The core question

Commercial lending starts with income, value and exit.

A commercial or mixed-use asset is assessed through property quality, income profile, tenant position, lease structure, location, use class, borrower experience and exit strategy. The lender needs to understand how the property performs and how the facility will be repaid.

Property type

Mixed-use does not mean simple.

A mixed-use property may contain a shop with flats above, offices with residential accommodation, a commercial unit with development potential or several income streams under different agreements. Each part may have a different risk profile, tenant type and value basis.

Income and tenant evidence

Rent should be proven, not just claimed.

Commercial value often depends heavily on rent. Useful evidence can include tenancy schedules, leases, rent statements, bank credits, tenant correspondence, service charge information and details of any arrears.

• Passing rent and market rent.
• Lease start and expiry dates.
• Break clauses and rent reviews.
• Arrears, incentives or rent-free periods.
• Vacant space and letting plan.
• Service charge, insurance and maintenance responsibility.

Valuation basis

Commercial value needs the right logic.

Commercial and mixed-use assets may be valued by income, comparable sales, vacant possession, development potential or a combination of methods. A lender should be able to see whether the case is being presented as income-led, asset-led, works-led or exit-led.

Exit strategy

Commercial exits need realistic evidence.

The exit route may be sale, refinance, letting, asset management, lease re-gear, planning uplift or conversion. Whatever the strategy, the lender needs to understand why the exit should be available within the term.