How much can I borrow?
Estimate the indicative maximum loan your rental income or trading profits will service on an income cover basis, with the implied loan to value.
Your estimate
Illustrative only. Not a quote or advice. Not an offer of finance.
Powered by PropertyCalculators.ai
How the borrowing calculator works
On industrial and logistics property, lenders size the loan from the income, not just the price, and the income they test depends on who is borrowing. On an investment purchase the income is the rent, whether that is a single unit on a full repairing lease, a distribution warehouse let to one covenant, or the combined roll of a multi-let estate, and the lender applies an interest cover ratio. For an owner-occupier buying their own unit or workshop, the income is the trading business's profits, broadly EBITDA, and the lender applies a debt service cover ratio instead. Either way the mechanics are the same. We take your annual income figure and divide by the cover ratio to find the maximum annual interest the deal can service. We then divide that by the interest rate to find the indicative maximum loan.
The formula is maximum annual interest equals annual income divided by the cover ratio over one hundred. Maximum loan equals maximum annual interest divided by the rate over one hundred. If you enter a price, the implied loan to value equals the maximum loan divided by the price multiplied by one hundred.
Why income cover drives the loan
Lenders want headroom so the loan can still be paid through a void, a tenant failure, a softer trading year or a rate rise. They usually set cover ratios between 125 and 145 percent, and price the loan accordingly. A higher ratio means a stronger cushion but a smaller loan. On a part-let multi-let estate, or where the trading business's profits are still building, the income may cap the loan below the headline loan to value of 65 to 75 percent. To model the deposit and monthly cost once you have a loan figure, use our commercial mortgage calculator.
Worked example
On a multi-let industrial estate producing 90,000 pounds of net rent a year, at a 7.5 percent rate and a 130 percent cover ratio, the maximum annual interest is about 69,200 pounds and the indicative maximum loan is roughly 923,000 pounds. Enter a 1.3 million pound price and the implied loan to value is around 71 percent, near the top of the usual industrial range, so the lender may trim the loan slightly. Send us the deal for a real view.
How much can I borrow: common questions
How do lenders decide how much I can borrow on an industrial property?
The main test is income cover, and it works two ways. On an investment purchase, lenders size the loan from the rental income and want the rent to cover the loan interest by a comfortable margin, typically 125 to 145 percent. For an owner-occupier buying their own unit or workshop, lenders size the loan from the trading business's profits, broadly EBITDA, and apply a debt service cover test instead. The price and loan to value, usually 65 to 75 percent of the valuation, then act as a second cap. Enter your annual rent or EBITDA, rate and cover ratio to see the indicative maximum loan.
What is a debt service cover ratio or DSCR?
Debt service cover ratio, shown as interest cover or ICR on investment deals, is the income divided by the loan interest. A 130 percent ratio means the rent or trading profit is 1.3 times the interest, leaving a 30 percent cushion. Lenders use this to make sure the loan can still be paid if a unit falls vacant, a tenant fails or rates rise. Higher cover means a lower maximum loan.
Why is my borrowing capped below the loan to value figure?
Because the income has to service the debt. On a part-let multi-let estate, a unit with a short unexpired lease, or a trading business with modest profits, the income may only support a loan below the headline loan to value, so income cover becomes the binding constraint. Enter a price in the calculator and we will show the implied loan to value alongside the income based maximum.
Want to know what you can really borrow?
Send us the deal, with the rent roll or the trading accounts, and we will come back with a view on the loan and likely terms within one working day.