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Compare commercial mortgages for your business

Compare commercial mortgages to secure funding against a business property with our finance division Think Business Loans.

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What is a commercial mortgage?

A commercial mortgage is a long-term loan that’s secured against a non-residential property. In the UK, a business mortgage is usually available for up to 75% of a property’s value and is repaid over a period of between three and 25 years. A buy-to-let mortgage is a type of commercial mortgage, but others are available for different needs.

When is a commercial mortgage used?

The amount you need to borrow can determine the type of loan you need to take out. If you’re borrowing up to £25,000, you might be eligible for an unsecured business loan. But if you’re looking to borrow more, your lender will want security. And that’s where a business mortgage comes in.

What is the difference between a commercial mortgage and a home mortgage?

A commercial mortgage is often used in much the same way as a residential mortgage, but for business premises. For example, you might use a commercial mortgage to buy a property your business already occupies or is looking to move into.

Or you could use a commercial mortgage to pay for a property you want to buy as an investment, and any interest paid on a commercial mortgage is tax-deductible.

How to get a commercial mortgage

Commercial mortgage applications work in much the same way as residential mortgage applications, which means you’ll need to do complete and send an Asset and Liability form along with the commercial mortgage application form.

You’ll then need to supply the following information on your business:

  • Bank statements from at least the last three months
  • Trading figures from at least the last three years
  • Proof of identity and address
  • Tenancy agreements and/or lease agreements

To help the lender determine the affordability of the mortgage, you might also be asked to provide a business plan that includes financial projections.

The property will need to have been valued by an agent accredited by the Royal Institute of Chartered Surveyors (RICS), and all legal due diligence is carried out by the lender’s solicitors.

If everything gets approved, you’ll receive a mortgage offer from the lender.

Is it difficult to get a commercial mortgage?

A commercial mortgage is a big undertaking for any business, so you need to carefully consider the type of mortgage and lender to go with before you start the application process.

But there are loads of commercial mortgage lenders on the market, all offering different types of business mortgages that come with different interest rates and loan-to-value rates (also known as LTV rates, these basically determine how much of a deposit you’ll need to put down).

That’s why using a commercial mortgage broker is arguably the most straightforward way to compare commercial mortgage providers to find the product and lender that’s right for your business.

At Bionic, we work with Think Business Loans to compare the best commercial mortgage rates from our panel of lenders, which includes high street and challenger banks.

Our business finance division at Think Business Loans understands the calculations these lenders will use when assessing your application. This means we’re well placed to find the right lender for your business. Our iFunds technology searches for commercial mortgages from a panel of lenders to work out a solution that matches your needs.

Is your business eligible for a commercial mortgage?

Commercial mortgages are big deal for both the lender and the borrower, which means the lending criteria is usually robust. Although eligibility checks vary between lenders, you’ll most likely need to meet the following conditions:

  • A good business credit score – Although not always a deal-breaker, having a good credit score will help your application for a commercial mortgage. Some lenders will accept applications from businesses with a bad credit rating, but these will come with higher interest rates to reflect the added risk to the lender.
  • Evidence you can afford to pay a deposit alongside the repayments - Commercial mortgages usually need a deposit of between 20% and 40% of the loan amount. You might need proof of projected income as evidence that you can afford the deposit and repayments. This might take the form of a financial health check that looks at cash flow, general income, existing debts, credits, and assets.
  • Proof of income – This can be in the form of salary, self-employment, or even rental income.

It might also help your application if you’re a homeowner.

What are the alternatives to a commercial mortgage?

A commercial mortage is a very specalised product that’s generally available for larger amounts and can only be used for specific purposes. But there are alternatives available if you need to borrow lower amounts or need the money for reasons outside of property buying or development.

  • Bridging loans might be an option if you've bought stock or property and have a gap between the payment due date and money becoming available to you (say you’re relying on the sale of one property to fund the purchase of another).
  • Short-term loans could be worth considering if you need to cover costs without the long-term commitment of a mortgage. These loans are usually available for smaller amounts and need to be repaid within 12 months. This is often used for financial relief to cover working capital, cash flow, and other expenses.
  • Asset finance is another short term loan option that is often used to finance any items that appear on your balance sheet, such as equipment, fixtures and fittings, or commercial vehicles.
  • Invoice finance may be an option if you’re owed money on outstanding invoices but need the money now to cover cashflow. This allows you to borrow money against the amounts owed to you on unpaid invoices.
  • Secured business loans are sometimes available for relatively large amounts, so long as you have the necessary assets to use as security against the loan. That means that a lender will be able to offer better repayment terms because the asset is used as a form of guarantee by the borrower.

Commercial mortgages

What is a commercial mortgage?
When is a commercial mortgage used?
What is the difference between a commercial mortgage and a home mortgage?
How to get a commercial mortgage
Is it difficult to get a commercial mortgage?
Is your business eligible for a commercial mortgage?
What are the alternatives to a commercial mortgage?

Compare Commercial business mortgages with our finance division Think business loans

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Commercial mortgage FAQs

To help you understand more about commercial mortgages, here are the answers to some of our most frequently asked questions.

There are two main types of commercial property mortgage to choose from:

  • Owner-occupier mortgages - Used for properties you plan to run your business from.
  • Commercial investment mortgages - Used for properties you plan to rent out.

You can take out a commercial mortgage loan on both an interest only and capital repayment basis.

Interest only commercial mortgages keep monthly payments low and can help from a cash flow position - but you’ll need to repay the full loan amount at the end of the mortgage term.

The amount you can borrow and the commercial property mortgage rates you’re offered will not only be affected by the current circumstances of your business, but also by the type of loan you apply for.

There are a number of fees that come with all commercial mortgages, but the amount you’re charged will depend upon the lender and the terms of your loan. Typical business mortgage fees and charges include:

  • Arrangement fees – Usually added once the loan is approved, arrangement fees paid to the lender for getting the funds in place and arranging the finance. These fees are added to cover the work involved in setting up a loan and are usually set at around 1% or 2% of the loan amount on borrowing of up to £1 million. Some lenders might ask for the arrangement fee to be paid earlier in case they put in all the work, but you don’t take them up on the offer.
  • Valuation fees - Lenders need proof that a property is worth what you’re willing to pay for it, and so a valuer needs to give the place a once over and send a report to the lender. Fees are based on the type of report that’s needed, but rates usually start at around £500, which is paid to the lender once you’ve accepted an initial offer.
  • Legal fees – Charged for things like insurance, site surveys and preparation of legal documents, it’s on you to pay legal fees for both yourself and the lender. Costs vary, but usually start at around £500 for each party.

A commercial mortgage application can take anything from a few weeks to a couple of months. The length of time your application takes will depend upon a range of things, including your current circumstances, the lender you choose, and the complexity of the loan.

Lenders will usually offer commercial loans for 70% to 75% of the amount you need to borrow (known as loan-to-value, or LTV for short). This means you’ll need a deposit of 25% to 30%.

Although fees vary from broker to broker, you can expect to be charged up to 1% of the value of the loan. As part of the service your broker should give you guidance based upon your specific circumstances and present your application to the lender to give you the best chance of success

A semi-commercial mortgage is a loan for a property that is used for both business and residential purposes, such as a flat with a shop above.

You can’t buy a residential property with a commercial mortgage. If you’re looking to buy a property to rent out to domestic tenants, you’ll need to apply for a buy-to-let mortgage. Similarly, if you want to buy a non-residential property to rent out businesses, you should look into a commercial buy-to-let mortgage.

How commercial mortgage comparison works with Bionic and Think

How Bionic Works

You tell us how much
you need to borrow

Let the team at Think know how much you need to borrow and what you’ll use the finance for. They’ll use smart data to find out more about your business.

How Bionic Works

We compare secured business
loans and lenders

The team at Think will compare commercial mortgages from a panel of providers – including high street banks and alternative lenders - to find the right finance for your business.

How Bionic Works

We’ll take care of your
application

You then choose the loan you want. Think’s tech-enabled team will answer any questions you have and help with the application to improve your chances of approval.

Your Think comparison is free.

If you take out a loan, we'll be paid a commission by the lender that is included in the rates we quote.