Can I get a commercial mortgage with bad credit?

Seeking commercial finance when you have a history of adverse credit can be challenging, but it is certainly not impossible. While high street banks typically adhere to rigid lending criteria that often exclude applicants with defaults, CCJs (County Court Judgments), or IVA (Individual Voluntary Arrangement) markers, a thriving market of specialist commercial lenders exists in the UK who are prepared to assess applications based on the overall viability of the business and the strength of the assets being offered as security.

Navigating Commercial Mortgages: Can I get a Commercial Mortgage with Bad Credit in the UK?

The short answer is yes, you can get a commercial mortgage with bad credit. However, obtaining this type of finance requires navigating a different lending landscape than standard residential or mainstream business banking. Commercial mortgages are highly bespoke products, and when adverse credit is involved, the focus shifts entirely to mitigating risk for the lender.

Lenders need confidence that the debt will be serviced reliably. While a clean credit history provides that assurance easily, specialist lenders accept that business owners and investors sometimes face financial setbacks. Their assessment process is designed to look beyond the credit score and evaluate the current financial stability and future potential of the business and the property itself.

Understanding Adverse Credit in the Commercial Context

When discussing bad credit, it is important to understand that lenders differentiate between various levels of severity and recency. Your application success may depend heavily on what specific markers are on your credit file and how long ago they occurred.

What Counts as ‘Bad Credit’ for Commercial L Mortgages?

• Late Payments (Arrears): Scattered missed payments on existing credit cards or loans. These are generally the easiest issues to overcome.
• Defaults: Failure to repay a debt obligation, leading to the creditor formally ending the agreement. Recency is key; a default six years ago is less impactful than one six months ago.
• County Court Judgments (CCJs): Official court orders requiring you to pay a debt. Lenders will examine the value of the CCJ and whether it has been satisfied (paid off). Satisfied CCJs are viewed much more favourably.
• Debt Management Plans (DMPs): Formal or informal agreements to repay debts over an extended period.
• Individual Voluntary Arrangements (IVAs) and Bankruptcy: These are the most serious forms of adverse credit and dramatically limit your options, though funding may still be available several years post-discharge.

Specialist lenders understand that defaults relating to personal credit (e.g., an old mobile phone bill) may be treated differently from defaults relating to previous business debts. Transparency and clear explanation are vital for your application.

The Specialist Commercial Mortgage Market

Why do mainstream banks often decline applications for a commercial mortgage with bad credit? High street banks typically rely on automated credit scoring and adhere to strict, volume-based lending rules. If you fail their initial credit check, they often cannot proceed.

Specialist commercial mortgage lenders, however, operate differently. They employ underwriters who manually assess each case. They can take a holistic view, weighing up the risks against the rewards and applying judgement to unique circumstances. This makes them the primary route for anyone seeking finance with an adverse credit history.

How Specialist Lenders Mitigate Risk

Because they are taking on higher risk, specialist lenders compensate by imposing stricter requirements:

• Higher Interest Rates: Rates will almost certainly be higher than those offered to prime borrowers.
• Lower Loan-to-Value (LTV): You will typically need a much larger deposit. While a borrower with clean credit might secure an LTV of 70% or 75%, an adverse credit borrower might be capped at 50% or 60%. This substantial capital injection demonstrates your commitment and reduces the lender’s exposure.
• Focus on Exit Strategy/Repayment: Lenders will rigorously scrutinise the source of your repayment income (i.e., the viability and profitability of the business or the rental income from the property).
• Requiring Additional Security: The lender may require additional personal guarantees or security over other assets you own.

Key Factors that Determine Success

If you want to secure a commercial mortgage with bad credit, your success hinges less on your credit score and more on four crucial pillars:

1. The Depth of Your Deposit

As mentioned, the single most powerful tool you have is cash. A larger deposit (equity stake) significantly reduces the lender’s exposure. If you can contribute 40% or 50% of the property value upfront, the lender may be more willing to overlook past credit issues, especially if the property itself is high quality and easily marketable.

2. Property Type and Quality

The commercial property itself acts as the primary security. Lenders favour properties that are readily saleable should the borrower default. Prime commercial assets (e.g., standard retail units, industrial warehouses, or offices in strong economic areas) are preferred over highly specialised or niche properties that are difficult to value or sell quickly.

3. Business Viability and Strength

The lender needs proof that the business occupying the property (whether it’s your own business or a tenant’s) generates sufficient, stable income to cover the mortgage repayments, plus a healthy buffer. Expect to provide:

• Three years of certified business accounts.
• Detailed management accounts showing recent performance.
• A robust business plan outlining future strategy, market analysis, and financial projections.

4. Time Since Adverse Credit Occurred

Lenders are always more concerned with recent financial behaviour. If the adverse credit events (CCJs, defaults) occurred three to six years ago and you have maintained a perfect credit history since then, your chances are vastly improved compared to someone who had a default recorded last month.

Preparing a Compliant and Compelling Application

For adverse credit applicants, presentation is everything. You cannot afford to submit a half-finished application.

Working with a Specialist Broker

Given the complexity of bad credit commercial mortgages, engaging a broker who specialises in this niche is highly advisable. They understand the specific risk appetites of different specialist lenders and can match your unique profile (type of credit issue, property type, LTV requirement) to the most appropriate institution.

The Importance of Explanation

Do not attempt to hide or downplay past credit issues. Write a clear, honest explanation that details the circumstances surrounding the adverse credit markers. Was it due to a one-off event (like a divorce or a failed market venture) rather than ongoing mismanagement? Providing context helps the underwriter view the issue as a historical anomaly rather than a predictor of future behaviour.

Reviewing Your Credit Health

Before speaking to a lender, you must know exactly what your credit file looks like. Mistakes happen, and negative markers may remain on your file that you thought had been removed or satisfied.

You should review your reports from the three main credit reference agencies (CRAs) in the UK: Experian, Equifax, and TransUnion. Understanding discrepancies and addressing errors is a vital first step.

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Ensuring the data held by the CRAs is accurate is crucial for any finance application. For further impartial guidance on managing your credit history and debt, resources such as MoneyHelper offer excellent advice.

People also asked

Can I get a commercial mortgage if I have a satisfied CCJ?

Yes, having a satisfied (paid off) County Court Judgment greatly improves your chances of securing a commercial mortgage, especially if the CCJ is older than one or two years. Specialist lenders view the settlement of the debt as a positive demonstration of your willingness to meet financial obligations, and they will typically offer funding, albeit at increased rates.

How much deposit do I need for a commercial mortgage with bad credit?

While standard commercial mortgages might require 25% LTV, applicants with adverse credit should typically prepare for a minimum deposit of 30% to 40% of the property value. In cases involving very severe credit issues or recent defaults, lenders may demand up to 50% to ensure a strong equity buffer against the risk.

Will a specialist lender assess my personal credit or my business credit?

For most commercial mortgages, especially those involving SMEs or owner-occupiers, the lender will assess both. They will look at the company’s financial health (business credit and accounts) to ensure the income stream is stable, and the directors’ personal credit profiles, as directors are usually required to provide personal guarantees for the commercial debt.

How long does the adverse credit commercial mortgage application process take?

The process is generally longer than for prime finance, often taking 8 to 12 weeks from initial application to completion. This is because specialist underwriting requires manual assessment, detailed scrutiny of business accounts, thorough valuation of the security, and careful structuring of terms to mitigate the identified risks.

Can I remortgage a commercial property with a history of bad credit?

Yes, remortgaging a commercial property with bad credit is possible. Lenders will focus on the equity you currently hold in the property, the current rental or operating income the property generates, and why you are seeking to remortgage (e.g., releasing capital for expansion or achieving a better interest rate than your current arrangement).

Conclusion and Next Steps

Getting a commercial mortgage when you have bad credit is fundamentally about shifting your focus from mainstream criteria to specialist lending criteria. The key to success lies in robust preparation, demonstrating exceptional business viability, and being able to offer significant security (in the form of a large deposit and a high-quality commercial asset).

By seeking advice from an expert commercial finance broker, compiling a comprehensive financial package, and being transparent about your financial history, you can dramatically increase your chances of securing the necessary finance to acquire or develop your desired commercial property.