Unlike traditional mortgages, commercial auction finance needs to be arranged quickly to meet the auction deadline—often within 28 days. This guide explains how commercial auction finance works, who provides it, and the key considerations investors must be aware of.
What Is Commercial Auction Finance?
Key Features of Commercial Auction Finance:
- Fast Approvals: Typically within 24–48 hours
- Loan-to-Value (LTV): Up to 75% of the purchase price
- Short-Term Duration: 6–24 months before refinancing
- Flexible Exit Strategies: Refinancing or resale
- Suitable for All Property Types: Retail, office, industrial, and mixed-use
Who Offers Commercial Auction Finance?
Several specialist lenders provide finance for commercial auction properties. These lenders understand the time-sensitive nature of auction purchases and offer tailored solutions for investors.
Top Lenders for Commercial Auction Finance in the UK:
Shawbrook Bank: Offers high LTV bridging loans for commercial buyers. Octane Capital: Specialises in flexible, non-status lending. Aldermore: Provides structured finance for complex transactions. United Trust Bank: Well-suited for mixed-use and commercial properties. Together Money – Known for fast bridging finance approvals.
These lenders assess factors such as property type, borrower experience, rental potential, and exit strategy before approving finance.
What Types of Commercial Properties Can Be Bought at Auction?
Investors can secure finance for a wide range of commercial auction properties, including:
- Office Buildings: Suitable for conversion, redevelopment, or leasing.
- Retail Units: Shops, high-street properties, and shopping centres.
- Industrial & Warehouses: Used for logistics, storage, or manufacturing.
- Mixed-Use Properties: Combining residential and commercial elements.
- Hotels & Guesthouses: High-yield investment opportunities.
Tip: Lenders may have different requirements for vacant vs. tenanted properties. Fully let properties may have better finance terms due to rental income security.
How to Secure Commercial Auction Finance?
Step 1: Get Pre-Approved
Before bidding at auction, secure a Decision in Principle (DIP) from a lender. This gives you confidence in your borrowing capacity and strengthens your bidding position.
Required Documents for Pre-Approval:
✔ Auction catalogue details of the property
✔ Proof of funds for deposit payment
✔ Business plan or investment strategy
✔ Personal financial details and credit history
Step 2: Conduct Due Diligence
Unlike residential properties, commercial properties often have complex legal or planning issues. Before bidding, check:
Title Restrictions – Ensure there are no legal complications.
Planning Permission – Confirm permitted use and development potential.
Structural Condition – Unmortgageable properties may need refurb finance.
Lease Agreements – For tenanted properties, review lease terms.
Example: A buyer secures a £400,000 retail unit at auction, but later discovers a restrictive covenant limiting its use. This prevents refinancing, causing financial strain.
Step 3: Arrange Deposit & Finance Quickly
Auction buyers must pay a 10% deposit on the day of the auction and complete the purchase within 28 days. This requires:
Short-Term Bridging Loan – Fast funding to complete the purchase. Development Finance – If the property needs refurbishment. Long-Term Commercial Mortgage – To replace short-term finance.
Tip: If you fail to complete within the deadline, you risk losing your deposit and facing legal action.
Loan Terms & Costs of Commercial Auction Finance
Additional Costs:
✔ Arrangement Fees: 1%–2% of the loan amount
✔ Valuation Fees: £500–£2,000+
✔ Exit Fees: May apply if repaid early
Use our Stamp Duty Calculator to estimate SDLT costs on commercial auction properties.
Case Study: Funding a Commercial Auction Purchase
Investor: David, an experienced landlord.
Property Type: Mixed-use retail & residential unit.
Auction Price: £350,000.
Finance Used: Bridging loan at 70% LTV.
Exit Strategy: Refinancing onto a long-term commercial mortgage.
Outcome:
- Purchased within 28 days using bridging finance.
- Increased value through refurbishments.
- Refinanced onto a 5-year commercial mortgage at 6%.
Lesson: Having a clear exit strategy helped David secure long-term, affordable finance.
Common Mistakes to Avoid When Buying Commercial Properties at Auction
- Failing to Arrange Finance Early: Always secure pre-approval before bidding.
- Ignoring Planning & Legal Issues: Check planning permissions and lease agreements.
- Overpaying on Interest: Consider refinancing onto a commercial mortgage quickly.
- Underestimating Renovation Costs: Factor in refurb costs before bidding.
Tip: Working with an experienced auction finance broker can help navigate these risks.
FAQs
Ans: No, most lenders require a deposit of at least 25%. However, additional security (like another property) may help you borrow more.
Ans: Bridging loans are short-term finance for quick purchases, while commercial mortgages provide long-term financing.
Ans: Most bridging lenders offer decisions within 48 hours, with funds available in 7–14 days.
Ans: Yes, but lenders may require a strong exit strategy such as redevelopment or securing tenants.
