It may be possible to obtain a commercial mortgage with bad credit, although lenders often assess these applications more carefully and may require a larger deposit or stronger financial evidence.
Commercial mortgage lenders usually review each application on a case-by-case basis. This means they consider the overall strength of the transaction rather than relying solely on automated credit scoring models.
Because of this approach, borrowers with previous credit issues may still be able to secure commercial property finance in certain circumstances.
How Lenders Assess Credit History
Credit history is one of several factors lenders consider when reviewing a commercial mortgage application.
Lenders typically look at:
- The severity of any past credit problems
- When the credit issue occurred
- Whether the borrower has since improved their financial position
- The borrower’s current financial stability
Minor issues such as late payments or small defaults may have less impact than more serious problems such as bankruptcy or recent county court judgments.
Because commercial lending decisions are often made manually, lenders may take a broader view of the borrower’s circumstances.
The Importance of the Overall Transaction
When considering applications from borrowers with imperfect credit histories, lenders often focus on the strength of the overall transaction.
For example, they may consider:
- The income generated by the property
- The borrower’s business performance
- The deposit being provided
- The long-term viability of the property investment
A strong property with stable income may help offset some of the risk associated with a weaker credit profile.
Understanding who can get a commercial mortgage can help borrowers see how lenders assess different applications.
Deposit Requirements With Bad Credit
Borrowers with bad credit may be asked to provide a larger deposit when applying for a commercial mortgage.
Deposits of 30% to 40% or more are sometimes required in higher-risk cases.
Providing a larger deposit reduces the lender’s risk and demonstrates the borrower’s financial commitment to the transaction.
You can learn more about typical deposit levels in our guide to how much deposit is required for a commercial mortgage.
Specialist Commercial Mortgage Lenders
Some lenders specialise in working with borrowers who have more complex financial situations.
These lenders may be willing to consider:
- Borrowers with previous credit issues
- Complex business structures
- Non-standard property types
- Commercial properties with unusual income profiles
However, these cases are usually assessed individually, and lending terms may differ from those offered to borrowers with strong credit histories.
Steps Borrowers Can Take to Improve Their Chances
Borrowers with credit challenges may improve their chances of securing a commercial mortgage by preparing their application carefully.
This may include:
- Providing detailed financial information
- Demonstrating stable business income
- Offering a larger deposit
- Explaining past credit issues where relevant
Preparing documentation in advance can help lenders understand the overall financial position of the borrower.
It can also be helpful to understand how difficult it is to obtain a commercial mortgage and the factors lenders typically assess.
Why Many Borrowers Use Commercial Mortgage Brokers
Commercial mortgage lenders have different criteria when assessing borrowers with previous credit issues.
Commercial mortgage brokers can help borrowers identify lenders whose criteria match their circumstances and structure the application appropriately.
They can also help present the case clearly to lenders, which may improve the chances of securing suitable funding.
Understanding what commercial mortgage brokers do can help borrowers navigate the commercial property finance market more effectively.
Related guides
- Who can get a commercial mortgage?
- How much deposit is required for a commercial mortgage?
- Is it hard to get a commercial mortgage?
Need Help Arranging Commercial Property Finance?
Commercial mortgage criteria can vary significantly depending on the borrower’s financial profile, the property being financed and the lender’s requirements.
Explore our Top Commercial Mortgage Brokers in the UK guide to compare experienced advisers who specialise in arranging commercial property finance.
