If you’re planning to purchase a shop or retail premises, arranging the right finance is an important part of the process. Commercial property finance operates differently from standard residential mortgages, with more detailed underwriting, tailored pricing structures, and a smaller pool of lenders available.
In this guide, we outline how commercial mortgages for shops and retail units operate, who is eligible to apply, how lenders review applications, the rates you may be offered, and how to identify the most suitable deal for your business.
Are there specific mortgages for buying retail properties?
Retail properties are generally financed through commercial mortgages rather than standard residential mortgages or buy-to-let (BTL) finance.
A commercial mortgage for a shop or retail premises is specifically intended for businesses and investors purchasing property such as:
- High street shops
- Retail units within shopping centres
- Mixed-use properties, such as a shop with a flat above
- Restaurants, cafés, and salons
Lenders will normally assess applications using a combination of factors, including your personal financial circumstances, the performance of the business where relevant, and the suitability and value of the property being purchased.
Eligibility criteria for retail mortgages
Lending criteria for retail mortgages can vary considerably between lenders and will often depend on the type of property being purchased. However, most lenders will typically assess the following:
- Deposit: Commercial mortgage lenders generally require a deposit of between 20% and 40%, although the exact amount will depend on the perceived risk, the applicant profile, and the property type.
- Business financials: Lenders will usually review your trading history, turnover, and profitability, often requesting between one and three years of accounts. In many cases, they will assess earnings before interest, taxes, depreciation, and amortisation (EBITDA) as part of the affordability review.
- Rental income (for investors): Where the property is being purchased as an investment, lenders will consider the anticipated rental income and whether it provides sufficient cover for the proposed mortgage repayments.
- Credit profile: Both personal and business credit histories may be examined, particularly for sole traders, directors of smaller companies, or first-time commercial borrowers.
- Experience: Some lenders favour applicants with previous experience in retail, commercial property investment, or business ownership. Having a clear and detailed business plan can strengthen an application.
- Property type and location: Retail premises located in established or high-demand trading areas are often viewed more favourably than properties in declining high streets or specialist retail sectors with limited demand.
How to get a mortgage to buy a retail premises
Arranging a mortgage for a shop or retail unit follows a similar process to other forms of commercial property finance, although lenders will place additional focus on the strength of the business and the suitability of the property.
- Speak with a broker: Commercial lending criteria can differ significantly between lenders, so working with an experienced commercial mortgage broker is often the most effective approach. A broker can identify lenders that are comfortable with your type of business, the property you are purchasing, and your overall financial profile.
- Compare your options: Your broker will review factors such as your deposit, financial position, business performance where relevant, and the details of the retail premises. They can then compare products across the market and recommend suitable retail mortgage options.
- Submit your application: Once a lender has been selected, the application process will usually involve detailed financial checks, a professional valuation of the property, and full underwriting. If the application is approved, the lender will issue a formal mortgage offer outlining the interest rate, repayment terms, loan structure, and any conditions attached to the finance.
Popular UK mortgage lenders for shops and retail units
Here are some examples of well-known UK lenders and their approach to commercial mortgages for shops and retail premises:
- NatWest: Commercial mortgages for retail properties are available with terms of up to 25 years. Borrowing starts from £25,001 and can extend to £10 million on fixed-rate products, while variable-rate lending may not have a formal upper borrowing limit.
- Barclays: Commercial mortgage customers can fix their interest rate for periods of up to 10 years. Loan amounts typically begin at £25,000, with repayment terms available up to 25 years. Early repayment charges may apply if part or all of the loan is repaid before the agreed term ends.
- Shawbrook: As a specialist lender, Shawbrook can offer greater flexibility in certain cases. Commercial mortgages for retail property may range from £150,000 to £35 million, with fixed-rate options commonly available over 2, 3, 5, and 10 years.
Commercial mortgages are generally arranged on a bespoke basis, meaning terms, rates, and lending criteria can vary significantly between lenders. Comparing options across the market and speaking with specialist lenders can help ensure you are matched with a finance solution suited to your individual circumstances and business requirements.
What interest rate to expect
Interest rates for retail mortgages are generally higher than those available on residential mortgages, reflecting the increased level of risk associated with commercial property lending.
As a general guide:
- Rates are often slightly above average residential mortgage rates, although the exact pricing will depend on the lender, the strength of the application, and current market conditions.
- Applicants with lower loan-to-value (LTV) requirements, strong business financials, and a proven trading history may qualify for more competitive rates.
- Higher-risk applications, such as start-up businesses, limited trading history cases, or specialist retail properties, may attract higher pricing. This is why selecting the right lender is particularly important.
Interest rates for shop and retail unit mortgages can usually be arranged on several different structures, including:
- Fixed rates for an agreed period
- Variable or tracker rates linked to the lender’s base rate or the Bank of England base rate
- Bespoke pricing tailored to the individual transaction
As commercial mortgage pricing is often assessed on a case-by-case basis, comparing lenders across the market is important to ensure you secure a solution that suits your business and financial circumstances.
Types of insurance to consider
When arranging a mortgage for a retail property, lenders will often require certain types of insurance, while others, although not compulsory, are strongly recommended to help protect the business and the property.
- Buildings insurance: Covers the structure of the property and is usually a mandatory requirement for commercial mortgage approval.
- Contents insurance: Protects stock, equipment, furniture, and fixtures located within the premises.
- Public liability insurance: Particularly important for retail businesses where members of the public regularly visit the property.
- Employer’s liability insurance: If you employ staff within the business, this cover can help protect against claims relating to workplace injuries or illnesses.
- Business protection insurance: Designed to help cover loss of income or interruption to the business following an insured event.
- Glass insurance: Useful for shops or retail units with large glass frontages, providing cover for accidental or malicious damage to windows and displays.
- Landlord insurance (where applicable): If part of the property is rented out, such as a flat above a shop, landlord insurance can help cover rental income and risks associated with tenants.
Frequently Asked Questions
Yes, mixed-use properties—such as a shop with a residential flat above—can usually be financed, although they are typically treated as commercial or semi-commercial mortgages rather than standard residential lending.