A long-standing tenant is offered the opportunity to buy its factory, surgery, office, shop or workshop. The accountant sees the strategic value: control of occupation, an asset on the group balance sheet and protection from future rent increases. The finance questions begin before the offer is accepted—because the intended purchaser, trading cash flow, property valuation and completion costs can all change the available loan.
The Client Situation
A family-owned motor business has traded from the same mixed commercial site for years. The landlord offers to sell. The property includes workshops, a forecourt, offices and a flat. Buying could secure the trading base, but the group also has debt with several lenders and needs cash for stock and operations.
The directors initially focus on the purchase price. The accountant knows the real decision includes deposit, VAT, SDLT or the relevant devolved property tax, valuation, lender fees, legal and environmental due diligence, debt refinancing and the working-capital position after completion.
The business may buy directly, or a connected property company may acquire and lease the premises to the trade. That choice changes the borrower, debt service and security. Finance input is needed before the structure is fixed—not after the accountant has optimised one part of the transaction.
The purchase price is negotiated with the seller. The lender advances against its own valuation, policy LTV and debt-service assessment. The lower constraint can determine the loan.
The Best Referral Points
| Moment | Why finance input matters | What can still change |
|---|---|---|
| Landlord first raises a sale | Tests broad affordability before price expectations harden. | Budget, deposit, term and purchaser. |
| Property search begins | Identifies acceptable property types and likely leverage. | Location, use, condition and offer range. |
| Ownership is discussed | Checks whether the intended vehicle has a lender market. | Trading company, propco, pension or personal route. |
| Heads of terms are drafted | Aligns completion period, access and valuation. | Conditions, exclusivity and finance timetable. |
| Auction pack is received | Determines whether term finance can meet the deadline. | Bid cap, bridge, legal enquiries and exit. |
| VAT or works are identified | Calculates total cash and interim funding. | Facility size, contingency and completion structure. |
The accountant does not need a complete mortgage pack to make the introduction. A high-level business, property and cash outline can show whether the plan is broadly realistic before professional costs accelerate.
Owner Occupied, Investment or Mixed?
Owner-occupied commercial
The borrowing entity or a connected trading business uses the premises. The lender relies heavily on historic and forecast trading cash flow, often testing EBITDA or another debt-service measure. Property value provides security, but the business must support payments.
Commercial investment
An independent tenant occupies the property. Rent, lease length, tenant covenant, breaks, arrears and re-letting prospects become central. The purchaser’s experience and wider balance sheet still matter.
Connected-party occupation
A property company buys and leases to a trading company under common control. The lender may assess both companies because connected rent ultimately depends on the group’s trading performance. A formal lease helps define the arrangement but does not turn the tenant into an unrelated covenant.
Mixed-use property
A shop with flats, surgery with accommodation or industrial site with several uses may require a mixed valuation and product. Residential occupation, tenancy type and proportion by value can alter lender and regulatory treatment.
Classification should match reality. Describing connected occupation as pure investment or omitting planned subletting can invalidate the lender’s assessment.
Who Should Buy the Premises?
Trading company
Direct ownership can be simple and aligns the borrower with the user. It also places property and operating risk together, may use trading cash for the deposit and can affect future sale or succession.
Separate property company
A propco can separate the asset from operations and receive rent from the trading company. The lender may require cross-guarantees, a debenture, personal guarantees, a formal lease or subordination of connected debt. The accountant and solicitor should assess tax, corporate benefit and cash movement.
Directors personally
Personal ownership with a lease to the business can be considered in some cases. It creates personal tax, legal, succession and secured-risk issues and must not be selected solely because a product appears available.
Pension or specialist ownership
A SIPP, SSAS, trust or other structure may be relevant with specialist advice. Trustee powers, connected-party rules, valuation and lender availability can make the transaction slower and more technical.
The most tax-efficient structure is not automatically the most financeable. The most easily financed structure is not automatically the right long-term owner. The decision needs a joined-up comparison before an offer names the purchaser.
Calculate the Total Cash Required to Complete
A 25% property deposit does not mean the client needs only 25% of the purchase price. The cash schedule may include:
- the gap between price and mortgage;
- VAT where the transaction is taxable;
- SDLT, LBTT or LTT depending on location;
- lender arrangement and broker fees;
- valuation, environmental and structural reports;
- legal costs for borrower, lender and connected lease;
- company formation or restructuring;
- repayment and exit fees on existing debt;
- immediate repairs, fit-out or compliance works;
- moving and business-interruption costs; and
- a post-completion working-capital reserve.
VAT can create a timing gap
HMRC’s property guidance explains that some commercial property transactions are standard rated, including certain new commercial buildings and opted property, subject to detailed rules. Whether VAT applies, whether it can be recovered and when are tax questions for the accountant.
The finance question is whether the client must fund VAT at completion and whether the lender includes it, provides a separate facility or expects the borrower to cover it. An expected recovery does not eliminate the initial cash requirement.
Property tax differs by jurisdiction
England and Northern Ireland use SDLT, Scotland uses LBTT and Wales uses LTT. HMRC publishes separate non-residential SDLT bands. Mixed use, lease premium and rent can affect calculation. The accountant or property tax specialist should calculate the actual transaction rather than relying on a percentage used in an earlier deal.
What the Commercial Lender Is Likely to Assess
Trading performance
Final accounts, current management figures, business bank statements, cash conversion, customer concentration, existing debt and historic rent payments help demonstrate capacity. Adjusted EBITDA should be explained and defensible.
Post-purchase forecast
The business stops paying rent but starts paying mortgage interest and possibly capital. It may also incur rates, insurance, maintenance and works. The forecast should compare the existing lease position with ownership and show downside sensitivities.
Property and valuation
The lender’s valuer considers market value, vacant-possession value, market rent, condition, use, location, alternative demand and environmental or planning issues. A specialised building may be essential to the trade but harder to sell.
Loan-to-value and debt-service cover
Both tests apply. Shawbrook currently publishes an owner-occupied Commercial Trading range for purchasing new premises or a currently rented site, with loans from £150,000 to £2.5 million and up to 75% LTV. Aldermore publishes commercial products with a wider maximum LTV of 75%, while detailed limits vary by property and repayment basis. These are current examples, not promises.
Security and guarantees
A first legal charge is typical. Debentures, personal guarantees, cross-guarantees, director-loan subordination and restrictions may also be required. The directors should understand the extent and enforcement consequences, not just the interest rate.
Sector and property appetite
Retail, hospitality, healthcare, automotive, offices, industrial and specialist-use properties are not treated uniformly. A lender comfortable with the business may dislike the building, or vice versa.
Finance Routes to Compare
| Route | When it may fit | Main trade-off |
|---|---|---|
| Owner-occupied commercial mortgage | Established business and mortgageable premises support long-term ownership. | Full trading and property underwriting. |
| Investment commercial mortgage | Property company buys with a formal tenant and sustainable rent. | Lease, tenant covenant and connected-party issues. |
| Commercial bridge | Auction, short completion, vacancy or works prevents immediate term finance. | Higher cost and a defined refinance or sale exit required. |
| Asset or business finance | Equipment, fit-out or working capital should not consume the property deposit. | Additional payments and security may affect mortgage cover. |
| Vendor support or deferred consideration | Seller accepts staged payment and lender approves the arrangement. | Priority, security and legal terms can be complex. |
| Refinance existing assets | Other property releases the deposit or completion funds. | Moves risk to additional assets and adds execution dependencies. |
The route should follow the actual constraint. A bridge solves timing; a term mortgage solves long-term occupation; asset finance preserves deposit cash; a separate capital raise may solve the equity gap. Combining facilities requires a complete debt-service and security map.
What the Accountant May Need to Provide
| Evidence | Why it matters | Presentation point |
|---|---|---|
| Three years of accounts | Shows trading strength and balance-sheet trend. | Explain exceptional and owner-specific items. |
| Current management accounts | Shows performance since the last year end. | Reconcile material variance from history. |
| Cash-flow forecast | Tests mortgage, ownership costs and working capital. | Show base and downside cases. |
| Existing debt schedule | Identifies payments, security, covenants and refinancing. | Include overdrafts, leases and director loans. |
| Ownership chart | Shows buyer, occupier, guarantors and connected entities. | Include proposed rent and movement of deposit. |
| Purchase-cost schedule | Establishes total cash and funding need. | Separate VAT, tax, fees, works and contingency. |
| Use and lease information | Supports owner-occupied, investment or mixed classification. | Flag connected occupation and subletting. |
| Business plan or rationale | Explains why ownership improves resilience or growth. | Use measurable assumptions, not promotional claims. |
An Illustrative Premises Purchase
A family motor business is offered its long-occupied site. The property includes workshops, a forecourt, offices, yard and a self-contained flat. The business also wants to consolidate borrowing across three lenders.
The accountant produces historic accounts, management figures, a debt schedule and a forecast comparing continued rent with property ownership. The structure identifies connected occupation and the residential letting. The lender’s valuation comes in higher than expected, but the facility is still sized against policy, trading performance and security.
A £1.08 million commercial facility is structured at 70% LTV on a ten-year interest-only term, consolidating debt and completing the purchase. Directors provide capped personal guarantees. This example follows a current published Shawbrook case and illustrates lender mechanics; it is not a Willow client outcome or a guarantee of equivalent terms.
The lesson for the accountant is timing: debt consolidation, valuation, mixed use, connected parties and the purchase had to be packaged as one transaction.
Where the Professional Boundaries Sit
The accountant models affordability, tax, VAT, ownership, deposit, working capital and post-purchase cash flow. They explain accounts and challenge assumptions.
Willow assesses property-finance routes, lender appetite, LTV, debt service, term, repayment, security, guarantees and execution.
The solicitor advises on title, contract, planning, environmental enquiries, leases, security, corporate benefit and completion. A valuer provides the lender’s independent property view. A surveyor or environmental specialist may be needed for condition and contamination.
All advisers should work from the same purchaser, property use, cost schedule and completion date.
Common Mistakes to Avoid
- Starting with the advertised LTV: valuation or debt service may produce a lower loan.
- Choosing the purchaser before checking lenders: ownership changes the market.
- Forgetting VAT at completion: recoverability and timing are separate.
- Using every company reserve as deposit: the business still needs working capital.
- Treating specialist premises like generic security: vacant-possession demand matters.
- Ignoring connected rent: the group may be underwritten together.
- Leaving environmental and planning issues late: they can affect value and lender appetite.
- Using a bridge without a validated term exit: future affordability must already be credible.
- Comparing only interest rates: fees, guarantees and repayment structure matter.
- Signing an unrealistic completion deadline: commercial valuation and legal work take time.
When to Involve Willow
Refer the scenario when:
- a landlord offers the premises to the tenant;
- the client begins a commercial-property search;
- the buyer could be a trading company or propco;
- the property is mixed use or specialist;
- VAT may apply;
- the business needs to retain working capital;
- existing debt must be consolidated;
- forecasts are needed to support growth;
- an auction or short completion is proposed;
- works are required before occupation;
- personal guarantees are sensitive; or
- the purchase is material relative to company assets or profit.
The initial anonymous brief should include purchase price, property and use, proposed owner and occupier, deposit, VAT position, accounts, EBITDA or cash flow, existing debt, works, deadline and intended repayment.
Relevant Willow Case Evidence
Willow’s published commercial case involved a property held through an offshore company, a long-standing strong-covenant tenant and a recently extended lease. Willow structured a £550,000 facility at conservative leverage, enabling a second commercial acquisition without a full personal guarantee. Read the full case study →
For the finance principles behind using a building for growth, see using commercial property to raise business capital.
Is a Client Considering Their Own Business Premises?
Share a non-identifying business, property, cost and timing outline. Willow can test the purchase route before the client commits to structure or price.
Frequently Asked Questions
The strongest premises purchase aligns the owner, occupier, cash requirement, lender security and business repayment capacity.
How much deposit is needed to buy business premises?
It varies with lender, property, sector, borrower, repayment method and valuation. Headline maximum LTVs are not guaranteed, and the client must also fund tax, VAT where applicable, fees and working capital.
Should the trading company or a separate property company buy the premises?
That is a combined tax, legal, commercial and finance decision. Each structure can change lender assessment, rent, guarantees, asset protection and movement of cash. Test financeability before committing.
Can a lender use projected growth from the new premises?
Some lenders may consider credible forecasts, but they normally require historic trading evidence and sensitivity analysis. The new site should not be asked to rescue an otherwise unsupported debt.
Can VAT be included in the commercial mortgage?
Sometimes a facility or short-term VAT loan may be structured around the requirement, but policy and timing vary. The accountant must confirm the VAT position and expected recovery; the broker must arrange suitable funding.
Is bridging finance suitable for a premises purchase?
It may fit an auction, short deadline, vacant building, works or title issue where a clear term refinance or sale exit exists. It is not a substitute for unresolved long-term affordability.
When should the accountant involve Willow?
When premises become a realistic option—ideally before heads of terms, auction bidding, ownership decisions or a deposit commitment. An anonymous property and business outline is enough initially.