Can A Business Get A Mortgage?

Home Can A Business Get A Mortgage?
Sunny Avenue
Commercial Sunny Avenue
31 May 2024

Owning a commercial property is often a crucial step for businesses looking to expand their operations. However, financing the purchase of a commercial property is not as straightforward as obtaining a residential mortgage.

Commercial mortgages have their own set of rules and requirements that businesses need to navigate.

In this comprehensive guide, we will explore the key aspects of getting a commercial mortgage in the UK, answering the question, can a business get a mortgage?

Key Takeaways

  • Businesses can obtain mortgages in the UK for commercial properties, which differ from residential mortgages, requiring larger deposits and tailored application processes.
  • Various business mortgage options are available, including commercial mortgages, portfolio finance, bridging loans, development finance, and mezzanine finance, each catering to different business needs.
  • Securing a business mortgage involves assessing factors like credit rating, financial situation, and business plan. Lenders have varying criteria, so finding the right fit is crucial for success.
  • Commercial mortgages typically require larger deposits (65-75%) compared to residential mortgages and have shorter terms, often capped at around 15 years. 

Can A Business Get A Mortgage?

Yes, businesses in the UK can obtain commercial mortgages to finance commercial properties or income-generating properties.

These mortgages differ from residential ones, requiring a larger deposit and a more detailed application process.

Looking To Get A Mortgage For Your Business?

Are you thinking about getting a mortgage within your business to fund your next project, to help you move, or to even buy commercial space?
We can help you find a mortgage specialist to offer you the very best advice. Complete our Sunny Fact Find form to provide us a bit more detail about your circumstances and we'll find the best-suited adviser for your needs.
Your appointed adviser will contact you to discuss how they can help, you decide how to proceed.

What is a Business Mortgage?

A business mortgage is a loan that enables a business to finance the purchase or refinancing of a property that will be used solely for business purposes. Unlike residential mortgages, which are intended for personal homes, a business mortgage is specifically designed for commercial properties.

It allows businesses to acquire properties, refinance existing mortgages, or even redevelop properties to suit their needs.

Types of Business Mortgages

There are several types of business mortgages available in the UK, each catering to different business needs. Let's explore the most common options:

Commercial Mortgages

A commercial mortgage is the most straightforward type of business mortgage. It involves securing a loan against a property that will be used solely for business purposes. Whether you want to transition from leasing to owning your business premises or establish a buy-to-let business model, a commercial mortgage can be an ideal choice.

Additionally, refinancing an existing property to unlock its capital is another option within the realm of commercial mortgages.

Portfolio Finance

Portfolio finance allows businesses to borrow against two or more properties within their portfolio. This type of financing can be used to acquire additional properties, develop existing properties, or release capital tied up in the portfolio.

Portfolio finance often offers lower interest rates compared to traditional commercial mortgages due to the higher value of the portfolio.

Bridging Loans

Bridging loans provide short-term finance to bridge the gap between acquiring a new property and obtaining a mortgage that fully covers its cost. These loans utilise the equity in a property you already own as a down payment for another purchase.

Unlike mortgages, which can have terms spanning several decades, bridging finance typically has a maximum term of one year.

Development Finance

Businesses looking to develop new properties or redevelop existing ones can benefit from development finance. This type of loan is tailored to meet the specific needs of property development projects and may differ slightly from a traditional commercial mortgage in terms of terms and conditions.

Mezzanine Finance

Mezzanine finance combines elements of both debt and equity finance. It is used to bridge funding gaps on high-cost property projects. If you have already secured a majority of the investment required through a mortgage, mezzanine finance can provide the remaining funds needed to complete the project.

How Much Mortgage Can A Business Get?

The amount of mortgage a business can get for a commercial property depends on various factors, including the financial health of the business, the type of property, the lender's policies, and the specific terms of the mortgage.

Generally, commercial mortgages cover a percentage of the property's value, typically around 65% to 75%. However, this can vary, and some lenders may offer higher or lower percentages.

To determine the exact amount, businesses should consult with potential lenders and provide detailed financial information for assessment.

How to Obtain a Business Mortgage

To secure a business mortgage in the UK, you need to follow a straightforward application process. However, given the competitive nature of the commercial finance marketplace, it is crucial to find the right mortgage for your business's specific needs.

Lenders will assess your viability based on various criteria, including your credit rating, current financial situation, projected financials, assets, and business plan.

It's important to note that businesses with less-than-ideal credit histories may face challenges when trying to obtain a commercial mortgage. In such cases, alternative business finance solutions may be available.

Types of Properties that Require a Commercial Mortgage

When it comes to commercial mortgages, the types of properties that require this type of financing are diverse.

While purely commercial properties such as offices, shops, and restaurants definitely need a commercial mortgage, the scope extends beyond these categories.

For instance, you might be interested in purchasing a mixed-use property, such as a pub with a flat or house above. Other properties may be primarily residential but feature attached business spaces, such as B&Bs, kennels and catteries, home-based beauty clinics, and nurseries.

Even if you plan to own a residential property and rent it out, you will need a specialised commercial mortgage known as a buy-to-let mortgage.

In essence, any property that generates income is likely to require a commercial mortgage.

However, it is important to consult with your mortgage lender if you are unsure about the specific requirements for the property you have in mind.

The Application Process for a Commercial Mortgage

Applying for a commercial mortgage involves a detailed assessment of your business's cash flow, long-term security, and other critical factors. Each lender has its own risk profile and sets its own conditions that your business must meet.

Therefore, if one lender rejects your application, it is essential not to despair, as another lender may have different guidelines that are more suited to your circumstances.

Unlike residential loan applications, the commercial mortgage application process is far less black-and-white. It requires a comprehensive understanding of your business's financials, growth potential, industry outlook, and risk management strategies.

To present the strongest possible application, it is crucial to work closely with a mortgage adviser who specialises in commercial financing and can guide you through the process.

Remember, the stronger your application, the better the deal you are likely to secure. Putting in the effort to present a robust case can result in more favourable terms, lower interest rates, and higher borrowing amounts.

Deposit Requirements for a Commercial Mortgage

When it comes to deposit requirements, commercial mortgages typically necessitate a larger deposit compared to residential mortgages. While residential mortgages may allow borrowing up to 95% of a property's value, commercial mortgages usually cover only around 65% to 75% of the property's value.

This means that you will have to provide the remaining funds as a deposit.

Mortgage Term Length for Commercial Mortgages

In terms of mortgage term length, commercial mortgages typically have shorter terms compared to residential loans. While residential mortgages can extend for several decades, commercial mortgages often have terms ranging from one year to 25 years.

However, it is common for commercial mortgages to have a cap of around 15 years.

A shorter mortgage term can limit the borrowing capacity, but it can also be advantageous if you are in a position to repay the loan quickly. When considering the mortgage term, it is crucial to carefully assess your business's cash flow and long-term prospects to ensure that the chosen term aligns with your financial goals.

Looking To Get A Mortgage For Your Business?

Are you thinking about getting a mortgage within your business to fund your next project, to help you move, or to even buy commercial space?
We can help you find a mortgage specialist to offer you the very best advice. Complete our Sunny Fact Find form to provide us a bit more detail about your circumstances and we'll find the best-suited adviser for your needs.
Your appointed adviser will contact you to discuss how they can help, you decide how to proceed.

Are Business Mortgages Cheaper?

In general, business mortgages are not necessarily cheaper than residential mortgages. Commercial mortgages often come with different terms, requirements, and risk profiles, which can lead to varying interest rates and costs. 

Businesses should carefully assess their options and compare offers to find the most suitable and cost-effective solution.

Next Steps For Getting A Business Mortgage

Remember to consult with a mortgage broker who specialises in commercial financing to guide you through the process and present a strong application.

By carefully assessing your financial position, exploring affordable capital-raising options, and presenting a compelling case, you can increase your chances of securing the best possible deal on a commercial mortgage.


Stuart is an expert in Property, Money, Banking & Finance, having worked in retail and investment banking for 10+ years before founding Sunny Avenue. Stuart has spent his career studying finance. He holds qualifications in financial studies, mortgage advice & practice, banking operations, dealing & financial markets, derivatives, securities & investments.

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