How difficult is it to get a commercial mortgage?
The short version
- A commercial mortgage is more involved than a home loan, but for a healthcare business with steady income it is far from difficult.
- Lenders weigh four things: the income that repays the loan, the people behind it, the property as security, and the loan structure.
- Affordability is tested with a debt service cover ratio (DSCR), not just loan to value. Most lenders want profit to cover payments comfortably, often above 1.25.
- Good packaging is what makes a case easy to say yes to. That is the part we do as arranger and introducer.
Buyers often arrive expecting a commercial mortgage to be hard work. It is more detailed than a residential mortgage, because the lender is underwriting a business as well as a building, but for a healthcare practice with a track record it is usually very achievable. This article explains how difficult it really is, and exactly what a lender assesses.
It sits under our hub on commercial mortgages for healthcare premises.
How difficult is it, really?
The honest answer is that difficulty scales with how clear and reliable your income is. A GP partnership receiving NHS notional rent, or a pharmacy with a long NHS contract, is a comfortable case for many lenders. A new private clinic with no trading history is a harder ask, not because it is impossible, but because the lender has less evidence to rely on.
What feels difficult to a first-time commercial buyer is usually the amount of information involved, not a high bar to clear. Most refusals come from gaps in the paperwork or a mismatch between the case and the lender, both of which are avoidable.
Most commercial mortgages are not declined because the business is weak. They stall because the case was sent to the wrong lender, or sent half-packaged.
What lenders assess
A lender breaks the decision into four parts. Understanding them tells you exactly what to prepare.
| Area | What the lender looks at | How to strengthen it |
|---|---|---|
| Income | Accounts, and the contracts behind them, for example NHS notional rent | Provide clean, up-to-date figures and the underlying contracts |
| The people | Experience of the partners or directors in the sector | Show a track record of running this kind of business |
| The property | Value, condition and how saleable it is | A proper valuation; flag any specialist features early |
| The structure | Loan to value, term and repayment basis | A sensible deposit and a term the profit can support |
We go deeper on the income side in our guide to how lenders assess healthcare covenants.
The affordability test: DSCR
The single most important affordability test is the debt service cover ratio, or DSCR. It is the profit available to service debt divided by the cost of the loan over a year. A ratio of 1.0 means profit exactly covers the payments, with nothing spare; lenders want a margin, and most look for comfortably above 1.25.
Making your case easy to say yes to
The difference between a smooth approval and a frustrating one is almost always preparation. A well-packaged case answers the lender's questions before they are asked.
What a strong application carries
- Two to three years of accounts, or a credible forecast for a newer business
- The contracts behind the income, for example NHS notional rent confirmation
- A clear statement of the deposit and where it is coming from
- A valuation, or at least a realistic view of the property value
- A repayment that profit covers with a comfortable DSCR
This is the work we do as an arranger and introducer: assembling the case, matching it to the lender most likely to back a healthcare business, and managing the questions through to offer. Sister reading: how much deposit you need and how rates are built.
Where we fit, and regulation
We are an arranger and introducer, not a lender, so we are not constrained to one lender's appetite. We compare the market and place the case where it fits. Most commercial mortgages are unregulated business lending, but where a loan is secured on your home, or otherwise inside the FCA perimeter, that part is regulated and we refer it to an authorised firm.
For the full route from enquiry to drawdown, see our guide to the commercial mortgage process for healthcare premises, and the wider options at our healthcare finance hub.