How much can my business borrow for its premises?

How much your business can borrow to buy its premises comes down to two ceilings, and the lower one decides the loan. The first is the loan to value: the proportion of the property's value a lender will advance, which sets the deposit you need. The second is affordability: whether your trading profits can comfortably service the repayments once the lender stresses them. A deal has to clear both, and which one bites depends on the strength of your accounts against the value of the building.

This guide explains both limits in plain terms, shows the figures lenders work with, and walks through a worked example so you can estimate your own number before talking to anyone. It is a spoke off our pillar on buying premises for your business, and it works closely with our guides on owner-occupier versus investment mortgages and buying premises through a pension. We arrange the finance as a broker and introducer; we are not a lender, and the figures here are indicative, not an offer.

Can a business get a mortgage to buy its premises?

Yes. A commercial mortgage is the standard way a trading business buys the property it operates from, whether that is an industrial workshop, a trade counter or a larger distribution warehouse. The loan is secured on the property and repaid over a term, typically up to 20 or 25 years, out of the profits the business makes while trading from it. Limited companies, partnerships and sole traders can all borrow, with lenders usually taking personal guarantees from directors on company lending.

The product is an owner-occupier mortgage, a subset of the wider commercial mortgage market, and it is underwritten on your trading business rather than on a tenant's rent, the distinction we cover in our owner-occupier versus investment mortgage guide. Because the lender is lending against a business it can see trading, often one it already banks, owner-occupier borrowing can reach higher loan to value than buy-to-let investment lending on the same building.

How much will a lender advance against the property?

The first ceiling is loan to value, the percentage of the property's value the lender will lend. For owner-occupier purchases, 70 to 75 percent is a common range, which means a deposit of 25 to 30 percent of the value. Some lenders advance more for strong businesses, where there is additional security, or where the bank already holds the relationship; specialist or higher-risk cases sit lower. The figure is set against the lender's valuation, not the price you agree, so if the valuation comes in below the price, the gap falls on you as extra deposit.

The deposit is not the only cash you need on day one. Stamp duty land tax (LBTT in Scotland, LTT in Wales), valuation and legal fees, the lender's arrangement fee and any broker fee all sit on top, and on commercial property those costs are not trivial. Non-residential stamp duty in England and Northern Ireland runs in bands, nil to £150,000, 2 percent on the slice from £150,000 to £250,000, and 5 percent above £250,000, so a £500,000 unit carries a meaningful duty bill before any fees. Our guide on the commercial mortgage deposit works through the full cash requirement and where the deposit can come from. You can size a loan against a value with our how much can I borrow calculator.

Loan to value, then, sets the maximum the property will support. But a business clearing the deposit hurdle can still be turned down or cut back on the second ceiling, affordability, which is where most owner-occupier deals are actually decided.

How do lenders test what your business can afford?

The second ceiling is affordability, and lenders test it with a debt service cover ratio, usually shortened to DSCR. The ratio measures your business's earnings available to service debt against the annual loan repayments. Lenders want a cushion, so they look for cover comfortably above one, often around 1.25 times or more, meaning your servicing earnings should exceed the repayments by at least a quarter. The earnings figure is typically taken from your accounts, adjusted, and lenders look across two or three years to judge that the profit is real and sustainable rather than a one-off.

Crucially, lenders stress the test. Rather than measure cover at today's pay rate, they apply a higher stressed interest rate to check the loan still services comfortably if rates rise, so a deal that just scrapes cover at the actual rate can fail at the stressed one. This is why a business can be profitable, clear the deposit, and still find its borrowing capped below what the property's loan to value would allow: the stressed repayments exhaust the trading surplus first.

What strengthens the affordability case is straightforward: clean, profitable accounts, a sensible add-back of the rent you currently pay (which the mortgage replaces), a credible trading forecast, and a manageable existing debt load. What weakens it is volatile profits, heavy existing borrowing, or accounts that do not clearly show the earnings the lender needs to see. We help present the trading position in the way lenders read it, which often unlocks more than the raw figures suggest.

A worked example: putting the two limits together

The clearest way to see how the ceilings interact is to run a single example through both tests, then take the lower answer. The figures below are illustrative and indicative only; your real number depends on your accounts, the valuation and the lender.

The example shows the discipline lenders apply: they do not simply lend the loan to value maximum, they lend the lower of the two ceilings. A strong business buying a keenly valued unit is capped by loan to value and needs to find the deposit. A business with thinner profits buying a higher-value building is capped by affordability and may need a larger deposit to bring the loan down to what its earnings can service. You can experiment with both sides using our commercial mortgage calculator alongside the borrowing calculator.

What else moves the number up or down?

Several factors fine-tune the limits the two ceilings set. The property itself matters: a standard, well-located industrial unit with a broad pool of future occupiers borrows better than an unusual, single-purpose or hard-to-let building, because the lender judges how easily it could be sold after a default. Lease and planning status feed in too, since a clean, broad use class supports keener terms than a narrowly conditioned consent.

The borrower's profile is the other lever. Trading history and profitability, the directors' experience and credit profiles, existing debts and the strength of any personal guarantees all shape both the loan to value offered and the rate. A larger deposit improves everything: it lowers the loan to value, which keens the rate, and it shrinks the repayment, which eases the affordability test. Term length plays the same role, since a longer term reduces the annual repayment and lifts the affordability ceiling, at the cost of more interest over the life of the loan.

Finally, the lender chosen changes the answer. High street banks, challenger banks and specialist lenders set different criteria, stress rates and appetites, so the same business gets materially different offers across the market. That spread is the reason to model the deal across a panel rather than walk into one bank, and it is what we do before approaching anyone, so you make your offer knowing your real number rather than a hopeful one. Wherever your premises are, our locations hub points you to local help.