Collateral: what it means for business borrowing
Collateral is an asset a borrower pledges to a lender as security for a loan, which the lender can sell to recover its money if…
Construction and property
Loan to value (LTV): what it means for business borrowing
LTV meaning: loan to value is the loan as a percentage of the property or asset value. How to work it out, a UK example and how LTV changes what you can borrow.
Loan to value, or LTV, is the amount you borrow as a percentage of the value of the property or asset that secures the loan. It is the first number a secured lender looks at, because it shows how much of a cushion there is if the asset has to be sold.
How to work out LTV
LTV = loan amount ÷ value of the security × 100.
A business borrows £300,000 against a warehouse valued at £500,000: £300,000 ÷ £500,000 × 100 = 60% LTV. If an existing first charge of £100,000 is already on the property and you add a second charge loan of £150,000, lenders look at the combined figure: £250,000 ÷ £500,000 = 50%.
Which value is used
Lenders use their own valuation, usually by a surveyor they appoint, rather than the price you hope to achieve. On a purchase they normally use the lower of the price and the valuation. For property development, lenders also talk about loan to cost and loan to gross development value (LTGDV), the value of the finished scheme.
How LTV affects borrowing
- How much you can borrow: each product has a maximum LTV, so the value of the security caps the loan.
- Price: a lower LTV usually means a lower rate, because the lender is better protected.
- Choice: more lenders compete for low-LTV cases; high-LTV cases need specialist lenders.
- Type of property: lenders often allow a different LTV on residential and commercial property.
On our panel, most secured business loan products (the middle half of them) lend up to 70% to 75% of a residential property's value and up to 70% to 75% of a commercial property's value, depending on the lender and the product (indicative ranges from lenders on our panel, checked October 2026; your maximum depends on your circumstances).
LTV is only half the test. Lenders also check the business can afford the repayments, through measures such as interest cover and the debt service coverage ratio.
To see what LTV means for your plans, try our commercial mortgage calculator, or see secured business loans and commercial mortgages. We search the market for lenders whose LTV limits fit your security. Any broker fee depends on the lender, with nothing to pay upfront.
Related terms
Sources
This guide is general information, not financial advice. Lenders set their own criteria, rates and terms, and all finance is subject to status.
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FAQs
Common questions
What is a good LTV for a commercial mortgage?
There is no single good figure; each lender sets its own maximum by property type and borrower. The lower the LTV, the more lenders will look at the case and the better the pricing tends to be. A larger deposit or extra security lowers the LTV.
Does LTV include fees added to the loan?
Usually, yes. If an arrangement fee is added to the loan, lenders count the gross loan, including the fee, when they check the maximum LTV.
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