Business Mortgage Calculator: A Specialist Look at the Three Tests Behind Your Loan Size
Most people who type “business mortgage calculator” into a search bar want one number: how much can my company borrow to buy the building it trades from? The online tools answer that quickly, usually by multiplying the price by a loan to value and quoting a monthly payment. Lenders do not work that way. An underwriter runs three separate tests on your accounts and the property, and the loan you are offered is whichever of those three produces the smallest figure. If you understand the three tests before you apply, you can predict the answer far more accurately than any single-box commercial mortgage calculator, and you can see which lever (term, deposit or profit) actually moves it.
Business Mortgages Broker is a trading name of Lenzie Consulting Ltd (company number 08174104). We arrange business mortgages for UK trading companies buying or refinancing their premises; we are a broker, not a lender. Commercial lending to a limited company is unregulated and falls outside the FCA’s regulated mortgage perimeter. Where a deal would be regulated, for example lending to a sole trader or individual, or a property where the borrower or a close family member will live in part of it, we refer it to an appropriately authorised firm. This is commercial mortgage finance for a trading business’s premises in the United Kingdom, not a residential mortgage, and the Financial Conduct Authority does not regulate it.
In the episode below, Georgina takes the lender’s affordability spreadsheet apart line by line, with the same round-number examples used in this article.
What does a business mortgage calculator actually measure?
A business mortgage is a long-term loan secured on the commercial property a trading company occupies, repaid from that company’s trading profit. Lenders usually file it under commercial mortgages, and owner-occupier and investment commercial mortgages share a name but are sized differently. A good calculator therefore has to model the business as well as the building. Our own business mortgage calculator is built around the same three questions a credit team asks:
- Can the profit carry the repayments? This is debt service cover, worked from adjusted EBITDA.
- Can the profit (or rent) carry the interest at a higher, stressed interest rate? This is interest cover.
- Is there enough equity in the commercial property? This is loan to value, capped by the lender’s appetite for the asset type.
Each test produces a maximum loan. The lowest of the three is the realistic ceiling, before the lender layers on judgement about sector, trading history and the directors.
Most free commercial mortgage calculators only answer the third question, and some only answer a fourth one nobody asked: “what are the monthly payments on a loan I have already assumed I can get?” A mortgage repayment calculator is useful for budgeting, but it can mislead a business owner into viewing a property the accounts will not support. The order matters. Work out how much you can borrow from the accounts first, then check the property, then work out the repayments. Unsecured business loans are sized on a different, shorter credit basis and do not belong in this calculation.
The inputs a lender wants
| Input | Where it comes from | Why it matters |
|---|---|---|
| Adjusted EBITDA | Last two to three years of filed accounts plus current management accounts | Drives debt service cover |
| Existing debt payments | Loans, hire purchase, asset finance, director loans being repaid | Reduces the cover available for the new mortgage |
| Purchase price or valuation | Agreed price, then the lender’s RICS valuation | Sets the loan to value ceiling |
| Term | Your choice, within lender limits of 5 to 25 years | Changes the annual repayment |
| Pay rate and stress rate | The lender’s pricing and its internal test | Sets both monthly cost and the affordability test |
How do lenders test debt service cover (DSCR)?
Debt service cover ratio is the headline affordability test on an owner-occupier commercial mortgage, and the first thing a commercial credit team calculates. It divides the profit available to service debt by the total annual repayments of capital and interest on all of the company’s borrowing, including the new loan.
Lenders commonly look for debt service cover of around 1.25 to 1.5 times on an owner-occupier case. That range is typical market practice rather than a rule: a well-established business with steady margins may be accepted nearer the lower end, while a younger company, a cyclical sector or a thin set of management accounts will be pushed towards the upper end or beyond. No lender is bound to any particular figure, and nothing here is a promise of what a given credit team will accept.
Starting with adjusted EBITDA
The profit figure is not simply the bottom line of your accounts. Lenders usually start from EBITDA (earnings before interest, tax, depreciation and amortisation) and then adjust it. Common adjustments include:
- Rent add-back. If the company currently rents its premises and will stop paying that rent once it owns the building, the rent is added back to profit.
- Directors’ remuneration. If directors take a low salary and high dividends, the lender may deduct a realistic salary; if they pay themselves above what the business needs, part of it may be added back.
- One-off items. A legal settlement, a one-off equipment write-off or a pandemic-era grant may be stripped out in either direction.
We go through these adjustments in more depth in our guide to how lenders read your accounts.
Illustrative example: sizing from profit
Illustrative example: a company reports EBITDA of £51,000 after paying £24,000 a year in rent. The rent stops when it buys, so adjusted EBITDA is £75,000.
- At a debt service cover of 1.25 times, the most it can spend on all debt repayments is £75,000 ÷ 1.25 = £60,000 a year.
- At 1.5 times, the figure falls to £75,000 ÷ 1.5 = £50,000 a year.
If the business already pays £6,000 a year on vehicle hire purchase, that comes off the top, leaving £54,000 or £44,000 for the new mortgage. Clearing small finance agreements before applying is one of the cheapest ways to increase what a business mortgage calculator will show.
Interest cover (ICR) and the stressed rate
The second test asks whether the loan stays affordable if rates rise. Lenders price commercial mortgages as a margin over Bank Rate, set by the Bank of England, or over a swap rate for fixed deals. Because that base can move, credit teams do not test affordability at today’s pay rate. They test at a stressed rate, commonly a point or two above the pay rate, or at a floor set by the lender’s own policy.
Running the stress
Illustrative example: take the £60,000 a year of debt service capacity from above. Tested at a stressed rate of 8.5% over a 20-year term on a capital repayment basis, £60,000 a year supports a loan of roughly £575,000. At 1.5 times cover (£50,000 a year), the same stress supports roughly £480,000.
For many owner-occupiers, the stressed DSCR is the only interest test. Some lenders also run a simple interest cover check on profit, dividing adjusted EBITDA by the annual interest on the loan at the stressed rate. On a £375,000 loan at 8.5%, annual interest is £31,875, so £75,000 of adjusted EBITDA covers the interest about 2.35 times.
ICR on let property
Where part of the building is let to a third party, or the purchase is an investment rather than an owner-occupied deal, lenders lean on rental interest cover instead. Rent is divided by the interest at the stressed rate, and lenders commonly look for 125 to 145%. Illustrative example: £30,000 of annual rent at 125% cover and an 8.5% stress supports £30,000 ÷ (1.25 × 8.5%) = about £282,000 of borrowing. At 145% cover, the same rent supports about £243,000. A semi-commercial building with a flat above a shop is often assessed with a blend of both approaches.
Loan to value, deposit and the 70 to 75% ceiling
The third test is the simplest. Lenders active in owner-occupier lending typically advance 70 to 75% of the lower of the purchase price and the RICS valuation, and up to 80% for strong cases with good trading history and an easy-to-sell building. Specialist premises such as a care home, a pub or a hotel are treated as trading businesses and usually sit lower.
Illustrative example: the property cap
Illustrative example: the company above agrees to buy a £500,000 freehold workshop.
| Measure | Figure |
|---|---|
| Purchase price | £500,000 |
| Loan at 75% LTV | £375,000 |
| Deposit at 25% | £125,000 |
| SDLT (England, non-residential) | £14,500 |
| Arrangement fee at 1 to 2% of the loan | £3,750 to £7,500 |
The profit test said £480,000 to £575,000. The property test says £375,000. The lower number wins, so loan to value, not affordability, sets the loan here.
The stamp duty figure comes from HMRC’s non-residential Stamp Duty Land Tax bands: 0% on the first £150,000, 2% from £150,001 to £250,000 and 5% above £250,000, which gives £14,500 on £500,000. Rates as at October 2026; check the current rates before you buy. Scotland (Revenue Scotland) and Wales (Welsh Revenue Authority) run their own taxes with different bands. Lenders do not add the tax to the loan, so it comes out of cash alongside the deposit. Our page on the full cost of buying business premises sets out the other items, from valuation to legal fees.
How much deposit do I need for a business mortgage?
Usually 25 to 30% of the price, plus stamp duty, fees and legal costs. A 20% deposit is possible for strong cases. On the example above, total cash needed is around £143,000 to £147,000 before legal and valuation fees.
Can you get a 90% commercial mortgage?
Not on the property alone. Mainstream commercial lenders rarely go above 80% loan to value on commercial property. Higher gearing generally means offering additional security, such as a charge over another property the company or directors own, so that the total borrowing stays within the lender’s limit across both assets. Treat any headline promising 90% or 100% with caution and read the security terms carefully.
Term, repayment and monthly cost: an illustrative example
Once you know the loan size, the term and rate decide the monthly payments. Terms usually run from 5 to 25 years, with some lenders going to 30. A longer term lowers each payment and, through the stress test, can raise the maximum loan, but you pay more interest overall.
What is the monthly payment on a 200k business loan?
Illustrative example: a £200,000 business mortgage on a capital and interest basis, at the ends of the indicative owner-occupier band. Indicative, subject to status, accounts and valuation.
| Term | At 6.0% a year | At 7.5% a year |
|---|---|---|
| 15 years | about £1,690 a month | about £1,855 a month |
| 20 years | about £1,435 a month | about £1,610 a month |
| 25 years | about £1,290 a month | about £1,480 a month |
| Interest only | £1,000 a month | £1,250 a month |
On the 20-year line at 6.0%, total payments come to about £344,000, meaning roughly £144,000 of interest over the life of the loan. Interest-only periods are sometimes available for part of the term, but most owner-occupier lenders want the loan to amortise.
Back to the workshop
Illustrative example: the £375,000 loan over 20 years costs about £2,690 a month at 6.0% and about £3,020 a month at 7.5%. That is £32,200 to £36,300 a year, against adjusted EBITDA of £75,000, which is a pay-rate cover of roughly 2.1 to 2.3 times. At the 8.5% stress, annual payments rise to about £39,100 and cover to about 1.9 times. Comfortably inside the typical range.
Early repayment charges
Fixed-rate commercial mortgages often carry early repayment charges for the first few years, commonly on a sliding scale. If you expect to sell, expand or refinance within the fixed period, factor the charge into the comparison. A variable deal with no early repayment charge can be the more flexible choice even at a slightly higher rate.
What the calculator cannot see: accounts, add-backs and personal guarantees
A business mortgage calculator works on the numbers you type in. An underwriter works on the numbers they believe. The gap between the two is where cases get resized or declined.
Things no online loan calculator or mortgage calculator can judge:
- Trend, not just level. £75,000 of EBITDA that has grown each year reads very differently from £75,000 that has fallen from £110,000.
- Quality of the management accounts. Year-to-date figures prepared by an accountant carry more weight than a spreadsheet.
- Sector. Lenders apply different appetite and margins to professional practices, manufacturing, leisure and retail.
- The directors’ own position. Most limited company lending comes with a personal guarantee, and the lender will look at the guarantors’ assets, liabilities and credit history. Read personal guarantees explained before you sign one.
- The building. A RICS valuer may value below the agreed price, which cuts the loan at the same loan to value.
The lender will also check Companies House for filed accounts, charges and director history. When the loan completes, the lender’s legal charge is registered at HM Land Registry and, because the borrower is a company, at Companies House within 21 days of creation. Any existing charges on the company’s assets show up in that same search, so it pays to know what is on file before a lender looks.
Using the calculator and the Apps Script tool before you apply
If you are looking at premises now, run the numbers three ways before you speak to anyone. It takes very little time:
- Profit first. Enter adjusted EBITDA and existing debt payments, then try debt service cover at 1.25 and 1.5 times to see the range of loan sizes.
- Stress second. Re-run at a rate a point or two above the latest pay rates you have seen. If the loan only works at the pay rate, it probably does not work.
- Property third. Apply 70% and 75% loan to value to the price, and take the lower of the profit and property figures as your working number.
When you are ready, add stamp duty, fees and a contingency to the deposit, and check the company can fund all of it without draining working capital.
A free web version of the calculator is on the way, so you will be able to save a scenario and share it with your accountant. Until then, our money-site commercial mortgage calculator runs all three tests in one place, and the commercial mortgage finance figures it returns are indicative only.
Frequently asked questions
How hard is it to get a business mortgage?
Commercial mortgages are harder to obtain than a residential mortgage because the lender is backing a business, not a salary. A company with two to three years of filed accounts, stable or rising profit, a 25 to 30% deposit and debt service cover comfortably inside the typical range is a straightforward case. Losses, a single year of trading or heavy existing debt make it harder, but not always impossible.
Is a commercial mortgage calculator accurate?
It is accurate about arithmetic and inaccurate about judgement. Treat the output as a range, not a quote. The real offer depends on the underwriter’s view of your accounts, the valuation and the guarantors.
Do commercial mortgage rates depend on the loan size?
Partly. Larger, lower loan to value loans to strong businesses tend to sit lower in the band; smaller loans and higher loan to value deals tend to sit higher. Commercial mortgage rates for owner-occupiers sit at an indicative 6.0 to 7.5% a year, subject to status, accounts and valuation, with arrangement fees typically 1 to 2% of the loan.
Talk to us
If you have run the numbers and want a second pair of eyes on which test is setting your limit, talk to Business Mortgages Broker. The firm is led by Matt Lenzie, who has 25 years in financial services, raising debt and equity, with around £400m arranged. We will tell you which lever moves your loan, and which lenders in the market are likely to read your accounts favourably.
All figures in this article are indicative and illustrative, not an offer of finance, and depend on status, accounts and valuation. We are a broker, not a lender, and we are not tax, legal or pension advisers: confirm tax and structuring points with your accountant and solicitor.