Commercial refurbishment finance

Light versus heavy works

Cosmetic and internal upgrades such as decoration, new services, fit-out and replacement fittings are usually treated as lighter projects. Structural alteration, extension, change of use requiring planning, or substantial conversion is generally heavier. The boundary differs between lenders, so describe the scope precisely rather than choosing a label.

When it becomes development finance

Ground-up construction, major conversion or projects where most of the value comes from the works are commonly funded through development finance. That typically releases money in stages after a monitoring surveyor confirms progress, and expects detailed budgets, contractors and planning in place. Trying to fit a heavy project into a light bridge can leave you short of funds midway.

Budgets and contingency

Lenders want a costed schedule of works, a timetable and evidence you can cover overruns. Commercial buildings can hide problems such as asbestos, structural defects or failing services. A sensible contingency and a realistic programme protect the exit.

Hypothetical example, not a real client: an investor buys a dated office building to modernise and relet. Internal refurbishment might suit a refurbishment bridge; if the plan grew into converting the building to another use, development finance and planning approval would become central.

Valuation before and after

Lenders may consider both current value and an estimated value after works. Those future figures are opinions, not guarantees, and may not support the refinance if the market moves. Leasing the space after works often matters as much as the works themselves.

Choosing contractors and managing the programme

Lenders funding works generally want comfort that the people doing them are capable. That may mean contractor details, fixed-price quotes, insurance and, on larger projects, a professional team such as an architect or project manager. Doing the work yourself can be acceptable for light projects if you have relevant experience, but lenders may treat it more cautiously.

Delays are common in refurbishment and every month adds interest and holding costs. Programmes that assume perfect weather, instant availability of materials and no surprises tend to fail. Build realistic time into both the works schedule and the loan term.

Lease, landlord and freeholder consents

If the property is leasehold, alterations may need the freeholder's consent. If tenants remain in occupation during works, their lease rights may restrict what you can do and when. Check these consents early: lenders may make them a condition of release, and waiting for permission can stall the whole project.

VAT on works

VAT on building work can vary with the nature of the project and the property. Some conversions and works may be treated differently from ordinary repairs, and whether you can recover VAT depends on your own registration and use of the building. Ask your accountant before setting the budget, because VAT can change the cash you need during the works even if it is later recovered.

Planning and building control sign-off at the end of works matter too, because a refinance lender may ask for completion certificates.