Commercial Mortgages Explained: A Guide for Business Owners

Commercial mortgages for business purposes only. Not for personal borrowing, consumer buy-to-let, or borrowing secured on a home you, your partner or a member of your family live in or plan to live in. We are a credit broker, not a lender.

Commercial mortgages may help business owners, landlords and property-owning companies buy or refinance property used for business or let to tenants. The structure and assessment can vary according to the property, the borrower and how the property will be used.

A commercial mortgage is secured against property, so the proposed repayment plan and the risks need careful consideration. This guide outlines how commercial property finance generally works and the information that may be considered. For an overview of commercial mortgages and other finance types, speak with a specialist finance broker.

1. WHAT IS A COMMERCIAL MORTGAGE?

A commercial mortgage is a loan secured against a property used for business or let to tenants. It may support a purchase, the refinancing of existing borrowing or, depending on the case, raising funds against a property already owned. Refinancing can bring early repayment charges on the existing loan and new fees, and raising funds increases the debt secured on the property.

The property is used as security for the borrowing. The amount, term and repayment structure will depend on the lender's criteria and its assessment of the property and the borrower. Commercial mortgage cases can involve several connected factors, including property value, business finances, rental income and the ownership structure.

2. WHO TYPICALLY USES COMMERCIAL PROPERTY FINANCE

Commercial property finance may be considered by:

• Businesses buying premises for their trading operations.

• Landlords buying or refinancing commercial property let to business tenants.

• Property-owning trading companies seeking finance against premises they own.

• Landlords or companies buying mixed-use property, such as a shop with a flat above, that is let or used for business.

• Businesses with complex property or ownership requirements.

  
  

The assessment may consider the reason for borrowing, the borrower's financial position and the property's role in the business or letting plan. Where the property is to be let, information about the source of wealth, relevant property experience and expected rental income may also be requested.

3. TYPICAL COMMERCIAL PROPERTY TYPES

Commercial mortgage lending may cover a range of property types, subject to the case and lender criteria. These may include:

• Offices and business premises.

• Retail units and high street shops.

• Industrial units and warehouse space.

• Mixed-use property, such as a shop with a flat above, that is let or used for business.

• Houses in multiple occupation (HMOs) and blocks of flats let to tenants.

• Land, where the proposed use and circumstances meet the lender's criteria.

  
  

Property condition, location, occupancy, lease arrangements and marketability may all form part of the assessment. Not every lender will accept every property type or structure.

4. HOW A COMMERCIAL MORTGAGE CASE STARTS

The initial information usually explains what you plan to finance, how the property will be used and how the borrowing is expected to be repaid. A case may start with details such as:

• The property type, purchase price or current value.

• The amount sought and purpose of the finance.

• Business accounts, management information or details of the letting.

• Existing borrowing and the proposed repayment plan.

• For let property, current or expected rent and tenancy details.

• The proposed ownership structure, such as a UK limited company or special purpose vehicle (SPV).

  
  

Where the property is to be let, lenders may ask about the source of wealth, the reason for the purchase and relevant property experience. They may also consider expected rental income and whether management will be handled through letting agents. The information required depends on the case.

5. PROPERTY SECURITY AND VALUATION

A commercial mortgage is typically secured against the property being financed. A valuation may help establish how the property is viewed for lending purposes. It may consider factors such as property condition, location, use, rental income and potential marketability.

The valuation figure may not match a purchase price or an owner’s estimate. The lender may also review title information, leases, planning and the property’s suitability as security. Further reports or legal checks may be required, depending on the property.

Security does not remove the risks of borrowing. If the borrower does not keep up repayments, or does not repay when the loan is due, the lender can repossess the property or appoint a receiver, who can collect the rent or sell the property. The borrower, and anyone who has given a personal guarantee, may also remain liable for any shortfall if the proceeds of sale do not cover the outstanding debt and other amounts due.

6. THE IMPORTANCE OF THE EXIT STRATEGY

Your repayment plan should be considered at the outset. With capital-and-interest repayments, payments are intended to reduce the amount owed over the agreed term. With interest-only or other structures, some or all of the original borrowing may remain due at the end.

A planned sale or refinance is not a guaranteed repayment outcome. Property values, sale timescales and lenders' rental criteria may change. Refinancing may not be available on the expected terms, or at all, when required.

The repayment plan should account for changes that could affect the business, the letting or the property. Any shortfall between the repayment due and available funds remains the borrower's responsibility.

7. INTEREST AND COST STRUCTURE

Commercial mortgage facilities may use interest-only, capital-and-interest or other repayment approaches, and the interest rate may be fixed or variable. If it is variable, payments can rise. The arrangement and payment obligations depend on the facility terms.

Where interest is rolled up, it will generally be added to the amount due for repayment in accordance with the facility terms. The outstanding balance may therefore increase during the term.

Costs can include the lender's arrangement fee, valuation and legal fees, and early repayment charges if the loan is repaid or refinanced within a set period. We may also charge a fee, which we will confirm before you proceed. Some facilities also set conditions, such as a maximum loan-to-value or a minimum level of rental cover; if they are not met, the lender may be able to change the terms or ask for repayment. Review the full cost of borrowing and the conditions carefully before proceeding. The total cost of finance may affect the viability of the project and the amount required from the borrower.

8. HOW THE PROCESS GENERALLY WORKS

The process may include an initial review, information gathering, valuation and legal checks. The lender may assess the borrower's finances, the property and the intended use of the funds. Where the property is let, the lender may also consider the rent, tenancy arrangements and property management.

If the case progresses, further documentation and conditions may be required before completion. Timescales can vary according to the property, ownership structure and complexity of the legal and financial checks. Keeping key information organised may help the parties understand what is required at each stage.

9. THE ROLE OF A SPECIALIST FINANCE BROKER

A specialist finance broker can help organise a complex commercial mortgage enquiry and present the relevant details to lenders. At Andromeda Specialist Finance, the process is:

• Enquire. Share the initial details of your commercial property requirement.

• Assess and structure. We review the circumstances, look at how the borrowing could be structured and which lenders' criteria it fits, and prepare the case for lenders.

• Choose. We present the options available, with their costs and conditions. You choose whether to go ahead, and with which lender.

• Apply and complete. The lender makes its own decision after its own checks and a valuation. We deal with its queries and liaise with the valuer and solicitors. Once the lender's offer has been accepted and its conditions are met, the lender releases the funds and the transaction completes.

  
  

We work with a range of lenders. We may receive a commission from the lender; the amount varies between lenders and is disclosed to you before you proceed.

10. TERMS DIFFER BETWEEN LENDERS

Commercial mortgage terms and criteria can vary. A lender may assess property type, location, condition, business finances, rental income, borrower experience and the proposed ownership structure differently from another lender.

A UK limited company or SPV may be relevant to a purchase, but not every lender will accept every structure, and lenders often ask the company's directors or shareholders for personal guarantees. Whether to buy through a company is a tax and legal decision: take advice from an accountant or solicitor. We do not give tax or legal advice. The purpose of the purchase, source of wealth, management arrangements and supporting documents may also be considered. The terms available depend on the full case and the lender's assessment.

BEFORE YOU BORROW

YOUR PROPERTY MAY BE REPOSSESSED OR A RECEIVER APPOINTED IF YOU DO NOT KEEP UP REPAYMENTS ON, OR REPAY WHEN DUE, ANY DEBT SECURED AGAINST IT.

Subject to status, valuation and lender criteria; not every case can be placed. Lender and other costs apply. Personal guarantees may be required and can put the guarantor's assets at risk.

We do not arrange finance secured on a property that you, your partner or a member of your family live in or plan to live in, including a flat that is part of a mixed-use building. If your needs include borrowing of that kind, we will tell you straight away. It is not part of this service.

PLAN THE NEXT STEP CAREFULLY

Before making an enquiry, gather the key details:

• Property address, type and intended use.

• Purchase or refinance details and amount sought.

• Business or letting information.

• Expected rental income and management arrangements, where relevant.

• Proposed ownership structure.

• Repayment plan and relevant property experience.

  
  

Contact Andromeda Specialist Finance to speak with a member of the team about a commercial mortgage enquiry. The team will review the initial information and explain the next steps.

IMPORTANT INFORMATION

This guide is general information about commercial mortgages for business purposes. It is not advice or a recommendation and does not constitute an offer of finance.

Andromeda Specialist Finance Ltd (FCA reference number 1059484) is an appointed representative of Commercial Finance Brokers UK Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 736199).

We work with a range of lenders. We are a credit broker, not a lender. We may receive a commission from the lender; the amount varies between lenders and is disclosed to you before you proceed. We may also charge a fee, which we will confirm before you proceed.

Commercial mortgages for business purposes only. Not for personal borrowing, consumer buy-to-let, or borrowing secured on a home you, your partner or a member of your family live in or plan to live in. Not all commercial mortgages are regulated by the FCA.

Subject to status, valuation and lender criteria; not every case can be placed. Lender and other costs apply. Personal guarantees may be required and can put the guarantor's assets at risk. Your property may be repossessed or a receiver appointed if you do not keep up repayments on, or repay when due, any debt secured against it.

Complaints: you can raise a complaint with us, or directly with our principal, Commercial Finance Brokers UK Limited, at complaints@cfbuk.org. Our principal investigates complaints about our service and sends the final response. If you are not satisfied with it, you may be able to refer your complaint to the Financial Ombudsman Service: www.financial-ombudsman.org.uk.

Andromeda Specialist Finance Ltd is registered in England and Wales, company number 16600646. Registered office: 167–169 Great Portland Street, 5th Floor, London W1W 5PF. ICO registration number ZC019772. Commercial Finance Brokers UK Limited is registered in England and Wales, company number 06353973.

© 2026 Andromeda Specialist Finance Ltd.