Office Space Financing: A Comprehensive Guide to Commercial Property Finance Options

Office space

Chris Whitney

While renting offices is the right option for many businesses, others will benefit from owning their office space or site outright. Leasing is ideal for growing businesses that may need more space to house a growing workforce in the future, as rental property allows for more flexibility and fewer upfront costs. On the other hand, buying an office can be ideal for established businesses that have a relatively steady headcount or that will expand on different sites, as opposed to in a single office. Purchasing office space means the business will have equity in real estate assets, which can be attractive for some business owners, and owning office space can mean the company can benefit from additional tax deductions. Ultimately, if financing is structured correctly and to your business’s advantage, you can rent out the space in the future, too. 

When financing office space or other types of property owned by a business, plenty of options are available. Business bridging loans and commercial mortgages are some of the most widely used debt for entrepreneurs and business owners looking to buy property. However, depending on your requirements and situation, you may be able to use other financing facilities - usually secured loans.


Key Considerations: Commercial Property Finance

The Purchasing Entity

For large commercial real estate purchases amounting to millions of pounds, limited companies usually make the property purchase, and lenders will, of course, structure finance around this. However, there are options for smaller companies buying through other entities like limited liability partnerships and SPVs, as well as individuals making purchases in their own names, although this tends to be rarer. Flexibility around financing entities and building debt around these is imperative for smaller companies buying commercial real estate to ensure the deal is optimised and will work to the benefit of your business in the long term. We can work with your accounting team and tax advisors to make sure the finance is structured most efficiently. 

VAT Liability

VAT should always be a consideration when you are buying a commercial property, as your business may be liable to pay a one-off VAT bill linked to your purchase. Using VAT finance as a separate facility to cover this liability can be an option so you don’t have to set aside valuable cash reserves to pay off the VAT bill at a time when you have other significant upfront costs relating to the property purchase to pay. We can often look at VAT loan options (from the same or different lenders as will finance your purchase) at the same time as arranging your property financing facility. 

Working Capital

Keeping cash reserves within the business is imperative for most companies, as these will cover day-to-day operating costs and give you the liquidity you need to cover unexpected liabilities or pursue opportunities. Available capital reserves are a huge consideration for any business owner or CFO considering purchasing a commercial property, as you won’t want to find yourself in a position where you are short on cash at a time when you are also making a significant investment into real estate for your business, which is usually a strategic and long-term play. 

Working capital loans can be ideal if your business is in a solid financial position, but you want to buffer the cost of a property purchase by putting as much of the business’ revenue into the property purchase (lowering the loan-to-value ratio on a commercial mortgage, for example). Cash flow loans can be used in addition to commercial property finance or as an additional facility alongside it, facilitating the property purchase.


Main Types Of Commercial Property Finance

Commercial Mortgages

Commercial mortgages are also available to businesses looking to purchase office space. While they can take longer to arrange than a business bridging loan, we can negotiate offers exceptionally quickly, giving you certainty of funding and visibility on how much you can borrow. This can be useful if you want to purchase office space but have yet to find a property you wish to purchase or if you have already found a property you want to buy and an alternative facility like a business bridging loan isn’t the right option for your company. 

Commercial property finance works much like a residential mortgage in that you will repay the loan on a monthly basis using your company’s natural cash flow. We can negotiate bespoke financing packages and interest rates with lenders based on your company’s revenue. 

While prominent players like high street banks operate in the commercial mortgage space, smaller firms can struggle to access smaller loans (in the region of a few hundred thousand pounds), as larger institutions tend to dominate the top of the market, catering to finance in the region of tens of millions of pounds, which may not be ideal for smaller firms. 

Boutique lenders tend to offer more flexible terms to businesses as they understand their setups better and often specialise in the space. There are multiple ways to structure commercial property finance and various facilities to consider, as well as an optimal loan term, which can last from a few months to up to twenty years. 


Business Bridging Loans

Companies often use business bridging loans to purchase office space and other commercial property types like a warehouse, manufacturing site or retail space. One of the benefits of this type of finance is that different sizes of loans are available (into the region of millions of pounds), and funding can be faster to negotiate and secure than a commercial mortgage. This means they can be ideal for companies that want to secure office space quickly because it’s a perfect location or at a ‘bargain’ price or because they are faced with a situation where they need to move very quickly and want to purchase office space rather than rent. 

Business bridging loans are a short-term type of finance, usually secured against the property the company will move into. They can last from just a few days (usually to tide over between a liquidity event or the completion of a different type of loan) or up to around three years. The loan then needs to be repaid in full. You’ll typically exit a business bridging loan by switching to a commercial mortgage or other longer-term financing facility or by accruing and paying off the loan and interest over the loan period with revenue generated via your company if cash flow allows. 



One area of tax planning that is often overlooked is Embedded Capital Allowances found in commercial buildings. This is either due to a lack of knowledge by the Accountant or needing to know who to refer to. We at Enness Global work with an award-winning Capital Allowance firm, a market leader in this sector.  

Since the 2001 Capital Allowances Act, commercial property owners have been able to claim certain qualifying items in their buildings and convert them to Capital Allowances to generate tax refunds and future relief. These items include lifts, suspended ceilings, electric cabling, plumbing, toilets, kitchens, CCTV, heating, and air conditioning systems etc. Anything that would remain in the building if it were tipped upside down.

On average, you can claim 26% of the cost of your property in Allowances. This isn’t tax evasion, and it’s not something your Accountant will have already claimed for you; it’s simply little-known legislation that requires a very specialist team, including surveyors.

Here is an example of a recent claim they have made:

  • Office building bought for £850,000 in June 2013
  • Total property improvements £458,000
  • Total Capital Allowances claimed £352,600
  • Total Tax benefits for the Limited Company owner £66,994

If you would like us to refer your property to the specialists for a Capital Allowance review, please get in touch. 



This guide is for information and illustrative purposes only and nothing contain within should be construed as advice or a recommendation.
Financing options available to you will depend on your requirements and circumstances at the time. Any changes in your circumstances, any known likely changes, or omissions in the information you provide can affect the suitability of the options available to you. These should be communicated to us as early as possible.
If you are considering securing debts against your main home, such as for debt consolidation purposes, please think carefully about this and consider all other options available to you.
Your home may be repossessed if you do not keep us repayments on your mortgage or other debts secured on it.
Corporate financing and lender introductions are unregulated.