, not advice. It is here to help you understand the landscape, not to recommend a particular product or course of action. A commercial mortgage is a significant business and investment decision with tax, legal and commercial consequences, so before you commit, speak to a qualified adviser who can look at your circumstances properly. Niche Advice Limited is a mortgage and credit broker, not a lender, authorised and regulated by the Financial Conduct Authority, FRN 750263.

Most commercial mortgages are not regulated by the FCA. Commercial lending is generally treated as a business activity, so it usually falls outside the consumer protections that apply to residential mortgages. The property securing the loan is still at risk if the borrowing is not repaid, and you should take the commitment just as seriously. An adviser can explain exactly what protections do and do not apply to your situation.

Which commercial mortgage do you need?

“Commercial mortgage” is a broad term covering several quite different situations. This quick guide points you to the right one — each is explained in full below.

You will not find interest rates, fees, APRCs or monthly figures here, because commercial lending is priced individually and depends entirely on your circumstances, the property and the business — for a current quote, speak to an adviser.

Owner-occupied commercial premises

An owner-occupied commercial mortgage is for a business buying the property it trades from itself — the office, shop, workshop, surgery, warehouse, restaurant or industrial unit where the work actually happens.

For many established businesses, buying their premises rather than renting is an attractive step. It removes the uncertainty of rent reviews and lease renewals, gives you control over the space, and means the monthly outlay builds an asset for the business rather than going to a landlord.

Lenders assessing an owner-occupied application look closely at the trading business — typically its accounts, profitability, cash flow and track record — because the loan is usually repaid out of trading income. They will want to be satisfied the business can service the borrowing comfortably alongside its other costs. Newer or less predictable businesses can still be considered, but may face a narrower choice of lenders or be asked for more supporting information.

The trade-offs are worth weighing honestly: owning ties up capital in a deposit, makes the business responsible for repairs and maintenance, and means you carry the risk if the property falls in value or your space needs change. For many businesses it is still the right long-term move — but it is a decision to take with the figures done properly and good advice behind you.

Commercial investment property

A commercial investment mortgage is for buying — or refinancing — commercial property that you intend to let to business tenants, rather than occupy yourself. The income comes from the rent those tenants pay under their commercial leases. This covers a wide range of property: offices, retail units, industrial estates, warehouses and leisure premises among others.

Here the lender’s focus shifts from a trading business to the strength and security of the rental income — who the tenants are, how financially sound they are, how long their leases run, and whether the rent reliably covers the borrowing with room to spare. A property let on a long lease to an established, creditworthy tenant is generally seen as lower risk than one with short leases, vacant units or a single tenant whose finances are uncertain.

Lenders will consider the lease terms, the covenant strength of the tenants, void risk (the chance of units sitting empty), and the property’s location and condition. If you also hold residential investment property, our guide to buy-to-let mortgages covers that side.

Commercial property investment can produce a worthwhile return, but the risks deserve equal billing. Tenants can fail or leave, and re-letting commercial space can take longer than residential. Values can fall as well as rise, and lease structures, rent reviews and dilapidations are more complex than residential tenancies. Because this lending is generally not FCA-regulated, the consumer protections around a residential mortgage do not apply.

Portfolio purchase and refinance

Investors and businesses often hold more than one commercial property, and a portfolio can be financed as a whole rather than property by property. Some lenders will look at the combined rental income and the overall loan-to-value across the portfolio, which can suit landlords consolidating several loans onto one facility or refinancing to release equity for a further purchase.

A portfolio view brings its own considerations — the spread of tenants and sectors, the mix of lease lengths, and how reliant the income is on any single property or tenant. Whether a portfolio approach or individual loans work better depends on your circumstances, and it is worth taking advice before you restructure existing borrowing, as extending a term can increase the total amount you repay.

Semi-commercial (mixed-use) property

A semi-commercial — or mixed-use — property combines commercial and residential elements in one building. The classic example is a shop, café or office on the ground floor with one or more flats above, but the mix can take many forms.

These properties sit in an interesting middle ground. They are usually treated as commercial lending overall, because part of the building is in business use, but the residential element can broaden their appeal — for example, providing a second income stream from the flats alongside the commercial rent.

Lenders take a tailored view. They will typically consider the split between commercial and residential use, the income from each part, the type of commercial tenant, and how the building is laid out and accessed. The balance of uses can affect which lenders will look at it and on what terms — a building that is mostly residential with a small commercial element is assessed differently from one that is predominantly commercial.

Because semi-commercial lending crosses two worlds, it is a specialist area with a smaller pool of lenders. The classification, the lease arrangements and the way the income is treated all matter, so it genuinely pays to take advice before you proceed.

Trading-business premises

Sometimes the property and the business that operates from it are bought together — the premises and the trade are part of the same deal. This is common where the property and the operation are closely tied, such as pubs, hotels, guest houses, care homes, nurseries, restaurants, petrol stations and dental or veterinary practices.

This type of lending is more involved than a straightforward property purchase, because the lender is assessing both the bricks and mortar and the business that generates the income. Lenders will look at the trading performance of the business — its accounts, turnover, profitability and the experience of the people running it — as well as the property itself.

The value of these businesses is often bound up with their ability to keep trading, so a lender wants to be confident the operation is viable in your hands. Sector experience can count for a great deal: someone taking on their first venture in an unfamiliar trade may face more questions, or a narrower set of lenders, than an experienced operator.

These are specialist transactions, frequently handled by lenders who focus on particular sectors. The legal and commercial detail — licences, regulatory approvals, goodwill, fixtures and fittings, and how the business is valued — can be considerable.

High street, challenger and specialist lenders — how they differ

Here is something I always explain to clients, because it is the part most people don’t realise. Commercial lending relies on both the applicant and the asset — not just the property. Different commercial assets perform very differently: warehousing and industrial space tends to be in strong demand, for example, while some retail is softer, and lenders factor that in. And it is very much about the client: your level of experience matters. If you are buying a care home, have you actually run that kind of business — not just managed one, but run it? Are you expanding? What experience are you bringing? This is a business transaction, so you have to be able to show the lender you can make the business work.

Where you take that case makes a real difference, because commercial lenders fall into three broad camps.

High street lenders

The high street banks have very good rates — but those rates come with conditions. They tend to be conservative: they generally prefer lower loan-to-values, a very clean credit profile and a strong accounts history (often around three years), and they look at risk cautiously. They pick and choose what they will lend on. If your case fits their box, they are hard to beat on cost; if it doesn’t, they will often say no.

Challenger banks

Challenger banks still want to see accounts and experience, but usually not as much. They will typically consider higher loan-to-values — some going up to around 70–75%, depending on the asset type — and a wider range of property, they are more flexible in how a deal can be structured — some, for instance, will allow pension funds such as a SIPP to be used towards the purchase — and they are usually faster and slicker. If you need a transaction to complete more quickly, or to position a deal differently, a challenger is often the answer. That flexibility usually comes at a higher rate than the high street.

Specialist lenders

Then there are the specialist lenders. These are the ones who may still lend where you have limited experience, or only a year’s accounts. They are the most flexible around your personal and business circumstances, and they will consider assets the others often won’t — newer commercial premises, retail without a long track record, or a borrower diversifying into a different sector. They are usually as fast as the challengers, and their rates are higher again — that is the trade-off for the flexibility.

Knowing which camp a case belongs in — and which lender within it — is a lot of what a specialist broker does. The same client and the same property can get a very different answer depending on where the case is placed.

How lenders assess a commercial mortgage

Commercial lending is far less of a tick-box exercise than residential. Lenders take a bespoke view of each case, and pricing and terms are individually set. A few principles explain how they tend to approach it. (No figures here — the actual thresholds and pricing vary by lender, property and business; speak to an adviser for a current quote.)

Affordability and the business behind the loan

The first question is how the loan will be repaid. For owner-occupied and trading-business cases, that usually means the profits of the business; for investment cases, it means the rent from tenants. Lenders examine business accounts, cash flow, projections and the track record of those involved, looking for confidence that the income comfortably covers the repayments with a sensible margin to spare. The stronger and more predictable that income, the wider your likely choice of lenders.

Deposit and loan-to-value

As with any mortgage, commercial borrowing is capped at a loan-to-value (LTV) percentage — the proportion of the property’s value the loan represents — and you fund the rest as a deposit. Commercial mortgages generally require a larger deposit than a residential purchase, and the maximum LTV varies by lender, by property type and by the perceived risk of the case. More specialist property — or a less established business — typically means a lower maximum LTV and a bigger deposit.

Security, valuation and structure

The property is the lender’s main security, so it will be professionally valued, and the lender will consider its type, condition, location and how easily it could be sold or re-let if needed. In some cases a lender may look for additional security or personal guarantees from the directors or owners, particularly where the business is newer or the property more specialist.

Commercial mortgages can be arranged on a capital-and-interest basis or, in some cases, interest-only, with terms often shorter than a typical residential mortgage. The right structure depends on your cash flow, your plans for the property and your appetite for repayment certainty — all things to talk through with an adviser before you decide.

What to have ready before you enquire

A commercial case moves more smoothly when the groundwork is done. It helps to have the following to hand — an adviser can work with you if some pieces are still coming together:

• Business accounts — usually the last two to three years, plus up-to-date management figures
• Property details — address, type, tenure, condition and any planned use
• The lease or rent schedule — for investment or mixed-use property, who the tenants are and how long their leases run
• Deposit and its source — how much, and where it is coming from
• Ownership structure — whether you are buying personally, through a limited company or an SPV, or as a partnership
• Your plans for the property — occupy, let, refurbish, or hold as part of a portfolio

A practical illustration

To show how the pieces fit together — without quoting any figures — imagine an established business that has rented its workshop for years and wants to buy the freehold. The lender would look at the trading accounts to see the business can service the borrowing, value the property as its security, and consider the deposit and structure. A newer business buying a more specialist unit might find fewer lenders willing to look, and be asked for a larger deposit or additional security. Same broad goal, two quite different cases — which is why the structuring and the choice of lender matter.

A note on the professionals around you. We work alongside your accountant and solicitor — we do not give tax or legal advice. A commercial purchase usually involves all three, and it works best when everyone is talking to each other.

When bridging or development finance may suit better

A commercial mortgage is a medium-to-long-term loan for a property that is ready to use or let. It is not always the right tool. If you need to move quickly — to secure a property at auction, complete before a sale, or buy before you refinance — short-term bridging finance may be more appropriate, with a clear plan to repay or refinance it.

If the property needs major building work, conversion, or is being built from the ground up, development finance is usually the better fit, because it is designed to release funds in stages as the work progresses. An adviser can help you weigh which route suits the project and your timescale — the wrong product can cost far more than the right one. If you are new to short-term lending, our guide to what bridging loans are is a useful starting point.

A balanced view: the realities of commercial borrowing

A commercial mortgage can be a sound way to secure premises or build an investment, but it is right to set out the risks alongside the appeal. The property securing the loan is at risk if you do not keep up repayments. Commercial property values can fall as well as rise, and commercial space can take longer to sell or re-let than residential.

Tenants can fail or vacate, leaving rent uncovered, and trading businesses can have lean periods when income dips. Deposits are usually larger, tying up capital you might otherwise use in the business. Personal guarantees, where required, mean directors may carry personal responsibility for the debt. And because commercial lending is generally not FCA-regulated, the consumer protections that surround a residential mortgage generally do not apply.

None of this means commercial borrowing is a poor idea — countless businesses and investors use it well. It simply means going in with your eyes open, the numbers stress-tested, the right professionals around you, and good advice behind the decision.

Frequently Asked Questions

Straight answers from a specialist mortgage and credit broker.

How much can I borrow on a commercial mortgage?›

It is set by the lower of two things: the maximum loan-to-value the lender will offer, and what the income can support. Lenders want the business profit — or the rental income on an investment — to cover the payments comfortably, with room to spare, and they stress-test that at a higher rate than you pay. So a strong, well-evidenced income can matter as much as your deposit. An adviser can give you a realistic figure for your case.

How much deposit will I need?›

Generally more than a residential purchase — as a rough guide, often around 25–40% of the value, so a maximum loan of roughly 60–75% loan-to-value. Where it falls depends on the lender, the property type and the strength of the business or rental income; more specialist property, or a newer business, usually means a bigger deposit.

Can I get a commercial mortgage through a limited company or SPV?›

Yes — commercial property is very often bought through a limited company or a special-purpose vehicle (SPV), and most commercial lenders are comfortable with that. The lender will still look at the people behind the company — their experience, and usually personal guarantees from the directors. Whether a company or a personal purchase is better has tax and legal implications, so it is worth taking advice from your accountant alongside an adviser.

Can I get a commercial mortgage with bad credit or a CCJ?›

It may be possible. A clean credit profile widens your choice and gets you the sharpest rates, but adverse credit — a CCJ, defaults or a patchy history — does not automatically rule you out. Specialist lenders take a more individual view and may still lend, usually at a higher rate. The detail matters: how old the issue is, how large it was, and whether it has been settled. An adviser can point you towards lenders likely to consider your circumstances.

Does the length of the lease on the property matter?›

It can matter a great deal, especially for leasehold property. A short remaining lease can make a property much harder to finance, because the lender needs the security to hold its value over the term of the loan and beyond. Freehold or a long lease is generally more straightforward. If the lease is short there may be options, such as a lease extension, so it is worth raising it early — an adviser can flag whether it is likely to be an issue.

Can I get an interest-only commercial mortgage?›

Sometimes. Commercial mortgages can be arranged on a capital-and-interest (repayment) basis or, with some lenders and for some cases, interest-only — often where there is a clear plan to repay the capital, such as a sale or refinance. Interest-only keeps the monthly payments lower, but the balance does not reduce, so lenders look closely at how it will ultimately be repaid. Which suits you depends on your cash flow and your plans for the property.

Can I use my pension (SIPP) to buy commercial premises?›

Often, yes. Commercial property — including the premises your own business trades from — can be bought through a self-invested personal pension (SIPP) or a small self-administered scheme (SSAS), and it is a well-established route for business owners. It has particular tax and pension rules, so it should be done with proper advice from your pension adviser alongside advice on the borrowing. It is a specialist area, but a well-trodden one.

How long does a commercial mortgage take to arrange?›

It varies. Some cases are more straightforward than others, but timescales depend on the valuation, the legal work, the lender’s assessment and the property itself. An adviser can give you a realistic sense of the steps involved for your case rather than a fixed timescale.

What is the difference between a high street, challenger and specialist commercial lender?›

Broadly, three tiers. High street banks are the cheapest but the most conservative — lower loan-to-values, strong accounts and clean credit. Challenger banks are more flexible on loan-to-value (some up to around 70–75%, depending on the asset) and property type, and usually faster, at higher rates. Specialist lenders are the most flexible — they may consider limited experience or unusual assets — with higher rates again. A broker helps work out which fits your case.

When might bridging or development finance suit better than a commercial mortgage?›

A commercial mortgage suits a property that is ready to use or let and held for the medium to long term. If you need to complete very quickly, short-term bridging finance may fit better, with a clear plan to repay or refinance. If the property needs major works or is being built from scratch, development finance — which releases funds in stages — is usually more appropriate. An adviser can help you choose the right route for the project and your timescale.