Getting a large business loan for commercial premises is a big step for any company, whether you are expanding, buying your first office or starting a new project. Choosing the right type of finance can be confusing without expert help.
If you are buying, refinancing or developing commercial property, most business owners look at two main funding options: bridging finance and commercial mortgages. Bridging finance gives you the short-term advantage to act quickly on opportunities like auctions or refurbishments. Commercial mortgages offer long-term stability for owning and growing your property.
In this guide, we’ll look at how lenders decide the size of business loan you might get, and how to set up your finance using both bridging loans and commercial mortgages.
How big a business mortgage loan can I get?
The amount you can borrow for a commercial property depends on things like the type of building you want and how strong your business finances are. While residential mortgages look mainly at your personal income, commercial mortgages focus more on how well your business is doing and the potential of the property you want to buy.
Lenders consider several factors when deciding how much you can borrow:
- Property value and loan-to-value ratio: Most commercial lenders will lend up to about 60-75% of the property’s value. You cover the rest with your deposit or, sometimes, with bridging finance to temporarily increase your funds. For example, if you buy a £1 million property, you could borrow between £600,000 and £750,000 through your mortgage, depending on the lender and your finances.
- Business performance and affordability: Lenders review your accounts, cash flow and profit margins to make sure you can manage the repayments.
- Credit profile and trading history: Having a good credit record and at least two years in business can help you to get better rates and higher loan amounts. If your business is newer or has had credit problems, specialist lenders might still help, but you might get lower loan amounts or higher interest rates.
- Type and condition of the property: Lenders prefer offices, retail units, warehouses and properties that are ready to use. If the property needs work, you may need bridging finance first to fund the refurbishment.
- Your deposit and security: A larger deposit or extra security, like collateral, can help you to borrow more and get better terms. Brokers such as Ascot Mortgages can arrange deals that increase your borrowing power by leveraging equity in other assets.
Understanding these factors helps you to plan your finances more effectively and gives you a clearer picture of what’s achievable.
How to get a big business loan for commercial property
Getting a large business loan for commercial property involves several steps. Understanding the process helps business owners act quickly on opportunities, such as buying at auction, funding refurbishments or covering deposits, before moving on to a long-term plan.
Two main types of finance are often used together: bridging loans and commercial mortgages.
Bridging loan
A bridging loan is a short-term, flexible loan that gives you immediate funding while you arrange a long-term mortgage. Business owners often use bridging finance to:
- Cover deposit payments: If you don’t have the full deposit, a bridging loan can add to your funds so you can secure the property quickly.
- Buy at auction: Auctions require quick completion, often within 28 days. Bridging finance lets you meet these deadlines without waiting for a standard mortgage approval.
- Fund refurbishments: If a property can’t be mortgaged right away because of its condition or use, a bridging loan can help you to upgrade it so it becomes eligible for a commercial mortgage later.
This type of loan is usually repaid once the property is ready to refinance, either with a commercial mortgage or another long-term funding option. Brokers like Ascot Mortgages can help to connect businesses with lenders who offer the right bridging terms for their needs.
Commercial mortgage
When the property is ready or you no longer need the bridging loan, you arrange a commercial mortgage to replace the short-term finance. The process usually includes:
- Property valuation: Lenders assess the property’s market value and suitability for long-term financing.
- Financial documentation: Businesses provide up-to-date financial statements, cash flow statements and supporting documentation to demonstrate affordability.
- Deposit and security verification: The lender confirms your deposit and any extra security you offer.
- Loan approval and completion: Once approved, the mortgage pays off the bridging loan and sets up a long-term repayment plan, often with better interest rates and terms.
Using bridging finance first, followed by a commercial mortgage, lets business owners act quickly, secure properties on tight deadlines and move to a stable, long-term financing solution.
With help from Ascot Mortgages, you can move through the process smoothly, set up your finances the right way and secure the funding you need to grow your business.
Contact our team today to find out how much you could borrow for your next commercial property.
