Commercial Loans & Mortgages in the UK: A Complete Guide for Businesses & Investors

Commercial loans and mortgages are vital tools for businesses, landlords, and investors looking to grow. In this guide, we’ll explain the different types of commercial loans, how they work, what lenders look for, and how to secure the right deal for your needs.

What Are Commercial Loans & Mortgages?

A commercial loan or mortgage is a finance product used to purchase, refinance, or invest in property for business use. Unlike residential mortgages, commercial products are tailored for companies, landlords, and investors. They often involve larger sums, longer terms, and more complex underwriting compared to personal mortgages.

Commercial Mortgage vs Business Loan: Key Differences

While both provide funding for businesses, a commercial mortgage is secured against property, typically offering longer terms and lower rates. Business loans are usually unsecured, shorter-term, and higher interest. A business loan might be used for equipment or working capital, while a commercial mortgage is more suitable for acquiring or refinancing property.

How Lenders Evaluate Commercial Loan Applications

Lenders assess applications based on:

Credit history and business trading record
Property valuation and location
Cash flow projections and income coverage
Loan-to-Value ratio (LTV)

Loan-to-Value (LTV) & Leverage

Most lenders offer up to 75% LTV, though higher funding may be possible in specific cases. The stronger your business finances and property, the more flexible lenders are likely to be.

Interest Rates & Repayment Options

Commercial loan rates vary, with repayment terms ranging from 5 to 25 years. Borrowers can choose between fixed or variable rates, interest-only or repayment plans. This flexibility allows businesses to tailor repayments to match cash flow.

Fees & Additional Costs

Arrangement fees, valuation costs, and legal fees should all be factored into affordability. Some lenders also charge early repayment or exit fees, so it’s essential to compare offers carefully.

Steps to Securing a Commercial Loan

Define the property and purpose of the loan
Prepare accounts, forecasts, and documents
Decide on personal or company ownership
Get a decision in principle from lenders
Submit full application and undergo due diligence
Valuation, legal work, and completion

Taking a methodical approach makes the process smoother and increases your chances of securing favourable terms. A broker can help at every step to ensure nothing is missed.

Types of Commercial Mortgage & Loan Products

There are many types of commercial finance, each suited to different needs:

Owner-Occupier Commercial Mortgages

For businesses buying premises they’ll trade from, such as shops, offices, or warehouses. These mortgages allow a company to build long-term stability and avoid rising rental costs.

Commercial Investment Mortgages

For landlords purchasing commercial property to rent out and generate income. They are commonly used by investors expanding portfolios and seeking steady rental yields.

Commercial Remortgage & Refinancing

For releasing equity or securing better rates on existing commercial property loans. Businesses often use refinancing to free up capital for expansion or reduce monthly payments.

Mixed-Use & Semi-Commercial Mortgages

For properties that combine commercial and residential use, such as shops with flats above. These mortgages require specialist lenders, but they can unlock valuable opportunities for investors.

Specialist Commercial Mortgages

For unique or niche properties like hotels, care homes, and medical practices. Specialist lenders evaluate these differently, focusing on sector-specific risks and income.

Commercial Mortgages for Limited Companies

For businesses or SPVs purchasing property, often used for tax efficiency and liability protection. This approach is increasingly popular with property investors due to tax treatment and easier portfolio structuring.

Commercial Mortgage Rates in the UK (2025)

Rates typically start around 5.75% but depend on property type, borrower profile, and market conditions. Specialist or higher-risk properties may attract higher rates, while strong applications on standard properties may secure lower ones.

Pros & Cons of Using a Broker vs Going Direct

Using a broker gives you access to the whole market, better deals, and expert guidance. Brokers also save time by managing paperwork and negotiating with lenders. Going direct can sometimes reduce fees, but it often limits you to one lender’s product range and may result in less competitive terms.

Common Pitfalls to Avoid

Overestimating rental income
Taking on too much leverage
Ignoring hidden fees
Not preparing financial documents in advance

Avoiding these mistakes will make the application smoother and reduce the risk of rejection or costly terms.

When & Why to Use a Commercial Loan

Commercial loans are ideal for expanding your business, investing in property, refinancing existing debt, or unlocking equity tied up in assets. They provide long-term stability, predictable repayments, and opportunities for growth that short-term finance can’t match.

Looking to secure the right commercial loan or mortgage for your business?

Contact I F Brokers today for a free consultation. Our experienced brokers will guide you through the process, compare lenders on your behalf, and help you access the most competitive rates available.