Business loans or commercial loans are designed for a wide range of small, medium and startup business needs including the purchase, refinance or growth of a company. Business loans are similar to a commercial mortgage in that money can be borrowed over an extended period of time, usually a maximum of 25 years, and are secured on the property being purchased.

A business loan can be secured against most types of freehold or long leasehold properties, such as factories, shops, bars, care homes, hotels, restaurants, offices, industrial units, blocks of flats and more. A business loan can also be secured against a residential property. The lending criteria is very similar to that of a commercial mortgage except that the general maximum that can be borrowed is 60% of the assessed Market Value. However, a few lenders will advance up to 75% depending upon the deal and the security available. Interest rates on the loan are variable and depend upon the status of the borrower and the length of the term.

These percentages are known as the Loan-to-Value ratio, or LTV. The lower the LTV, the lower the risk is to the lender. The higher the LTV, the more the risk to the lender and it is likely that a higher interest rate would be levied. Lenders won’t generally advance above 75% LTV to try to ensure that there would be sufficient security in the case of a quick sale, often via an auction when it is expected that property will sell at a lower rate of up to 25% below the usual market value.

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