Commercial lending strain often leaves smaller borrowers out in the cold
The UK’s commercial property borrowers have spent the last few years in a tough spot, with many struggling to find lenders willing to back smaller-ticket deals.
While there are signs of improvement in 2026, brokers say the market remains skewed towards larger loans and owner‑occupied properties, leaving small investors and regional buyers at a disadvantage.
High-street focus leaves gaps in the market
Ash Ajaz, director at Focus Finance Solutions, says commercial borrowers have endured a lean stretch, with only a handful of lenders willing to look at the space – and then mainly at the larger end of the market.
“There's been very few lenders who have been wanting to do commercial lending,” he told Mortgage Introducer, noting that those that did offer products often came with strict minimum loan sizes and tight parameters.
That dynamic has been particularly punishing for smaller businesses acquiring cheaper commercial units. Deals below about £100,000–£150,000 have been hardest to place because the choice of lenders willing to write such tickets has been “very limited”.
Many of those investors are targeting the North and other regional markets where entry prices are lower and yields stronger, but they still find themselves constrained by a thin lender pool.
Tax nudges investors towards commercial
At the same time, tax has quietly nudged investors towards commercial stock.
While stamp duty on additional residential properties has risen sharply – with a 5% surcharge on extra homes – commercial buyers enjoy far more favourable treatment, including no stamp duty at all on purchases up to £150,000.
“A lot of people have been going towards commercial,” Ajaz said, arguing that lenders have been slow to adapt to this shift in demand and need to “accommodate more people in that aspect”.
Brokers turn to structuring and auctions
Where lenders do engage, brokers are leaning heavily on structuring to make deals stack up.
Ajaz describes using unencumbered or lowly geared residential properties to support commercial purchases, sometimes spreading security across multiple assets to unlock higher borrowing power.
In some cases that means clients can buy with cash, complete quickly and negotiate harder on price – particularly when combined with auction purchases, an area he says borrowers are “very proactively looking at” as finance for auction lots has become “very smart and very sophisticated”.
Bridging lenders step in – but small deals still exposed
Looking ahead, Ajaz sees tentative signs of improvement. More bridging lenders are moving into the commercial space, increasing competition and helping to drag down what were previously “really high” rates.
But he warns that high-street appetite still skews heavily toward owner‑occupied rather than investment stock, leaving a gap for investors that specialist lenders will need to fill if the small-ticket end of the market is to recover.
Until that happens, smaller commercial borrowers – especially those chasing sub‑£150,000 assets in regional markets – will remain reliant on creative structuring, bridging and auction strategies to get their deals over the line.
