Advising on the hurdles to avoid, Mark Kozo, commercial director at Approved Business Finance, shares advice on how to de-risk applications to put businesses in the strongest possible position to secure a commercial mortgage.
The Green Refinance Gap
In 2026, a property’s Energy Performance Certificate (EPC) is an important factor that lenders consider when reviewing a commercial mortgage application. Lenders are increasingly cautious of ‘stranded assets’ that may become difficult to let or sell due to looming environmental regulations.
This issue is particularly pressing, as commercial building owners and landlords should be preparing for an interim energy performance target of the proposed minimum targets of EPC C by 2028, and EPC B by 2030, though this is subject to change.
If you are considering a property with a lower EPC rating, you must include a costed ‘Green Retrofit Plan’ in your application. Proactively showing how you will improve energy efficiency can not only secure an approval but can often unlock ‘Green Loan’ products with more favorable interest rates.”
Strategic Interest Rate Hedging
While we have entered a period of relative stability in 2026, lenders are no longer underwriting based on the hope of imminent rate cuts. Credit committees are increasingly looking for borrowers, particularly larger or multi-site operators, to consider utilising interest rate hedging, such as interest rate caps, to provide greater certainty over their borrowing costs.
Instead of a standard variable rate, consider an interest rate cap. This allows you to benefit if rates fall further in 2026 but provides a guaranteed ‘ceiling’ that protects your cash flow if inflation spikes. Presenting a hedged position to a lender demonstrates a sophisticated approach to risk management, which can often result in more favorable loan-to-value (LTV) terms.
Debt Service Coverage Ratio (DSCR) Stress Tests
Lenders have moved past basic affordability and are now focused on the Debt Service Coverage Ratio. They want to see a clear buffer between your business’s net income and your mortgage obligations to ensure you can withstand future economic shifts.
Aiming for a DSCR of at least 1.25x to 1.5x puts your application in a much stronger position. If your current projections are tight, providing a larger deposit can lower your monthly repayments and move the deal into the lender’s ‘comfort zone’ before the underwriting process begins.
Sector-Specific Experience
Lenders currently favor sectors with strong rental growth, such as industrial, healthcare, and data centers, but they are increasingly selective about the team behind the deal. You need to prove that your business model is resilient enough to justify a 15-20 year commitment.
Don’t just provide accounts; include a biography that highlights your track record and how you’ve navigated previous industry challenges. For lenders in 2026, the quality of the operator is often as important as the quality of the brick and mortar.”
Conclusion
Credit appetite is returning, but underwriting discipline hasn’t loosened. Lenders are rewarding preparation, not optimism.
It means you have to think past just filling out the application; only the best-packaged deals are actually getting across the line.
The key to securing competitive funding is having the right preparation. That means you need to be future-proofing your assets today to meet the 2030 green standards, getting your internal accounts tidied up, and hedging against future volatility.
Ultimately, we want to make sure no business is held back by a hurdle that has a simple, strategic solution. By taking control of these factors now, SMEs and investors can secure the premises they need to support sustainable growth for the years ahead.
