15/04/2026

Securing finance for commercial property is more complex than standard residential mortgages. A borrower needs to understand not just lending terms, but also legal, tax, and risk considerations.

Whether you are taking a loan or mortgage to buy commercial premises, refinancing an existing commercial mortgage or funding a property development or investment portfolio, there are several types of commercial property finance options to suit each situation:

  • Commercial mortgages – These are long-term loans for owner-occupied or investment properties.
  • Bridging loans – Bridging loans provide short-term finance, for example, for auction purchases or refurbishment work.
  • Development finance – For construction projects or major redevelopments.
  • Buy-to-let commercial – For rental investments.

How does commercial property finance work?

Commercial property finance usually involves a secured loan against a commercial asset. A lender secures its loan by placing a legal charge over the property.

There are some notable differences between commercial and residential lending which are worth being aware of:

  • Lenders – Some high street banks offer commercial mortgages but there are also specialist lenders who are experienced in commercial property finance.
  • Loan-to-Value (LTV) – The LTV is lower than for a residential mortgage, typically 60-75%, and higher risk properties, such as those with vacant units, may get less.
  • Interest rates are usually higher than for residential mortgages and can be fixed or variable.
  • Debt Service Coverage Ratio (DSCR) – This measures affordability based on rental income and is typically 125%-145% of loan payments.
  • Risk – Lenders will be concerned with a property’s income stability, which they will assess based on the type of tenant – retail, industrial, office, national chain, lease length and whether there are vacant units.
  • Personal guarantees are often required by lenders, even for limited companies. Director guarantees and sometimes debentures over company assets means personal liability if the loan defaults.
  • Repayment of the loan – Lenders will want to know how they’ll get repaid, especially for bridging or development loans. For example, on sale of the property, refinance onto a longer-term product or rental income over time.
  • Documentation that you’ll need to provide is likely to include business accounts, personal financial statements, rental projections or tenancy agreements, asset and liability statements.

Common pitfalls in commercial property finance agreements

Commercial property finance agreements are complex and require negotiation. Borrowers frequently focus on interest rates and loan amounts but there are other considerations.

  • While interest rates are important, don’t overlook default interest provisions, arrangement and exit fees, early repayment penalties and possible interest rate rises.
  • Personal guarantees are personal, even when borrowing through a limited company, so it is important to negotiate caps on liability and not to overlook joint and several liability between directors.
  • Don’t ignore default clauses, such as technical defaults like late reporting or covenant breaches, lender rights to call in the loan early and increased interest rates on default.
  • Most commercial loans include ongoing obligations, including loan-to-value limits, financial reporting and debt service coverage ratio requirements. It’s important to understand how these are calculated and to plan for market changes.
  • Pay attention to the lender’s security package, which often includes legal charges over the property, debentures over company assets and assignments of rental income.
  • Finally, don’t overestimate rental income or ignore potential void periods. Realistic budgeting is essential.

Do I need a solicitor for a commercial property finance transaction?

Yes, you will certainly need the services of an expert commercial property solicitor to manage commercial property finance negotiations and due diligence. In fact, one of the biggest mistakes is not instructing a solicitor early enough. Commercial lending is not regulated by the Financial Conduct Authority, which means borrowers have fewer protections and contract terms take on greater emphasis.

Good legal advice from the outset ensures negotiation opportunities aren’t missed, and restrictive clauses can be challenged, reducing the risk of unfavourable terms.

Instructing a solicitor at an early stage, ensures proper negotiations can take place, decisions aren’t made under time pressure and any risks are identified early

Need advice on commercial property finance?

If you need advice on any type of commercial property finance matter, don’t hesitate to contact our experienced team of commercial property solicitors by emailing enquiry@beswicks.com or phoning 01782 205000 or 0161 929 8494.