Last updated: September 29th, 2026
Getting the right finance in place for a commercial to residential conversion project could be critical to its success.
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The short version
- Commercial to residential conversion finance is short term property lending used to buy a commercial building and fund its conversion into homes, repaid on sale or on refinance once the units are finished.
- Two products cover almost all of it. Bridging suits conversions with no major structural work. Development finance suits heavier schemes involving structural change, demolition or ground up building.
- Bridging typically funds up to 75% of the purchase price and up to 100% of build costs, released in arrears. Development finance typically runs to 85% of total cost and 75% of gross development value.
- Many Class E buildings in England can be converted under Class MA permitted development without full planning permission, although prior approval from the council is still required. Since 5 March 2024 there is no floorspace cap and the building no longer needs to have been vacant.
- The exit is either sale of the finished units or a refinance onto a buy to let or commercial term facility.
Written by Marcus Wright, owner and founder of Bolton Business Finance Ltd, in financial services since 2008 and a commercial finance broker since 2019. Last reviewed September 2026.
Having the right funding, at the right time is important for any property development project. With a commercial to residential conversions, finance may be required for different parts of the project. Such as:
- Finance to purchase commercial land and buildings
- Financing the cost of commercial conversion works
- Exit finance, such as Buy To Let Mortgages
It may be possible to use one lender for everything or it may require different lenders for different stages of the conversion.
That’s why working with a specialist property finance broker like us, can help make sure all your finance needs are taking care of from start to finish.
Click here to get in touch today.
Types of Commercial To Residential Conversion Finance
There are different ways to fund a commercial conversion project and also eligibility criteria varies between different lenders.
The main two product types being Bridging Loans and Property Development Finance.
When it comes to commercial conversion projects, each one is unique and often different so will require a bespoke financial solution to get the project finished.
Commercial To Residential Conversion Bridging Loans
A bridging loan may be suitable for some commercial to residential conversion projects.
Typically a bridging loan may be used if there are no major structural changes to the building, no ground up element, the building is not being demolished and for smaller projects.
Features of a Commercial Conversion Bridging Loan
- £25k to £10m
- Up to 75% LTV towards the purchase price
- Up to 100% of build costs funded
- 100% funding with extra security (1st or 2nd charge)
- No Quantity Surveyor (QS) required
- 12 – 18 month terms
- Lending across the UK in England, Scotland, Wales and Northern Ireland
Click here to apply for a Commercial Conversion Bridging Loan
Commercial To Residential Conversion Development Finance
In some instances a commercial conversion may require Property Development Finance.
This tends to be for larger and more complex projects. Such as when there are major structural works required, demolition of existing structures and significant ground up development.
Features of Commercial Conversion Development Finance
- £500k to £200m
- Typically up to 85% LTC
- Up to 75% LTGDV
- Quantity Surveyor (QS) usually required
- 24 months terms
- Lending across the UK in England, Scotland, Wales and Northern Ireland
Click here to apply for Commercial Conversion Property Development Finance
Which Lenders To Approach, and How To Choose
This is the question we are asked most often, and the honest answer is that there is no single best lender for conversions. Lending for this splits into three groups, and picking the wrong group costs you weeks before anyone tells you no.
| Lender group | Suits | What to expect |
|---|---|---|
| Bridging lenders | Conversions with no major structural work. Internal reconfiguration, subdivision, change of use under permitted development. | Fastest to complete, often in weeks. Usually no Quantity Surveyor. Up to 75% of purchase and up to 100% of build costs in arrears. Terms of 12 to 18 months. |
| Development lenders | Heavier schemes. Structural change, demolition, ground up elements, or a large number of units. | Slower to arrange and more paperwork. QS required and signing off every drawdown. Typically up to 85% of total cost and 75% of gross development value. Terms around 24 months. |
| Lenders that do both | Schemes that start light and grow, or where you are not yet certain how structural the works will be. | A smaller group, but valuable. One facility that can flex from a bridge into a development structure without refinancing partway through the build. |
Once you are in the right group, the variables that actually move the terms are these.
- Your track record. The single biggest lever. A developer on their fourth conversion gets materially better terms than one on their first, and some lenders will not look at a first timer on a multi unit scheme at all. If it is your first, that is workable, but it narrows the list and it should shape who we approach.
- Whether planning is in place. A scheme with prior approval or full planning granted is a different proposition from one where it is pending. Some lenders will fund pre-planning at a lower advance and let you refinance up once it is granted.
- Whether you already own the building. If you do, there is no purchase to fund and the equity in the building does much of the work. That often means the conversion can be funded with little or no further cash going in.
- How firm the exit is. The exit is what is really being underwritten. A signed sales strategy or an agreed refinance in principle is worth more than a good headline rate.
- The unit mix and the end value. Lenders are more cautious on schemes producing a large number of small units in a market where the comparable evidence is thin, because that is where valuations come back short.
Why the cheapest quote is often not the one to take
Two lenders looking at the same conversion can differ enormously on how much they will actually advance, and the gap between them is usually worth far more than the difference in rate. A facility that is half a point cheaper but leaves you £80,000 short at drawdown three is not the cheaper facility. Size the advance first, then compare pricing within the lenders that can reach it.
The other thing worth saying plainly: tell us who has already seen the case. Approaching the same lender twice through a different route does not help you, and it leaves a footprint the next lender can see.
Worked Example: Six Apartments in a Former Conservative Club, Bacup
A real scheme we funded, included because it shows the full cycle from conversion facility through to exit, and because the structure is one people often do not realise is available.
The building was the Old Conservative Club on Irwell Terrace in Bacup, built in 1893 as a political club for the town. The client already owned it, having bought it for £132,000. The scheme converted it into six apartments, retaining the original features, the high ceilings and the large windows.
| Item | Figure |
|---|---|
| Original purchase price | £132,000, already owned by the client |
| Conversion cost | £500,000 |
| Total cost | £632,000 |
| Units created | Six apartments |
| Gross development value | £1,000,000 |
| Conversion facility | Bridging, structured as a drawdown facility against the building already owned plus the cost of works |
| Exit | £750,000 five year specialist multi unit buy to let mortgage |
| Exit loan to value | 75% of the £1m gross development value |
Two things are worth pulling out of that.
There was no purchase to fund. Because the client already owned the building, the bridge was arranged as a drawdown facility rather than a purchase plus build facility. The equity already sitting in the building carried the deposit function, so the conversion was funded without a large cash injection at the start. If you own a commercial building and have been assuming you need to refinance it first and then find a separate development facility, you usually do not.
The exit did the heavy lifting. A £750,000 five year multi unit buy to let facility against a £1,000,000 gross development value repaid the bridge and left the client holding a finished six unit block with a long term facility on it. Six flats under one freehold title is a specialist product. Most mainstream buy to let lenders will not write a multi unit freehold block, so the exit lender has to be lined up as part of the plan rather than found at the end.
Figures are the actual figures from this scheme, shared with the client’s permission. They are included to show how a conversion facility and its exit fit together and are not a quotation or an indication of terms available on any other scheme. Every case is assessed on its own merits, and all finance is subject to status, lender criteria and credit assessment.
Commercial Conversion Key Considerations
Have you considered these key points below for your commercial to resi conversion?
- Does it require full planning permission? If the scheme falls outside permitted development, or an Article 4 Direction applies, you are on a full application and the timeline lengthens considerably.
- Can you use permitted development? Class MA covers most Use Class E buildings in England and is faster, but it still needs prior approval and it does not cover external works.
- What will the cost of works be? Lenders fund against a costed schedule, not an estimate. On larger schemes a Quantity Surveyor will sign off each drawdown, and an underestimated build cost is the most common reason a scheme runs out of facility partway through.
- What will the end value of the units be (GDV)? Gross development value drives the loan, because development lending is sized against a percentage of GDV as well as against cost. Get this wrong on the optimistic side and the facility shrinks at valuation.
- Will you exit via sale or refinance? Decide before you draw, not at the end. A sale exit needs a realistic sales period built into the term. A refinance exit needs a lender willing to take the finished building, which is a question worth answering in week one rather than month ten.
Class MA Permitted Development and What Changed in 2024
Planning is what decides whether a conversion is fundable, so it is worth being clear on where the rules now sit. Most lenders will want to see the planning position before they release anything.
Class MA is a permitted development right in England that allows buildings in Use Class E to be converted to residential use without applying for full planning permission. Use Class E is broad. It covers shops, offices, restaurants and cafes, gyms, health and medical premises, nurseries, professional services and light industrial space. You still need prior approval from the local planning authority, but that is a narrower and faster test than a full application.
The two restrictions removed on 5 March 2024
- The 1,500 sqm floorspace cap is gone. Class MA now applies to a building of any size. Previously anything above 1,500 sqm fell outside the right and needed a full planning application, which ruled out most larger office blocks.
- The three month vacancy requirement is gone. The building no longer has to have been empty before you apply for prior approval. It can be occupied and producing rent while the application runs.
Source: The Town and Country Planning (General Permitted Development) (England) (Amendment) Order 2024, SI 2024/141, in force 5 March 2024. Article 3 removes both the three month vacancy requirement and the floorspace upper limit from Class MA.
The second of those is the one that matters most for funding, and it is routinely overlooked. Under the old rules you had to empty a building and leave it standing idle for three months before you could even apply, which meant carrying the holding costs with no income against them. That is no longer the case. You can now hold a tenanted commercial building, collect the rent, and run the prior approval process at the same time.
That changes what lenders will look at. Rental income during the pre-works period strengthens the case, because it covers some of the interest before the conversion starts. It also means a building bought as a commercial investment can move to a conversion scheme without a dead period in between.
Three things to check before you rely on Class MA.
Article 4 Directions. A local authority can withdraw permitted development rights in