Why Lender Choice Matters
The UK commercial property finance market includes over 100 active lenders, each with different appetites, criteria, pricing, and service levels. Choosing the right lender for your specific transaction can make the difference between a smooth, well-priced facility and a frustrating, expensive process - or between getting funded and being declined.
Many borrowers default to their existing bank or the first lender who says yes. This approach often leaves money on the table. A systematic approach to lender selection, ideally with the help of a specialist broker, ensures you access the most suitable lender for your needs at the most competitive terms.
This guide compares the main lender categories for [commercial mortgages](/services/commercial-mortgages), [bridging finance](/services/commercial-bridging), and [development finance](/services/development-finance), helping you understand which type of lender is best suited to your transaction.
The UK Commercial Property Lending Landscape
High Street Banks
The major UK banks - **Lloyds**, **NatWest**, **Barclays**, and **HSBC** - are the largest commercial property lenders by volume.
**Strengths:**
- Lowest rates in the market (typically 5-7% for commercial mortgages)
- Highest LTV on prime assets (up to 70-75%)
- Long-term relationships with existing customers
- Large facility sizes (£1m to £100m+)
- Fixed rate products at competitive swap margins
**Limitations:**
- Strict criteria - strong tenant covenant, good location, standard property types
- Slow processing - 8-16 weeks for standard commercial mortgages
- Limited flexibility - standardised products, less willingness to adapt to unusual structures
- Sector restrictions - cautious on certain sectors (secondary retail, leisure, HMO)
- Experience requirements - prefer established property investors
- Relationship requirements - may require full banking relationship including current accounts
**Best for:** Experienced investors purchasing prime commercial property with strong tenants on long leases. Standard transactions where speed is not critical.
Specialist Lenders
Lenders such as **Shawbrook**, **Aldermore**, **Hampshire Trust**, and **Paragon** focus specifically on commercial property lending.
**Strengths:**
- Broader criteria - more property types, shorter leases, wider borrower profiles
- Faster processing - typically 4-8 weeks
- Dedicated commercial teams with deep sector knowledge
- Flexible structures - interest-only, split facilities, non-standard properties
- Accept wider experience levels - including newer investors
**Limitations:**
- Higher rates than high street (typically 6-9%)
- Lower maximum LTV on some property types (60-70%)
- Facility size limits - may cap at £5-15m
- Arrangement fees - typically 1-2% vs some high street banks offering fee-free products
**Best for:** Non-standard transactions, borrowers who do not meet high street criteria, properties with shorter leases or secondary locations, and transactions where speed and flexibility matter.
Challenger Banks
Newer entrants including **Allica Bank**, **Investec**, **Recognise**, and **Atom Bank** are disrupting the traditional lending market.
**Strengths:**
- Technology-driven processes, often faster than traditional lenders
- Competitive rates - often between high street and specialist pricing
- Flexible criteria - wider than high street, comparable to specialist
- Good service levels - smaller teams, more responsive
- Innovative products - green mortgages, flexible drawdown facilities
**Limitations:**
- Newer entrants - less established track records
- Evolving criteria - appetites may shift as they grow and mature
- Maximum facility sizes may be lower than established banks
**Best for:** Borrowers who want a balance of competitive pricing, flexible criteria, and responsive service. Good for mid-market transactions.
Bridging Lenders
Specialist short-term lenders providing [bridging finance](/services/commercial-bridging) for acquisitions, refurbishment, and transitional situations.
**Strengths:**
- Speed - can complete in 5-15 working days
- Flexible criteria - asset-led lending, less focus on borrower financials
- Wide property acceptance - including unusual assets, development sites, auction purchases
- Creative structures - accommodate complex situations
**Limitations:**
- High rates - typically 8-14% per annum
- Short terms - 6-18 months
- Arrangement and exit fees - total cost can be significant
- Require clear exit strategy - refinance or sale plan essential
**Best for:** Time-critical acquisitions, auction purchases, refurbishment projects, transitional situations where long-term finance is not yet available. See our guide on [heavy refurbishment finance](/knowledge-hub/heavy-refurbishment-finance-guide).
Development Finance Lenders
Specialist lenders providing staged funding for property development projects.
**Strengths:**
- Staged drawdown structures aligned with construction milestones
- Interest roll-up preserving cash flow during construction
- Deep development expertise within the lending team
- Support through the build process via monitoring surveyors
**Limitations:**
- High rates - 7-12% per annum
- Complex process - monitoring, staged drawdowns, professional team requirements
- Experience requirements - many require a development track record
- Longer setup - 6-12 weeks from application to first drawdown
**Best for:** Ground-up construction, major conversions, and substantial refurbishment projects. See our [development finance guide](/knowledge-hub/development-finance-explained-complete-guide).
**Key Takeaway:** There is no single "best" lender. The right lender depends on your specific transaction, property type, timeline, experience level, and requirements. A lender that is perfect for one deal may be entirely wrong for the next.
Factors to Consider When Choosing a Lender
1. Property Type and Quality
Different lenders have different appetites by property type:
| Property Type | Best Lender Category |
|---|---|
| Prime office (long lease) | High street bank |
| Secondary office (short lease) | Specialist or challenger |
| Industrial warehouse | High street or specialist |
| Standard retail | Specialist or challenger |
| Retail warehouse | High street or specialist |
| HMO / multi-let residential | Specialist |
| Development site | Development finance specialist |
| Mixed-use | Specialist or challenger |
| Leisure / hospitality | Specialist |
| Healthcare | Specialist |
2. Speed Requirements
| Urgency | Recommended Lender Type |
|---|---|
| No time pressure | High street bank (best rates) |
| 4-8 weeks | Specialist or challenger |
| 2-4 weeks | Challenger with fast-track |
| Under 2 weeks | Bridging lender |
3. Borrower Profile
- Experienced investor, strong financials - high street banks will compete for your business
- Newer investor, limited track record - specialist or challenger lenders are more accommodating
- Complex income or corporate structure - specialist lenders have more flexible underwriting
- Adverse credit history - specialist lenders may consider, high street banks unlikely
4. Loan Amount
| Loan Size | Suitable Lenders |
|---|---|
| Under £500,000 | Specialist, challenger |
| £500,000 - £5m | All lender types |
| £5m - £25m | High street, larger specialist |
| Above £25m | High street, institutional |
5. Flexibility Requirements
If you need non-standard features, specialist and challenger lenders are generally more accommodating:
- Interest-only for extended periods
- Staged capital releases
- Multiple property security
- Personal guarantee limitations
- Non-standard lease structures
- Vacant property lending
How Brokers Add Value in Lender Selection
A specialist [commercial mortgage broker](/services/commercial-mortgages) adds significant value in lender selection:
Market Knowledge
Brokers maintain relationships with dozens of lenders and understand their current appetites, criteria, and pricing. This knowledge is constantly evolving - a lender that was competitive last month may have changed their appetite or pricing.
Access
Many specialist lenders do not deal directly with borrowers, only accepting applications through approved brokers. Using a broker opens up lender options that are not available to direct applicants.
Presentation
Brokers present your application in the format each lender prefers, highlighting the strengths of your case and pre-empting potential concerns. This improves approval rates and speed.
Negotiation
Brokers negotiate rates, fees, and terms on your behalf. Competition between lenders for broker-introduced business often results in better terms than a direct approach.
Process Management
From application through valuation, legal, and completion, a broker manages the process and chases progress, keeping your transaction on track.
**Key Takeaway:** The broker fee (typically 0.5-1% of the loan) is usually recovered many times over through better rates, terms, and access to lenders that would not otherwise be available to you.
Comparing Lender Offers
When comparing indicative terms from multiple lenders, look beyond the headline interest rate:
Total Cost of Borrowing
Calculate the **total cost over the expected loan period**, including:
- Interest (at the quoted rate, for the expected term)
- Arrangement fee
- Exit fee (if applicable)
- Valuation fee
- Legal fees (both borrower's and lender's)
- Broker fee
A lender offering 6% with a 2% arrangement fee and 1% exit fee may cost more overall than a lender offering 7% with a 1% arrangement fee and no exit fee.
Flexibility and Terms
- Overpayment - can you make additional capital payments without penalty?
- Early redemption - what are the early repayment charges?
- Further advances - can you borrow more against the property later?
- Portability - can you transfer the mortgage to a different property?
- Personal guarantee - what level of personal guarantee is required?
Service and Speed
- Typical completion timeline - how quickly can the lender complete?
- Dedicated contact - will you have a named relationship manager?
- Ongoing service - how does the lender handle queries, consents, and variations during the loan term?
Red Flags When Choosing a Lender
Watch out for:
- Unusually low rates that increase after an introductory period
- Excessive fees (arrangement fees above 2%, high exit fees)
- Non-refundable application fees before the lender has properly assessed your case
- Pressure to proceed quickly without adequate due diligence
- Vague or changing criteria that suggest the lender may not be able to deliver
- No broker channel - reputable lenders work with brokers
- Unregulated lenders for regulated transactions
Summary
Choosing the right commercial property lender is as important as choosing the right property. The UK market offers a wide range of options, from the lowest rates of high street banks to the speed and flexibility of specialist and bridging lenders.
Take a systematic approach: define your requirements (property type, speed, flexibility, loan size), assess which lender category best matches those requirements, and compare multiple offers on total cost rather than headline rate alone.
For expert guidance on selecting the right lender for your specific transaction, [contact our team](/contact) to discuss your requirements.
*Written by Matt Lenzie, Founder of Commercial Mortgages Broker. Ex-Lloyds Bank & Bank of Scotland.*