Bad credit rating
You’ll usually still be able to apply for a commercial mortgage if you have a bad credit rating, but you’ll likely pay a high interest to make up for the risk the lenders take
What is a commercial mortgage?
A commercial mortgage is a loan secured on a commercial property which is not your residence.
Also known as ‘business mortgages’, they’re aimed at business owners who wish to buy property or land for commercial purposes, or use their property as collateral to secure financing for investing.
What can I use them for?
Buying or refinancing commercial property
Property development
Investment finance
Refurbishing a business premise (if you're the owner-occupier)
Funding equipment, machinery, or other business assets
Do I need a buy-to-let or commercial mortgage?
Depending on your property investment portfolio or how you plan to use the money, your lending needs will differ
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Buy-to-let mortgages
A buy-to-let mortgage is for
Individuals who invest in residential property only
Own 10 properties or fewer
Do not register as a business entity when operating as a landlord
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Commercial mortgages
Commercial mortgages are for:
Limited companies investing in commercial, or mixed-use property
Buying property for your business to trade from (owner occupied premises)
What are the pros and cons of commercial mortgages?
Here are the benefits and downsides of taking out a commercial mortgage:
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Pros
The interest on your commercial mortgage is tax-deductible
If your property increases in value, your capital could also increase
You’ll be able to rent out the property to generate extra income
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Cons
A larger deposit is needed. Most lenders will require a deposit of 30% for a commercial mortgage
This type of mortgage comes with a range of various fees, such as arrangement fees, valuation fee, legal fee and a commercial-broker’s fee
Getting a business mortgage won’t be a quick process as there are many checks involved, including your company’s finances and legal checks
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What fees will I pay on a business property mortgage?
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Arrangement fees
Arrangement fees are typically added to the loan after the loan is approved. But some lenders may request the arrangement fees earlier to cover their work in case you don't accept their offer. Arrangement fees are usually 1% -2% of the loan amount for loans up to £1 million.
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Valuation Fees
A valuer will visit the property and write a report to the lender. Commercial valuations can start at around £500 for a simple case, and the fees are based on an individualised quotation, which is payable to the lender after an initial indicative offer has been accepted.
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Legal Fees
You’ll need to pay both your own legal fees as well as the lender’s, which can start at around £500 for each party.
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Broker fees
A broker gives you advice specific to your situation and real estate and presents your case to the lenders. Their service is usually charged at up to 1% of the loan value.
What are my alternatives to commercial mortgages?
There are several alternatives if you decide that a commercial mortgage is not the right choice for you:
How is interest paid on a commercial mortgage?
Most commercial mortgages are paid at a variable rate. Typically, a rate will be quoted as X% over base or LIBOR, and this in residential terms would be called a tracker mortgage. Fixed rate mortgages are available and for amounts under £500,000, where the lender takes the rate risk themselves, they may be advantageous.
Unlike most personal loans, the rates charged for commercial mortgages and business loans are not determined from the offset. Lenders usually have a risk profile that they work to, so if your loan falls outside their risk profile it will be refused.
How to choose the best commercial mortgage?
Since a commercial mortgage is quite complex. it’s a good idea to carefully consider which mortgage to opt for. Here are a few factors you might want to keep in mind:
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Loans are secured
Commercial mortgages are a type of secured loan where the property is used as collateral by the lender against the loan, so if you default you could lose ownership of your real estate
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Check affordability
Deposits for this kind of mortgage can be quite hefty, so it’s a good idea to ensure you’ll be able to pay both the deposit and the monthly repayments comfortably
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Loan to value ratio
A broker can often help you find the highest loan to value ratio (LTV)
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Personal guarantees
If you haven’t been trading for long, lenders may see this as a sign of high-risk and request personal guarantees
How to compare commercial mortgages with MoneySuperMarket
Getting a business mortgage with B2B Finance is straightforward. Here’s what to expect:
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Apply online
Start the application process with a click. You’ll be asked a few questions about yourself and what you want the loan for
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Review offers
After being assigned an indicative quote, you can review offers from lenders
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Accept offer
Decide which lender you want to borrow from and then accept their offer
Who are B2BFinance.com?
B2BFinance.com is a commercial finance broker who we’ve partnered with to provide you with a business mortgage. B2BFinance.com have been operating since 2005 and are FCA authorised and regulated.
What are the eligibility criteria for a commercial mortgage?
In order for you to qualify for a commercial mortgage, you’ll need to pass the lender’s eligibility checks which usually include:
The cash flow and any debts you may owe to assess the financial health of your company
Your business’s projected income to determine whether you can cover the cost of the loan
Your ability to pay the deposit, which can range from 20% to 40% of the loan
Rental income may also be taken into account, as this will have an effect on your business’s cash flow
General income, credit and assets
How do I apply for a commercial mortgage?
The application process will vary across lenders, but here’s what to expect:
You complete and submit the Asset and Liability form (this can usually be done online)
You’ll then be asked to complete the commercial mortgage application form
You’ll be required to provide information on your business (listed below)
The property is valued
All legal due diligence will be carried out by the lender’s solicitors
If approved, you’ll receive a mortgage offer by the bank
You’ll also have to provide:
Bank statements usually covering the last 3 months
Trading figures usually covering the last 3 years
Proof of identity and address
Lease and/or tenancy agreements
Is there a minimum or maximum deposit for a commercial mortgage?
There isn’t an exact figure that can be given for the minimum or maximum deposit for a commercial mortgage. However, most lenders will want you to have a 30% deposit.
What is the difference between a commercial mortgage and a home-buyers mortgage?
The key difference between a commercial mortgage and home-buyers mortgage is that with the latter, you’re securing a loan to purchase a property you intend to live in. With a commercial mortgage, you’re seeking a loan to buy a building you’ll do business in.
Reviewed on 17 Dec 2025 by
