Harper James advises ambitious businesses on commercial property finance under the laws of England and Wales, from acquisition funding to development and refinancing. The right structure depends on the property’s value, income, development risk, available equity and the borrower’s wider balance sheet.
Senior debt is the standard starting point. A bank or specialist lender advances funds secured by a legal charge over the property, supported by a debenture, director or group guarantees, and financial covenants. Acquisition finance funds a purchase, development finance covers construction costs, and bridging finance provides short-term funding where timing is more important than price. Mezzanine finance sits behind senior debt and increases the total funding available, but it carries a higher return for the lender and often requires an intercreditor agreement. Equity finance, including a joint venture with an investor, reduces borrowing but shares ownership, control and future returns.
The capital stack, lender protections and key negotiation points are covered in this practical commercial property finance guide. Borrowers should compare not only the headline interest rate, but also arrangement fees, valuation costs, monitoring fees, exit fees, default interest, mandatory hedging and the consequences of breaching a loan covenant.
Lenders are applying closer scrutiny to interest coverage, loan-to-value ratios, development budgets and the quality of rental income. Sustainability-linked lending and green finance are also more visible, particularly where buildings meet recognised energy or environmental standards. Sale and leaseback transactions remain useful for releasing capital from an owned property, although the business then takes on a long-term rent obligation. For property companies, lenders increasingly assess the whole asset portfolio rather than a single building, with cross-collateralisation and group guarantees affecting risk and flexibility.
The process normally starts with an agreed term sheet, followed by valuation, title review, planning and building due diligence, insurance checks, tenant review and confirmation of the borrower’s corporate authority. The finance documents then record the facility, representations, undertakings, events of default and conditions precedent. Security usually includes a legal charge, debenture, rent assignment, insurance assignment and share charge, with guarantees where appropriate. Before signing, the board should test the repayment plan, refinancing assumptions, covenant headroom and ownership consequences of enforcement. This work identifies whether the proposed structure supports the property strategy or leaves the business carrying unnecessary cost and restricted cash flow.