The Client
Our client was an established business owner looking to raise additional capital to reinvest in the company. The business owned its trading premises outright, in the sense that there was substantial equity in the property even though a commercial mortgage was already secured against it. Rather than refinance that existing commercial mortgage, the client wanted to know whether the equity sitting in the property could be released through a second charge instead.
The Opportunity
The business needed £175,000 of additional capital to support its next stage of growth, split between working capital and further investment into the company. Disturbing the existing commercial mortgage arrangements was not something the client wanted. The premises held enough equity that raising the money against the property itself made more sense than touching what was already in place.
The Problem
On paper, the obvious option was to refinance the existing commercial mortgage and raise the extra £175,000 at the same time. But that meant replacing a first charge facility that was already working perfectly well. New lending terms, extra costs, a higher rate applied across the whole mortgage balance rather than just the new £175,000, all to access money the client only needed a fraction of that balance for. A narrower solution was what the case actually called for.
How We Looked At It Differently
Refinancing the whole commercial mortgage was not the only route available. The equity sitting within the business premises was the real point of interest here. A first charge already sat against the property, but there was still enough equity underneath it to support further borrowing. Specialist lenders exist who will take a second charge over an owner-occupied commercial property for business purposes, and that is who we approached. Between the two facilities, first charge and proposed second charge, the combined borrowing was kept within a maximum 60% loan-to-value.
The Solution
We arranged a £175,000 second charge facility secured against the client’s existing business premises, with the first charge commercial mortgage left completely untouched. Combined lending across both charges, the existing first charge plus the new £175,000 second charge, was structured to stay within 60% combined loan-to-value against the property’s value. That gave the lender a strong security position while letting the client unlock a substantial amount of capital without refinancing anything. Most importantly, the business got the £175,000 it needed for commercial purposes, and its existing facility never had to move.
The Benefits
With this structure in place, the business was able to:
- Raise £175,000 of additional capital
- Put equity already sitting in its commercial premises to work
- Keep its existing first charge commercial mortgage exactly as it was
- Sidestep a full refinance of the existing mortgage balance
- Keep total secured borrowing within 60% loan-to-value
- Access funding structured specifically for business purposes
Rather than replacing a facility that was working perfectly well, we simply added the new borrowing alongside it.
Why This Worked
Finding a lender willing to advance another £175,000 was the easy part to describe, but not really the point. What mattered was reading the client’s full property and borrowing position correctly. The business held a valuable commercial asset carrying significant equity, and putting that equity to work meant building the new funding behind the existing lender, not around it. A relatively conservative 60% combined loan-to-value gave the second lender the security it needed to take on that position at all.
Through this structure, the client was able to keep their existing commercial mortgage in place, release £175,000 from the equity in their business premises, avoid unnecessarily refinancing their first charge debt, and put fresh capital straight back into the business.
The Bigger Takeaway
Plenty of business owners assume that having an existing commercial mortgage rules out raising further capital against the same premises. It does not, provided there is enough equity in the property. A second charge against commercial property is often a genuine alternative to a full commercial remortgage, especially where the existing first charge is performing well and there is no real commercial reason to disturb it. A specialist lender may be willing to sit behind the existing one and lend against whatever equity is left. In this case, keeping combined borrowing within 60% loan-to-value is exactly what made the extra £175,000 possible without touching the existing commercial mortgage.
Frequently Asked Questions
Can you get a second charge on a commercial property?
Yes. Specialist lenders can consider second charge lending secured against commercial property, including owner-occupied business premises.
The lender will look at the property’s value, the existing first charge borrowing, overall loan-to-value, the business itself, and what the funds are actually going to be used for.
Can a second charge be used for business purposes?
Yes. What it can be used for varies by lender and by case, but funds raised through a commercial second charge can potentially cover a wide range of legitimate business purposes.
Working capital, expansion, equipment, acquisitions, and general investment into the business are all among them.
What does 60% combined loan-to-value mean?
Combined loan-to-value looks at all borrowing secured against the property, not just the new second charge on its own.
Take a commercial property valued at £1 million with a £425,000 first charge mortgage already in place. Adding a £175,000 second charge would bring total secured borrowing to £600,000, which works out at 60% combined loan-to-value.
Why use a second charge instead of refinancing a commercial mortgage?
A second charge can make sense where a business wants to raise additional capital without replacing its existing commercial mortgage.
A full refinance means refinancing the entire outstanding balance, whereas a second charge lets the existing facility stay in place while the additional borrowing is arranged separately. The relative costs, rates, fees and terms of both routes are worth comparing properly before deciding which structure fits.
How much can I borrow on a commercial second charge?
This depends on the commercial property’s value, how much is already secured against it, the maximum combined loan-to-value a lender will accept, and the lender’s assessment of the business itself.
Lenders will also look at what the funds are for and whether the business can comfortably service the extra borrowing.
Commercial Finance Network is a whole-of-market FCA authorised commercial finance broker working with businesses, property investors and developers across the UK and internationally. We work with specialist lenders able to consider second charge lending against commercial property, and can assess how much equity might be available and how best to structure the borrowing.
Commercial Finance Network is directly authorised and regulated by the Financial Conduct Authority.
Think carefully before securing other debts against property you own. Your property may be repossessed if you do not keep up repayments on a loan secured against it. Second charge lending taken for business purposes or secured against investment or commercial property is not regulated by the Financial Conduct Authority.
Call: +44 1494 622 111
Email: info@cfnuk.com
Related Pages
- Second Charge Mortgage UK – the full overview of how second charge lending works and who it is for.
- Second Charge Mortgages for Commercial and Business Purposes – the full guide this case study sits alongside.
- Owner-Occupied Commercial Mortgages: A Complete Guide – background on the first charge side of a case like this.
- Second Charge Mortgage Calculator – estimate repayments and work out the equity available under combined loan to value.
- Business Loans – unsecured and secured funding where a second charge is not the right fit.