Up to 80% for profitable businesses
Buying your own premises is one of the best-priced kinds of commercial lending, because the business that pays the mortgage is also the tenant. Lenders on our panel will go up to 80% of the value for a well-established, profitable business with clean accounts, and 70–75% is widely available. The profits, not the property, usually set the limit.
How lenders work out what you can borrow
The lender takes your business's EBITDA, adjusts it for one-off costs and directors' pay, deducts other loan and lease payments, and checks what's left covers the new mortgage's yearly capital and interest at a stressed rate, typically by 1.25–1.5 times. That's the debt service cover ratio (DSCR). The calculator above runs the same test.
What they'll ask for
- Two to three years' full accounts, and current management accounts. Some lenders consider one year for strong businesses.
- Business bank statements, and details of existing borrowing, leases and asset finance.
- Personal guarantees from the directors, and their assets and liabilities.
- How the business uses the property, and whether any part is let.
Ways to buy
- In the trading company: the simplest; the property sits on the balance sheet.
- In a separate property company that lets to your trading company, keeping the property apart from trading risk.
- Through your pension (SSAS or SIPP): the pension buys the premises and your business pays it rent. Some lenders lend to pensions, usually at lower LTVs.
Typical owner-occupied properties
Offices, warehouses, industrial units, shops, workshops, surgeries, nurseries, and specialist trading premises such as pubs, hotels and care homes, which are valued on their trading performance.
How commercial lenders stress test
Every commercial lender asks the same question: if rates rise, can the income still pay the loan? How they test it depends on where the income comes from.
| Owner-occupied | Investment (let) | |
|---|---|---|
| Income tested | Business profits (EBITDA, with add-backs) | Rent from the tenants |
| Test | Debt service cover: profits cover the yearly capital and interest, typically 1.25–1.5 times | Interest cover: rent covers the interest, typically 125–150%, higher for weaker tenants |
| Stress rate | The pay rate plus a margin, or a floor rate, whichever is higher | The pay rate plus a margin, or a floor rate; longer fixes are often tested nearer the pay rate |
| Existing debt | Other business loans, leases and finance count against the profits | Usually just this loan |
| Max LTV | Up to 80% for strong, profitable businesses | Up to 75% |
Because many commercial loans are on capital repayment over 15–25 years, the test often covers the capital as well as the interest. That's why a commercial loan can be limited by the income even at a modest LTV.
Frequently asked questions
What LTV can I get on an owner-occupied commercial mortgage?
Up to 80% for well-established, profitable businesses, and 70–75% is widely available. Newer or less profitable businesses usually need a bigger deposit.
How do lenders assess an owner-occupied commercial mortgage?
On business profits. They take EBITDA, adjust it, deduct other debt, and check it covers the yearly capital and interest at a stressed rate, typically by 1.25–1.5 times.
How many years' accounts do I need?
Usually two to three years, plus current management accounts. Some lenders consider one year of strong trading.
Can my pension buy my business premises?
Yes. A SSAS or SIPP can buy commercial premises and lease them to your business. Some lenders lend to pension schemes, usually at lower LTVs.
Is it better to buy in my trading company or a separate company?
It depends on tax, risk and future plans. A separate property company keeps the premises apart from trading risk. Take tax advice before deciding.
Do I need a personal guarantee?
Most lenders ask directors for personal guarantees on a limited company borrower.