COMMERCIAL PROPERTY · EAST MONEY GUIDE
Commercial property finance: what lenders assess
Commercial property lending starts with the property, the borrower and the proposed use. A clear transaction summary helps a lender understand how those parts support each other.
East Money · General information
The property type changes the assessment
An office, warehouse, retail premises or specialised property can attract different valuation, lease and lending requirements. Location and alternative use may also affect lender appetite.
Owner-occupied and investment purposes differ
A business buying premises for its own operations presents a different risk profile from an investor relying on lease income. Clarify the intended use and ownership structure early.
Lease quality matters for investment property
Lenders may consider the tenant, lease term, rent, incentives, outgoings and vacancy risk. A headline yield alone does not describe the whole income position.
- Current lease and remaining term
- Tenant profile and payment history
- Rent reviews, options and incentives
- Who pays property outgoings
The borrower must support the debt
Business trading history, cash flow, existing commitments and liquidity can be important even when the property is tenanted. Guarantees and entity structures also need to be understood.
Allow time for valuation and due diligence
Commercial valuations and legal documents can take longer than a straightforward residential transaction. Finance dates should reflect the information and approvals required.
QUESTIONS PEOPLE OFTEN ASK
Useful points to clarify early.
How much deposit is required?
It varies with property type, location, borrower strength and lender policy. Commercial lending ratios are often more conservative than residential lending.
Are commercial loan terms the same as home loans?
No. Loan terms, amortisation, reviews, fees and covenants can differ materially.
Does a lease guarantee approval?
No. The lease is one part of the assessment alongside the property, borrower, structure and proposed debt.
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