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Buying a Business Through Mortgage Lending

Can you buy a business with a mortgage? Read on for all the information you need to know about applying for mortgages for business investments.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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Buying a Business Through Mortgage Lending

The Revolution team often hears from investors looking to purchase a business and wanting to know whether mortgage lending is available to finance this.

Mortgages can undoubtedly be used for a business purchase, and here we explain the most important factors to be aware of when comparing mortgages for business investments.

With more help with mortgage lending for business investment, contact mortgage brokers on 0330 304 3040 or send us a message to [email protected].

What Business Investments can I Pay for Through Mortgage Finance?

Lenders will consider a broad range of circumstances, before deciding whether to offer mortgages for business acquisitions so the best option is to consult a professional, independent broker who can point you in the right direction.

Commercial mortgages for business investments fall into two main categories:

  • Investment mortgages - for buy to let commercial properties.
  • Owner-occupier mortgages - for business to buy premises to trade from.

Mortgages for business investments can finance any sort of premises acquisition, including offices, medical facilities, schools, retail sites, and professional properties.

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How do Lenders Calculate Business Mortgage Eligibility?

Every lender will consider applications for mortgages for business purchases on their own merit, and will evaluate the following factors:

  • Affordability - whether the business profits demonstrate that the company would be able to keep up with the mortgage repayments.
  • Deposit - most lenders offering mortgages for business acquisitions need a deposit of 20-40% for investment mortgages, depending on the risk factor. Owner-occupier mortgages usually require a slightly lower deposit of 20-30%. If you have no deposit, then you may be able to borrow at 100% LTV, but will need to offer another form of security.
  • Credit history - if you have a bad credit history, then you will need to apply through a specialist lender who caters to this scenario.
  • Trading history - if you have a long track record for at least two to three years’ accounts, the business is considered less risky and will have greater choice between mortgages for business investments.

How do I apply for a Commercial Mortgage to Buy a Company?

The key in finding mortgages for business investments is to apply to the right lenders, where you know you meet most of their eligibility criteria. It can be challenging for businesses to make this decision without having the experience and insight of an expert commercial mortgage broker.

Your broker will help you to put your application for mortgages for business investments together in a favourable way to meet the criteria of your chosen provider.

Are there Alternatives to Finance a Business Investment?

There certainly are - you will find a range of commercial lending products to compare against mortgages for business acquisitions, each of which has its own pros and cons. These include:

  • Bridging finance
  • Remortgaging
  • Unsecured business loans

Bridging Finance to Buy a Business

Bridging loans are quick to organise and often used for company purchases at auction, or where time is critical, rather than mortgages for business acquisitions.

It is vital to have an exit strategy to work out how you will repay the temporary finance when the term ends, usually after one to three years.

Most borrowers using mortgages for business investments either plan to remortgage, or sell the asset, to repay their bridging loan.

Remortgaging to Invest in a Business

Another option, where you have an existing property and own equity, is to consider remortgaging. These mortgages for business acquisitions release the equity you need to purchase a business, although the affordability assessment will apply.

Unsecured Business Loans for Company Investments

Loans are often a good choice if you need to borrow on a shorter-term basis and need £25,000 or less from lenders offering mortgages for business acquisitions. These are usually quicker to arrange and do not require any security.

If you need to borrow a higher value, another option might be more cost-effective.

Are Commercial Mortgages Available to Buy a Residential Property?

Commercial mortgages are not intended for this purpose, so if you'd like to buy a home, you are best applying for a residential mortgage.

However, if the property is going to be a business - such as a B&B - then commercial lending is applicable. If you live in the business property, your residential space must not account for more than 40% of the total property space to qualify for mortgages for business investments.

In some cases, a semi-commercial mortgage is the most suitable choice, for properties with both a commercial and residential aspect, such as a retail premise with an apartment above.

How Can a Broker Help Me Fund a Business Investment?

The Revolution Brokers team has years of experience in commercial mortgage lending. As a whole-of-market, independent broker, we can recommend mortgages for business acquisitions from any provider, and any product that we think best suits your circumstances.

For help finding mortgages for business investments, including negotiations and access to off-market products, give us a call on 0330 304 3040 or email at [email protected].

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

twitter  linkedin  

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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