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January 2019

Commercial finance covers a broad spectrum of areas, including lending on commercial or investment property and non-property lending to raise funds for a commercial purpose.

This guide will focus on lending on commercial property, providing you with information, hints and tips to help you to spot new opportunities.


Lending on commercial property can include:

  • Businesses looking to purchase or refinance their own premises
  • Investment mortgages to fund the purchase or refinancing of properties that will be let to businesses for rental return and capital gain
  • On some occasions a commercial mortgage can be used to fund a particularly complex transaction on residential investment property, such as apartment blocks of flats above commercial premises


The types of property covered can include:

  • Retail units, industrial units and warehouses
  • Single offices and office blocks
  • Forecourts, petrol stations and car washes
  • Public houses, restaurants, hotels and guest houses
  • Care/nursing homes, child day care nurseries
  • Holiday and caravan parks


Commercial lending for owner occupied/trading businesses

Commercial mortgages for owner occupied property are aimed at trading businesses that want to purchase or refinance their own premises. They can cover a variety of property types such as retail units, offices, factory units or any commercial premises used by the business.

The maximum loan amount is normally 80%, but in some circumstances up to 100% may be possible. Interest rates start from around 2% over the base rate and lender fees from 1%. Repayment loans are typically over 20 years, but interest only facilities can be arranged. The funds can be borrowed in personal names, limited company, pension fund or trust.

Mortgages for commercial property investors

Commercial investment mortgages cover commercial or mixed-use properties that are being purchased for rental return and capital gain and lending can be against any type of commercial property, including offices, shops, industrial units etc.

With the right property, investors in commercial property can earn a good yield on a full repairing lease, with tenants generally tied in for longer periods than a standard AST, so they can have real stability.

The strength of a lease is an important consideration when it comes to a commercial property mortgage, but lenders are becoming more flexible on the types of lease they will allow on commercial properties. Traditionally, high street lenders would want a five-year lease on a commercial property, with no break clause, but the challenger banks reduced this requirement to two years and some lenders will now allow a rolling a lease, which can make the property more attractive to potential tenants.

First-time investors in commercial property will have a more limited choice of lenders, but it is still possible to source a good deal for a first-time investor and lenders will base their decisions on the strength of the tenant and the debt service cover.

Understanding what is required on leases and which lenders will consider different types of lease is one of the most complex elements of commercial property lending and we can help by providing the expertise to identify the most suitable product for a client’s circumstances.

Often an investor may want to purchase a property in need of renovation before it can be let to tenants and, at Brightstar, we are able to work closely with our Short-Term Lending team to provide bridging finance to prepare a property to be let and then provide the exit with a longer-term commercial loan.


Commercial mortgages for residential property investors

Sometimes a commercial mortgage can be the appropriate solution for larger or more complex residential properties that are being purchased for rental return and capital gain. Lending can be against any type of multi-unit residential property such as apartment blocks, HMO’s, student lets or portfolios.


Get in touch

You don’t need to be a commercial specialist to benefit from the demand for commercial finance. By working with Brightstar you have access to our team of commercial experts and our comprehensive lender panel, which covers the full spectrum, from high street to challenger and specialist lenders, including those that are not available on a direct-to-broker basis.

If you would like to learn more about how you can work with Brightstar to help provide commercial finance solutions to your clients, call our team on 01277 508959 or click here to enquire