If you own the building your business trades from, or a unit you let out, refinancing it can free up cash, cut your monthly payments or fund your next move. To refinance a commercial property simply means replacing your existing mortgage with a new one, either from your current lender or a different one, usually to get a better rate, release equity or extend the term. Specialist lenders such as Allica Bank have built much of their business around exactly this kind of established, owner-occupied SME borrowing.
The short answer for a busy owner: gather your accounts and property details, get a rough valuation, compare what your current lender will offer against two or three challenger banks and a broker’s whole-of-market view, then budget three to four months for the process. This guide walks through the how, the real costs in pounds, and the lenders worth putting on your shortlist.
What refinancing a commercial property actually means
A commercial mortgage is a loan secured against a business premises: a shop, warehouse, office, industrial unit, care home, pub or a buy-to-let commercial investment. Refinancing pays off your current loan and starts a fresh one. People do it for a handful of practical reasons:
- Your fixed rate is ending. Many commercial deals fix for two to five years. When the fix expires you often roll onto a higher variable rate, so shopping around before that happens can protect your margins.
- You want to release equity. If the property has risen in value or you have paid down a chunk of the balance, you can borrow against that increase to fund refurbishment, buy equipment or provide working capital.
- You want to lower monthly payments. Extending the term or securing a lower rate reduces the monthly outgoing, which helps cash flow.
- You are consolidating. Some owners fold a mix of expensive borrowing into one property-backed loan at a cheaper rate.
Refinancing to pull out cash for growth sits alongside other funding routes. If your need is really about kit rather than the building, our guide to asset finance for vehicles, diggers and equipment may be the cheaper answer.
Are you eligible? What lenders look at
Commercial lending is more hands-on than a residential mortgage. There is no simple online decision in most cases: an underwriter looks at the property and the business behind it. Expect them to assess:
- Loan to value (LTV). This is the loan as a percentage of the property’s value. Owner-occupied commercial deals often go up to around 70 to 75 per cent LTV; investment property tends to be capped a little lower. The more equity you hold, the better your rate.
- Affordability and trading history. Lenders want to see your last two to three years of accounts filed at Companies House, plus management figures and often a debt service coverage ratio (the property income or business profit measured against the loan repayments).
- The property itself. Type, condition, location and how easily it could be re-let or sold all matter. Specialist premises like petrol stations or care homes need lenders comfortable with that sector.
- Your track record. Personal credit, any County Court Judgments, and how you have run existing borrowing.
Weak confidence stops a lot of good businesses even asking. As we covered in why weak SME lending confidence stops firms getting finance, plenty of solid applications never get made. If your numbers are reasonable and you hold real equity, it is worth a conversation.
The real costs of refinancing
Refinancing is not free, and the fees can add up, so weigh them against the saving. Typical costs in the UK include:
- Arrangement fee: often 1 to 2 per cent of the loan, sometimes added to the balance rather than paid up front.
- Valuation fee: a commercial valuation by a RICS surveyor commonly runs from a few hundred pounds into four figures depending on property size and complexity.
- Legal fees: you usually pay both your own solicitor and the lender’s legal costs, frequently £1,500 or more combined.
- Broker fee: if you use a commercial finance broker, expect a fee that may be a flat amount or a percentage of the loan.
- Early repayment charge (ERC): check your current deal. Leaving a fixed rate early can trigger a penalty that wipes out the benefit of switching.
A simple rule: add every fee together, then divide by your monthly saving to see how many months it takes to break even. If you plan to hold the property well beyond that point, refinancing usually pays.
Lenders to shortlist
The high street banks, Lloyds, NatWest, HSBC and Barclays, all write commercial mortgages, and they can be competitive on rate for straightforward cases. But the useful part of any shortlist is the specialists and challengers who often move faster and take a more common-sense view of a trading business. Metro Bank’s push into small business lending is one sign of how active this market has become.
Names worth getting quotes from include:
- Allica Bank, a UK challenger focused specifically on established small and medium businesses, including owner-occupied commercial mortgages.
- Shawbrook Bank, known for commercial and property lending with an appetite for cases that need a human underwriter.
- Aldermore, a specialist bank active in commercial mortgages and asset finance.
- Together, which handles less standard cases and mixed-use property that mainstream banks sometimes decline.
- Cynergy Bank and Redwood Bank, both smaller UK banks that lend against SME commercial property.
A whole-of-market commercial broker can be worth their fee here, because they know which lender is comfortable with your sector and your numbers before you waste time on a decline.
Comparison: routes to refinancing at a glance
| Route | Best for | Typical speed | Watch out for |
|---|---|---|---|
| Stay with current lender (product transfer) | Straightforward cases, no equity release needed | Fastest, often weeks | May not be the best rate available |
| High street bank (Lloyds, NatWest, HSBC) | Strong accounts, standard property | Slower, more paperwork | Rigid criteria, can decline non-standard cases |
| Challenger or specialist bank (Allica, Shawbrook, Aldermore) | Trading SMEs, some equity release, mid-complexity | Moderate, human underwriting | Arrangement fees can be higher |
| Non-standard specialist (Together, Redwood) | Mixed-use, adverse credit, unusual premises | Moderate | Higher rates for higher risk |
| Via a commercial broker | Anyone unsure which lender fits | Depends on lender chosen | Broker fee on top of lender costs |
The step by step process
- Check your current deal. Find your rate, remaining term and any early repayment charge. This tells you whether now is the moment or whether to wait for the fix to end.
- Estimate the property value. A realistic figure sets your LTV and the equity you could release. Recent local sales and an agent’s view help before you pay for a formal valuation.
- Get your paperwork together. Two to three years of filed accounts, up to date management accounts, business bank statements, a lease if the property is let, and personal details for directors.
- Compare offers. Approach your current lender, one or two challengers and a broker. Compare the total cost over the fixed period, not just the headline rate.
- Apply and instruct the valuation. Once you accept a decision in principle, the lender instructs a RICS valuation and legal work begins.
- Complete. Solicitors handle the redemption of your old loan and the drawdown of the new one. Budget three to four months end to end.
Frequently asked questions
How long does it take to refinance a commercial property?
Most cases take three to four months from first enquiry to completion, driven mainly by the valuation and legal work. A simple product transfer with your existing lender can be much quicker, sometimes a few weeks, because they already hold your details and security.
Can I release equity to fund business growth?
Yes. If the property is worth more than you owe, you can borrow against that difference, subject to the lender’s LTV limit and affordability checks. Owners commonly use released equity for refurbishment, buying stock or plant, or providing working capital. Compare it against unsecured or asset-based options before you decide.
Will a challenger bank really be cheaper than my high street bank?
Not always cheaper, but often more flexible. Banks such as Allica, Shawbrook and Aldermore underwrite by hand, so they can say yes to a trading business or a property a mainstream bank finds awkward. Always compare the total cost, including arrangement and legal fees, over the whole fixed period.
Do I need a broker?
You do not have to use one, but a whole-of-market commercial broker earns their fee when your case is not textbook: unusual premises, a short trading history, or a need for higher LTV. They know which lender is likely to approve before you apply, which protects your credit profile from repeated declines.
What documents will lenders ask for?
Expect to provide filed accounts for two to three years, recent management accounts, business bank statements, details of the property and any tenancy, and personal and credit information for the directors or owners. Having these ready shortens the process considerably.
What to do next
- Dig out your current mortgage paperwork and note the rate, remaining term and any early repayment charge, so you know whether refinancing now makes sense.
- Get a realistic value for your property and work out your loan to value and any equity you could release.
- Request indicative terms from your existing lender plus at least two challengers such as Allica Bank, Shawbrook or Aldermore, and speak to a commercial broker if your case is at all unusual.
- Add up every fee, divide by your monthly saving to find your break-even point, and proceed only if you will comfortably hold the property beyond it.
