Key takeaways
- Start with a conversation. Your relationship manager, broker or accountant can help before you submit anything.
- A decision in principle gives you a realistic idea of what a lender might offer. It doesn’t affect your credit score or commit you to anything.
- Complete, well-explained documents are the quickest way to a faster decision.
How to prepare a commercial mortgage application that gets a faster decision
This guide is about preparation. It covers what you can do to make your application stronger and keep it moving. For the full process, read our guide on how to get a commercial mortgage.
1. Find a commercial mortgage provider
You have two main routes: work with a broker or talk to a lender directly.
A broker can often reach more products than you could on your own and will have a wider view of the market. That’s useful if you want a range of options, or if your deposit is borderline for the loan to value you need.
If you already have a relationship manager at your bank, they’re a good first conversation before any formal application. They can answer questions early and tell you what to expect.
Talk to your accountant, too. They can review your financial position before a lender sees it, which may show any issues you’d rather address before they become questions in an application.
There’s no right or wrong route, so don’t let uncertainty stop you from starting.
2. Get a decision in principle
A decision in principle (DIP) is an early indication of how much a lender might lend. It isn’t formal approval.
It gives you a realistic idea of what a lender is likely to offer before you commit to a full application. It doesn’t affect your credit score, and it doesn’t commit either side to anything.
At Allica, we aim to turn around a decision in principle by the next working day.
At this stage you’ll share:
- Basic information about your business, such as company number, ownership and top-line financial figures
- An estimated value for the property
- How much you want to borrow, and the size of your deposit
It’s also a good time to start putting together what you’ll need for the full application. That way, if you go ahead, nothing holds you up.
If a lender says no at this stage, that isn’t the end. Lenders apply different risk criteria, so a decline from one doesn’t mean another will reach the same answer.
3. Prepare your full application documentation
For an established business, you’ll usually need:
- Information about your business, including its age, ownership structure, directors and persons with significant control
- Your sector, and where you sit in it
- Your profit and loss account, balance sheet, and statement of assets and liabilities
- Bank statements and previous years’ accounts
- Why you want the property, and how it fits your plans
- A business plan
If your structure is more complex, for example group companies or several beneficial owners, you may need to provide more than the standard list.
Lenders are building a picture of your business: its past performance, where it stands today and where it’s heading. Give them what they need to see that picture clearly. Share everything as early as you can, ideally on the day you apply.
4. Make your business case and financial projections credible
Strong projections show the numbers and the reasoning behind them. If you expect growth, explain what’s driving it. A few short bullet points under each projection setting out your assumptions can answer many of the questions a lender would otherwise ask.
Gareth Anderson, Head of Client Relationship Management at Allica Bank gives this advice:
"Lenders assess the people behind a business as well as the figures. Evidence of sound decisions and clear oversight supports your case alongside the accounts.
If something in your trading history might raise a question, address it up front. An unexplained dip in revenue invites more scrutiny than one that comes with a clear explanation and a plan."
5. Keep the valuation and legal stages on track
This stage often takes the longest. Four to six months is a realistic expectation, although it can be quicker.
The lender will instruct an independent surveyor to value the property and spot any structural, environmental or title issues that could affect lending. Alongside that, the legal work includes:
- Checking ownership
- Reviewing rights, such as rights of way
- Carrying out searches, covering things like drainage, environmental risk and flood risk
Appoint a solicitor with commercial property experience as it reduces the risk of delays. Ask them upfront about what they need from you.
Several parties are involved, and some delays are outside your control. Staying organised and replying quickly to requests are the most effective things you can do.
Frequently asked questions
Does getting a decision in principle affect my credit score?
No. A decision in principle doesn’t affect your credit score, and it doesn’t commit you or the lender to anything.
What documents do I need for a commercial mortgage application?
Usually business details, your financial accounts, bank statements, a statement of assets and liabilities, the reason for the purchase and a business plan. More complex structures may need extra documents.
How long does a commercial mortgage application take?
The valuation and legal stages often take four to six months. The overall time from your first application depends on how complex your application and the property are.
What causes delays in a commercial mortgage application?
The usual culprits are incomplete or disorganised documents, unexplained oddities in your accounts, solicitors without commercial property experience, and issues spotted at valuation.
Talk to an Allica relationship manager about your application
If you’re ready to explore a commercial mortgage, speaking to a relationship manager before you apply can help you shape your approach and spot gaps in your paperwork early.
Find out more about commercial mortgages, or find your relationship manager.
All lending is subject to status, lending criteria, and a satisfactory credit assessment. Terms and Conditions Apply. For more information, visit allica.bank/commercial-mortgages.
Links were live and information was correct at the time of writing the article.
Disclaimer: This is information – not financial advice or recommendation.
The content and materials featured in this article are for information and education only, and are not intended to take into consideration any particular recipient’s financial situation. The product details referred to are correct at the time of writing. The information does not constitute financial advice or recommendation and should not be considered as such.
