Commercial Mortgages for Retailers

Whether you are buying the shop you already trade from, opening a second location, or releasing equity from a property you own, a commercial mortgage lets a retailer put down permanent roots instead of paying rent indefinitely. It fixes your occupancy cost, removes the risk of a rent review or a landlord refusing to renew, and turns what was an expense into an asset on the balance sheet. Sadi's Commercial Finance is an NACFB and FIBA registered commercial finance brokerage and arranges commercial mortgages for retail businesses across the UK.

Who it is for: retailers buying their own shop premises, owner occupiers exercising a right to buy from a landlord, retailers using equity in one property to fund a second site, and investors refinancing an existing retail unit.

Who we help

Our retail clients include independent shops buying the freehold of the unit they have rented for years, convenience store and forecourt operators, salon and barbershop owners, showroom and trade counter businesses, and multi site retailers expanding into a second or third location.

We also work regularly on mixed use buildings, where a shop sits below one or more flats. These are extremely common on a British high street and are perfectly financeable, but they need a lender who is comfortable with the residential element rather than one who declines the moment they see it.

What we arrange for retailers

Owner occupier commercial mortgages, assessed on your trading profits rather than a tenant's rent
Commercial investment mortgages, assessed on rental income where the unit is let to a tenant
Semi commercial and mixed use mortgages for shops with flats above
Capital raising and remortgage, releasing equity from an owned property to fund expansion, fit out or working capital
Staged drawdown facilities, where funds are released in tranches to support a purchase followed by refurbishment
Bridging into a commercial mortgage, where a purchase has to complete faster than a term lender can move

Why retailers buy rather than rent

Fixes your occupancy cost instead of leaving you exposed to rent reviews
Builds an asset on your balance sheet rather than paying into a landlord's
Removes the risk of losing a location you have spent years building footfall for
Equity in an existing property can fund expansion into a second location
Gives you freedom to alter, extend or sublet the premises
Monthly payments are often comparable to the rent you already pay

How the process works

Tell us about the property and the plan. Address, price, whether you will trade from it and how much deposit or equity you have. We respond the same working day.
Assess affordability. For owner occupied premises we work from your trading profits, adding back rent you will no longer pay. For investment units we work from the rental income and the lease.
Match to lenders with retail appetite. Retail lending varies enormously by location, footfall and use class, so this is where a broker earns their fee.
Agreement in principle and valuation. Terms are agreed, then a surveyor inspects the property and the lender issues a formal offer.
Legal work. Your solicitor and the lender's run the title, searches and any lease documentation in parallel.
Completion and drawdown. Funds are released, in stages where a fit out is involved.

What lenders assess

For an owner occupied shop the lender is really assessing the business, so they look at two to three years of accounts, current management figures, the affordability of the payment against profits with rent added back, your deposit and its source, your credit history, and your experience in the trade. For an investment purchase the focus shifts to the rental income, the covenant strength of the tenant and the unexpired lease term.

The property itself matters as much as the numbers. Lenders look closely at location and footfall, whether the unit would let easily to another retailer if you stopped trading, the planning use class, the condition and construction, and on mixed use buildings the proportion of value in the residential element. A prime high street unit and a secondary parade unit are priced very differently.

What it costs

Commercial mortgages for retail typically go up to around 70 to 75% loan to value, so expect a deposit or equity stake of roughly 25 to 40% depending on the property and the strength of the business. Arrangement fees are commonly 1 to 2% of the loan, and you will also pay for a valuation, legal fees on both sides, and usually a broker fee. Terms typically run from 5 to 25 years, on capital repayment or interest only depending on the case.

Rates are usually quoted as a margin over base rate or as a fixed rate for an initial period, often two to five years. Our broker fee is disclosed in writing before you commit, and we present the full cost of each offer including fees rather than the rate alone.

How long it takes

A straightforward commercial mortgage typically takes 6 to 12 weeks from application to completion. Valuation and legal work are the two stages that determine the pace. Where a purchase has to complete faster than that, for example an auction lot or a seller pushing for a quick exchange, we can arrange a bridge and refinance onto a term mortgage afterwards.

Case study

A London-based retailer secured £750,000 to purchase a second location, using equity from their existing property. We arranged a 5-year fixed-rate mortgage with staged drawdown to support the purchase and fit-out.

Why use a broker

Retail lending varies significantly by location, footfall and use class. Some lenders are cautious on high street retail, others actively specialise in it, and appetite shifts month to month. We know which lenders are lending on retail premises right now, which will take a shop with flats above, and which will work from management accounts when the filed accounts are out of date. That avoids dead end applications, which cost you weeks and leave a trail of searches on your credit file.

We are registered with the NACFB and FIBA. Your property may be repossessed if you do not keep up repayments on a mortgage secured against it.

Frequently asked questions

Can I use equity in my current shop to buy a second location?

Yes. Releasing equity from a property you already own is one of the most common ways retailers fund expansion into additional sites, either by remortgaging the first property or by taking a second charge.

How much deposit do retailers typically need?

Commonly between 25 and 40% of the purchase price, since commercial mortgages usually go up to around 70 to 75% loan to value. Equity in another property can stand in place of cash.

What if my retail unit is above or below other premises?

Mixed use and multi let buildings can usually still be financed. Lenders assess the retail element alongside the wider building, and the split between commercial and residential value affects which lenders will consider it.

Can I buy the shop I currently rent from my landlord?

Yes, and it is one of the strongest cases to present. You have a trading record at the address, the lender can see the rent you have been paying, and that rent is added back when affordability is assessed.

Will I be assessed on my business accounts or on the rent?

If you will trade from the premises, on your business accounts and profits. If you are buying it as an investment to let out, on the rental income and the strength of the tenant's lease.

Can I get a commercial mortgage with only two years of accounts?

Often yes. Two years of filed accounts plus up to date management figures is workable with several lenders. Fewer than that is harder but not impossible where there is a strong deposit or experience in the trade.

Interest only or capital repayment?

Owner occupiers usually take capital repayment so the debt reduces and the asset is owned outright at the end. Interest only is more common on investment purchases, where the plan may be to refinance or sell.

What happens if I stop trading but still own the building?

You can normally let the unit to another retailer, subject to the lender's consent, and the mortgage may need to convert to investment terms. It is worth raising this possibility at the outset so the facility you take does not block it.

Related guides

Speak to us about buying your premises

Send us the property and your deposit position and we will tell you what is achievable, what it will cost and how long it will take. We respond the same working day. Contact Sadi's Commercial Finance.