Commercial Renovation finance
Commercial renovation finance covers any lending used to fund works on a commercial or mixed-use property, from cosmetic upgrades to structural alterations and ground-up rebuilds. There is no single product called "commercial renovation finance." The right financing product depends on the scale of works, the current condition of the property, the timeline, and the exit strategy. Choosing the correct product type at the outset is crucial. This guide maps the finance options available and shows which product matches which project type.
What is commercial renovation finance?
Commercial renovation finance covers any lending used to fund works on a commercial or mixed-use property. The scope ranges from cosmetic and non-structural works (redecoration, window replacement, new flooring) through to substantial alterations (structural changes, extensions, mezzanines), change of use conversions, and ground-up rebuilds. There is no single standardised product called "commercial renovation finance." Instead, lenders offer multiple products suited to different project scales and risk profiles.
The critical first step is classifying your project correctly, because choosing the wrong finance product will either price you out of the market or delay your development unnecessarily. A light cosmetic refurbishment of a retail unit uses a completely different borrowing structure to a structural conversion of a redundant office building into residential apartments. FD Commercial arranges all these products from a single point of contact, eliminating the need to approach separate lenders or brokers for each scenario.
FD Commercial's minimum loan across all commercial renovation scenarios is £250,000. We work with commercial property owners and developer-investors across England, Scotland and Wales. Rates vary by project type and structure, but typically range from 0.75% per month (indicative) for light refurbishment bridging, up to 1.5% per month (indicative) for development finance on more complex builds with higher lender risk.
Light commercial refurbishment: what it covers and how to finance it
Light refurbishment means cosmetic and non-structural works that do not require planning permission and do not fundamentally change the property's use, classification, or layout. Works that fall under light refurbishment include redecoration (interior and exterior painting), new flooring (carpeting, vinyl, concrete sealing), suspended ceilings, kitchen or bathroom upgrades in commercial premises (new units, sanitaryware), window and door replacement, and minor mechanical and electrical upgrades (new lighting, socket replacement, boiler servicing).
Light refurbishment works are often done by commercial property owners seeking to improve the property's rental appeal, secure better tenants, or prepare for sale. They may also be required as part of a lease agreement. Light refurbishment typically takes 2 to 8 weeks depending on the size and complexity.
Finance options for light refurbishment
The standard product for light commercial refurbishment is commercial bridging or light refurbishment bridging. Rates typically range from 0.75% to 1.0% per month (indicative). LTV is typically up to 75% on the property's current market value. Funds are usually released in a single tranche on completion. No monitoring surveyor is required. Completion is typically fast: 5 to 14 days from application to advance.
The exit strategy after light refurbishment is typically either sale of the property at the improved value, or refinancing onto a commercial mortgage at better terms now that rental yield or income has improved. The light refurbishment bridging facility is temporary: it bridges from purchase through refurbishment to exit within 3 to 12 months.
See our pages on commercial bridging loans and refurbishment bridging loans for detailed information on structure, costs, and application process.
Heavy commercial refurbishment: structural, extensions and conversions
Heavy refurbishment includes structural alterations, extensions, mezzanine floor installations, and internal reconfiguration that requires building regulations approval. Works may also require planning permission depending on the specific scope. Examples include: removing or adding structural walls, installing a mezzanine floor, enlarging openings, adding external extensions, installing new roof structures, upgrading fire safety systems, and reconfiguring internal layouts.
Heavy refurbishment projects typically take 3 to 12 months or longer depending on the scope. They require a formal building contract, structural engineer input, and building control sign-off. The lender appoints an independent monitoring surveyor to verify progress and costs at each stage.
Finance options for heavy refurbishment
Heavy refurbishment is financed using heavy refurbishment bridging loans or development finance, depending on the scale and complexity. Both products release funds in staged drawdowns verified by a monitoring surveyor. Rates typically range from 0.85% to 1.25% per month (indicative). LTV is typically assessed against the property's gross development value (completed value after works) rather than current value, up to 70%.
The facility is structured with an initial purchase advance (usually 60-70% of purchase price or valuation) and a build facility drawn in tranches at construction milestones. The monitoring surveyor inspects the site at each draw stage, verifies works are progressing on budget and to specification, and certifies the tranche. Monitoring surveyor fees (£1,000 to £3,000 per visit) are payable by the property owner.
Term is typically 6 to 18 months. Exit is usually sale at the improved value or refinancing onto a commercial mortgage once the works are complete and income is established (typically 6-12 months post-completion).
Change of use conversions: office to residential, retail to mixed use
Change of use conversions fundamentally alter the property's classification. A redundant office building becomes a residential apartment block. A retail unit on the ground floor becomes mixed use with residential flats above. A disused warehouse becomes a small hotel. These conversions are among the highest-value renovation opportunities because the end value (residential) is typically higher than the original use (commercial).
Change of use falls into two categories. Permitted development (PD) is a type of work that can proceed without full planning permission, provided specific criteria are met (building size, location, local authority, access to services). Full planning permission is required for other change of use scenarios.
Planning certainty is the key underwriting factor
Confirmed PD rights or full planning approval (decision notice in hand) allow lenders to underwrite based on the completed residential value and structure more generous LTV. Speculative applications (planning decision pending) force lenders to underwrite on the existing commercial value, reducing available facility and increasing cost.
Finance options for change of use
Small change of use conversions (e.g., single office unit to 2-3 residential units) can be financed with commercial bridging for the acquisition and initial structural works. Rates typically 0.85% to 1.25% per month (indicative). Larger conversions (office building to 10-20 apartments, or substantial structural work) are better suited to development finance, which allows larger facilities and better aligns with the staged construction approach.
See our pages on commercial bridging loans and development finance for detailed structure and application information.
Industrial and warehouse upgrades
Industrial and warehouse refurbishment typically falls under light to medium refurbishment: roof repairs, cladding replacement, dock leveller installation, roller shutter upgrades, electrical and plumbing upgrades, sprinkler system installation, and office fit-out within the industrial unit. Most industrial upgrade projects do not involve structural changes and do not require planning permission unless the works affect lettable floor area or building classification.
Finance options depend on the scale. Light industrial upgrades can use commercial bridging (rates 0.75-1.0% per month indicative, LTV up to 75% current value). If works substantially affect lettable floor area or building classification, heavy refurbishment bridging applies (rates 0.85-1.25% per month indicative, LTV up to 70% GDV).
For properties already income-producing and where refurbishment works are modest, a commercial mortgage may be available if the property meets underwriting criteria. This offers lower longer-term rates than bridging but requires a longer application process.
Fit-out finance for commercial occupiers
Commercial tenants and owner-occupiers often need to finance a fit-out of leased or owned premises. Examples include office fit-outs (partition walls, ceilings, flooring, new kitchen and bathrooms), retail fit-outs (new shopfronts, interior fittings), and restaurant or café fit-outs (commercial kitchen, servery, dining area).
For owner-occupiers, fit-out costs can be included within a commercial mortgage facility. The property is secured and the mortgage funds both the acquisition and the fit-out works in a single facility. For tenants fitting out under a lease agreement, property-secured lending is less appropriate because the tenant has no equity in the building. Tenants typically finance fit-outs through unsecured business finance, business lines of credit, or asset-backed lending on equipment. FD Commercial's bridging and development finance products focus on property-secured lending from £250,000 and are not suitable for tenant fit-outs without significant underlying property equity.
VAT considerations on commercial renovations
VAT on commercial construction work is typically charged at the standard rate of 20%. This is a critical cash flow consideration that many commercial property owners underestimate. New residential construction is zero-rated by HMRC, but commercial renovation is not. The contractor invoices you for 20% VAT on labour and materials. If you are VAT-registered, you can reclaim the VAT through your VAT return, but the timing gap (typically the next VAT return period) creates a cash flow lag between paying the VAT and recovering it.
Change of use to residential introduces additional VAT complexity. The conversion work (the process of converting commercial building to residential) may attract zero-rate VAT on the conversion element in certain circumstances, but this depends on the specific nature of the work and requires specialist VAT advice for each project. Do not assume that conversion work is zero-rated. Seek expert VAT advice before budget finalisation.
Budget for 20% VAT on all commercial renovation finance projects unless you have specialist VAT advice confirming otherwise. This affects total project costs and LTGDV calculations.
Planning and building regulations: what affects your finance
Planning permission is required for change of use (unless covered by permitted development rights), extensions beyond PD limits, external alterations to listed buildings or buildings in conservation areas, and any material change of use. Building regulations approval is required for structural alterations, new drainage systems, fire safety modifications, and new electrical or plumbing installations.
Lenders assess planning certainty before approving renovation finance. The availability of confirmed planning (full planning permission with decision notice in hand) or confirmed PD rights (written confirmation from the local authority that works are permitted development) allows lenders to underwrite against the completed value post-renovation. This improves LTV and reduces cost.
Speculative planning (application pending, or PD rights not yet confirmed) forces lenders to underwrite on current value only. This significantly reduces available facility. The facility is smaller and cost is higher. Lenders are essentially saying "we will not take the risk that planning will be refused, so we are lending based on current use only." If planning is subsequently granted, the facility does not automatically increase. You would need to reapply.
Obtain planning confirmation before finalising your borrowing proposal. This is particularly important for change of use conversions where planning risk is highest.
Matching the finance product to the project
The table below shows which product matches which project type, typical LTV, rates, and key characteristics. Use this to understand where your project fits.
| Project type | Finance product | Max LTV | Rate range (indicative) | Monitoring surveyor | Typical term |
|---|---|---|---|---|---|
| Cosmetic light refurb, no planning required | Commercial bridging / light refurb bridging | 75% current value | 0.75–1.0% pm | No | 3–12 months |
| Heavy structural works, building regs required | Heavy refurb bridging | 70% GDV | 0.85–1.25% pm | Yes | 6–18 months |
| Change of use conversion, PD rights or planning approved | Commercial bridging or dev finance | 70% GDV | 0.85–1.25% pm | Yes (larger schemes) | 6–24 months |
| Ground-up or near ground-up rebuild | Development finance | 70% LTGDV / 90% LTC | 0.75–1.5% pm | Yes | 12–24 months |
| Post-completion, awaiting sale or refi | Development exit finance | 70–75% GDV | 0.65–0.95% pm | No | 6–18 months |
Use this table to identify which product is most suitable for your specific renovation project. The key factors are the scope of works (light vs heavy, structural vs cosmetic), whether planning is required and confirmed, and your planned exit timeline. When in doubt, contact FD Commercial to discuss your specific scenario.
Process steps
You describe your renovation project: scope of works, timeline, budget, and planned exit. We classify whether this is light refurbishment (bridging), heavy refurbishment (refurb bridging), or development finance.
We confirm whether your works require planning permission or building regulations approval. We establish whether planning is confirmed or speculative, which directly affects lender appetite and pricing.
We review your project budget and work with you to develop a realistic cost estimate. We understand the post-renovation value (GDV) so lenders can assess LTV correctly.
We approach lenders with your project proposal. Based on feedback, we select the most suitable lenders and prepare a credit proposal.
You complete the lender's formal application. Required documents include: property details, planning confirmation (or PD confirmation), building regulations drawings (for heavy refurb), building contract or works specification, professional team references (architect, surveyor, engineer), and project timeline.
The lender appoints an independent valuer to assess the property's current value and post-renovation GDV. For heavy refurbishment, the lender may also require a structural engineer's assessment.
The facility is completed and registered as a charge. For bridging, funds are typically released in a single advance. For heavy refurb or development finance, the initial purchase advance and build facility are set up ready for staged drawdowns.
For heavy refurbishment or development finance, you request drawdowns at agreed milestones. The monitoring surveyor inspects and certifies. Tranches are released within 3-5 working days of certification.
Works are completed. The property is sold, refinanced to a commercial mortgage, or development exit finance is arranged. The renovation facility is repaid in full.
A property investor purchased a vacant ground-floor retail unit with residential upper parts in Bristol for £320,000. The retail space had been empty for three years. The project scope: convert the retail space to two residential studios under Class MA permitted development rights, while also refurbishing the existing upper floor residential flat. Combined works budget: £145,000 (structural, fit-out, M&E, and contingency). Estimated GDV on completion: £600,000 (two studios at £140,000 each, one one-bedroom flat at £320,000).
FD Commercial arranged a heavy refurbishment bridging facility of £465,000. Structure: £320,000 purchase advance on completion of the property acquisition, plus £145,000 build facility drawn in three staged tranches (foundation/carcassing stage, first fix stage, second fix/practical completion stage). Total facility: £465,000. Facility LTV against GDV: 77.5% (£465,000 against £600,000). Term: 12 months. Rate: 1.0% per month (indicative). Monitoring surveyor appointed for three site visits at £1,500 per visit.
Works completed on schedule over 10 months. All three units were refinanced onto buy-to-let mortgages post-completion. The heavy refurbishment bridging facility was repaid in full from the BTL mortgage advances.
Commercial renovation finance from £250,000. Whether you are bridging, refurbishing or developing, we will identify the right product and lender for your project.
Call 03300 100315Frequently asked questions
What is commercial renovation finance?
Commercial renovation finance covers any lending used to fund works on a commercial or mixed-use property, from cosmetic upgrades to structural alterations and ground-up rebuilds. The right financing product depends on the scale of works, current condition, timeline, and exit strategy. FD Commercial arranges bridging, refurbishment bridging, and development finance for commercial renovation from £250,000.
What is the difference between light and heavy commercial refurbishment finance?
Light refurbishment covers cosmetic and non-structural works (redecoration, flooring, window replacement) that don't require planning permission. Heavy refurbishment includes structural alterations, extensions, and works requiring building regulations approval. Light refurb typically uses commercial bridging; heavy refurb uses heavy refurbishment bridging with staged drawdowns and monitoring surveyor verification.
Do I need planning permission to get commercial renovation finance?
Planning requirements depend on the scope of works. Cosmetic works don't require planning. Structural works, extensions beyond permitted development limits, and change of use require planning permission. Lenders assess planning certainty: confirmed PD rights or full planning approval allow underwriting against completed value. Speculative applications force underwriting on current value only, reducing available facility.
What LTV is available on commercial renovation finance?
Light commercial refurbishment LTV is typically up to 75% on the property's current value. Heavy refurbishment LTV is typically up to 70% assessed against gross development value (completed value) rather than current value. LTV varies by scheme, lender, and exit strategy.
What are the rates on commercial renovation finance?
Commercial bridging rates typically range from 0.75% to 1.0% per month (indicative) for light refurbishment. Heavy refurbishment bridging rates range from 0.85% to 1.25% per month (indicative). Development finance for renovation typically ranges from 0.75% to 1.5% per month (indicative) depending on project risk and structure.
Does VAT apply to commercial renovation works?
VAT on commercial construction work is typically 20% standard rate. Commercial renovation is not zero-rated like new residential construction. VAT-registered businesses can reclaim VAT through their VAT return, but the timing gap affects project cash flow. Build VAT into project budgets. Change of use to residential may attract zero-rate VAT on the conversion element in certain circumstances, but this requires specialist VAT advice.
Can I get finance for a change of use conversion?
Yes. Change of use (commercial to residential, retail to mixed use) can be financed through commercial bridging for acquisition and initial works, or development finance for larger structural conversions. Planning certainty (confirmed PD rights or full planning approval) is critical: it allows lenders to underwrite against completed value. Speculative planning applications limit available facility.
What is a monitoring surveyor and when is one required?
A monitoring surveyor inspects the build at each drawdown stage, certifies works completed to standard, and verifies sufficient budget remains to complete. Required for heavy refurbishment bridging and development finance. Not required for light commercial refurbishment. The developer pays monitoring surveyor fees (£1,000-£3,000 per visit).
What are my exit options after a commercial renovation?
Exit options include sale of the completed property, refinancing to a commercial mortgage once rental income is established (typically 6-12 months post-completion), or refinancing to a development exit loan if sales are slower than expected. Renovation finance is bridging: temporary funding until the property is sold or refinanced onto long-term finance.