Personal Finance Logic in Commercial Property Finance?

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We have seen a lot more of it in all types of commercial finance proposals. Is it a change in mindset generally?

Have business owners realised that they weren’t applying the same thought process to their company’s finances as they were to their personal money?

Or as one business owner-manager said to me, he has had a lot more time over the last year to look at the issues he never normally has time for.

Whatever has brought us to this change in mindset, it’s a positive.

Businesses save money and are better prepared for the future when they have reviewed their finances, identified cost saving opportunities, forecast their future cash flows and planned steps that they can take to improve their finances for the long term.

All of this sounds very similar to the budgeting and planning that we do in our personal finances. And an increasingly frequent request that we are hearing from clients is that they want to buy either their existing commercial premises that they are currently leasing, or if that is not available then an alternative premises.

Whether they are currently paying £16,000 or £60,000 to their landlord, the comment from them is the same – we worked out that we would just be better off owning our own space than paying all that rent. Something I said myself before buying my first property!

An ‘Owner Occupier’ commercial mortgage can be used in a number of circumstances:

  •  A company wants to purchase the commercial premises from which they already operate
  • To buy a new or additional commercial premises to operate from
  • The purchase of a new business which includes a freehold commercial property
  • To re-mortgage their commercial property from their existing mortgage provider

We are always asked very early in the conversation about the level of deposit that would be required for a new ‘Owner Occupier’ commercial mortgage – and we have to set expectations according to the prevailing climate; while the commercial lending market is still in Recovery mode from the pandemic to some degree – it is very much open for business!

A high level answer would be to expect to be asked for 30% – 40% deposit for this type of mortgage, and the 30% level is something that lenders have only recently decreased to again as the economy started to open more fully again from Covid restrictions.

It is always worth our covering this point early with the client – we are all bombarded with the high LTVs applied in the residential property market, and we talk to people expecting 90% mortgages on commercial properties on a daily basis.

There is a high level fact find that we will do with a business to allow us to determine whether lender/s will support a proposal in principal, and source indicative terms. This would currently include:

  •        Details of the property
  •        The business’s financial performance over the last 2-3 years
  •        Current lease/rental payment details
  •        Summary of Covid impact on trading
  •        Existing commercial debt in the business

Assessing your case thoroughly at this initial stage means that we have a far greater chance of indicating realistically achievable terms for your requirements. We don’t just quote you the best rates and terms available to anyone, and hope that we can find someone to support them for you later!

Every lender has their own variance of affordability calculations – but if you can comfortably afford the repayment structure within your existing rent/lease payments then that is a good place to start to think that you could potentially afford a commercial mortgage payment.

We enjoy working with clients on ‘Owner Occupier’ commercial mortgage cases as it feels like we are helping them to take a leap forward in their company’s finances. Every day I hear the description of rent payments being ‘dead money’ when business owners discuss the opportunity of owning their own premises.


Why not get in touch with us to discuss your property ownership aspirations, and join the ranks of business owners that have these aspirations for their company as well as their family?

Mark Grant, May 2021.  / 01636 614 014