Last updated: September 15th, 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 a defined area, and many have done so in town centres and conservation areas. If an Article 4 Direction covers your site, Class MA does not apply and you need full planning permission. Check this first, because it is the most common reason a conversion scheme falls over at the funding stage.
It is a change of use right, not a building right. Class MA covers the change from commercial to residential. It does not grant permission for external alterations, extensions or additional storeys. Anything beyond internal reconfiguration generally needs a separate planning application.
England only. Class MA does not apply in Scotland, Wales or Northern Ireland, which have their own planning regimes. We arrange conversion finance across all four nations, but the planning route differs.
FAQ: Commercial Conversion To Residential Finance Questions
Here are some common questions we are asked about finance for commercial conversion to residential property developments.
Can I use a Bridging Loan for Commercial To Residential Conversion?
Yes a bridging loan can be used to finance a commercial to residential conversion project. A bridging loan will typically provide up 75% LTV of the property purchase cost and up to 100% of the cost of works (in arrears).
Do I need Development Finance for a Commercial To Residential Conversion?
You don’t necessarily need development finance for a commercial to residential conversion, in some instances a Bridging Loan can be used instead. Typically development finance would be required for more complex projects with elements such as ground up building work, significant structural work and demolition of existing structures.
Do you need planning permission to change from commercial to residential?
You don’t always need full planning permission to convert a building from commercial to residential use. Some commercial conversion can be done under Permitted Development rights, using Class MA which was introduced on 1st August 2021.
This allows the conversion of Use Class E buildings such as commercial and office space into new homes in England. If your project meets a set of conditions, you will not need to apply for full planning permission. But you still need to apply for prior approval from your local council.
Class MA was relaxed on 5 March 2024. The 1,500 sqm floorspace cap was removed, so there is now no size limit on what can be converted, and the requirement for the building to have been vacant for three months before applying was removed as well. Article 4 Directions still apply in some areas and can switch the right off locally, so always check before you commit.
Do you need planning permission before applying for commercial conversion finance?
It’s possible you may need to buy a property or land before apply for full planning permission. In this case you can use a short term bridging loan to buy the land or building while you apply for planning. Once planning is granted you can then refinance the property and can even benefit from the higher value due to any planning gains since it was purchased.
Which lenders should I approach for a commercial to residential conversion?
There is no single best lender, because conversion lending splits into three groups and the right one depends on the scheme rather than on price alone.
Bridging lenders suit conversions with no major structural work, and will usually fund without a Quantity Surveyor. Development lenders suit heavier schemes with structural change, demolition or ground up building, and will require a QS to sign off each drawdown. A smaller group will do both under one facility, which matters when a scheme starts as a light conversion and grows.
What actually decides it is your experience as a developer, whether prior approval or full planning is already in place, how firm the exit is, and whether the building is already owned or being purchased. Two lenders looking at the same scheme can differ by a wide margin on how much they will advance, so the sensible approach is to match the scheme to the right group first and compare within it.
Can I get bridging finance to convert offices into flats under permitted development?
Yes. Office to residential conversion under Class MA is one of the most commonly funded conversion types in England, and bridging is usually the right product where the work is internal reconfiguration rather than structural.
Lenders will want to see the prior approval, or a clear view on whether it will be granted, before they release funds. Some will lend against a scheme where prior approval is still pending, at a lower loan to value, and allow you to refinance up once it is granted. Because the vacancy requirement was removed in March 2024, you can now buy or hold an office that is still tenanted and producing rent while the prior approval process runs, which changes the cash flow on the deal considerably.
Can I borrow against a commercial building I already own to fund the conversion?
Yes, and this is a common structure that people often do not realise is available. If you already own the building, there is no purchase to fund, so the facility is arranged as a drawdown against the asset plus the cost of works.
The equity already in the building does a lot of the work, which usually means you can fund the conversion with little or no further cash going in. The lender will still assess the scheme, the end value and the exit in the same way. We arranged exactly this structure on a six apartment conversion in Bacup, set out in the worked example above.
How do you exit a commercial to residential conversion loan?
Either by selling the finished units or by refinancing onto a term facility. Which one you choose should be decided before the conversion facility is drawn, not afterwards, because the exit is what the lender is really underwriting.
If you are keeping the units, the usual exit is a buy to let mortgage, or a multi unit freehold block mortgage where several flats sit under one title. Specialist multi unit lenders will consider blocks that mainstream buy to let lenders will not touch. If the finished building trades as serviced accommodation or holiday lets, the refinance is assessed on trading income rather than on standard residential comparables, and that is a different and smaller group of lenders again.
Apply today for Commercial To Residential Conversion Finance
As an independent property finance brokers we specialise in arranging funding for property investors and developers across the UK.
Let us help you on your next commercial conversion project by calling 0161 5469128 or completing the form below.
About the author
Marcus Wright is the owner and founder of Bolton Business Finance Ltd. He has worked in financial services since 2008, beginning at Santander, and has been a commercial finance broker since March 2019. He founded the firm in 2020 and is a member of the National Association of Commercial Finance Brokers.
He arranges bridging finance, development finance, commercial mortgages, business loans, asset finance and invoice finance for UK businesses and property investors, working with a panel of more than 135 lenders. He can be reached on 0161 546 9128.
Bolton Business Finance Ltd is registered in England and Wales, company number 12495909. Registered office: Westgate House, Westgate Avenue, Bolton, BL1 4RF.
Bolton Business Finance Ltd is not authorised or regulated by the Financial Conduct Authority. We arrange non-regulated commercial and business finance only, and do not advise on or arrange residential mortgages, consumer buy to let, equity release or consumer credit. All finance is subject to status, lender criteria and credit assessment. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.