Factory, workshop and industrial unit finance

A factory mortgage is a commercial mortgage used to buy or refinance a factory, workshop, manufacturing plant or industrial unit. It is secured on the building and repaid over an agreed term, usually monthly. Most factory finance is unregulated business lending (FCA Handbook PERG 4.4, accessed 20 Oct 2026).

The same loan type covers small workshops on a business park, mid-sized industrial units and larger manufacturing sites. Lenders treat them as one family of security, but they look closely at how specialised the building is, because a building that suits only one process is harder to sell or relet.

When the business that uses the unit is buying it, the lender assesses the loan mainly on the business. Trading accounts, profit, existing debt and the directors' experience show whether the business can meet the repayments. The property is security, but affordability comes from the business's own earnings rather than from rent.

Buying the premises rather than renting can fix occupation costs and build equity, but it ties capital into the building. Owner-occupied lending on all kinds of business premises is covered in the commercial mortgages section, which explains the wider market that industrial units sit in.

When an investor buys an industrial unit to let, the lender looks at the lease and the tenant. Lease length, rent, the tenant's financial strength and how easy the unit would be to relet all affect the loan. Multi-let industrial estates are assessed on the whole rent roll, with attention to vacancies and lease expiries.

Lenders usually test that the rent covers the interest by a set margin, the interest cover ratio, which each lender sets for itself. A short unexpired lease or a weak tenant can reduce the loan or lead the lender to assess it as if the unit were empty.

Lenders instruct a commercial valuation of the unit and check its condition, construction, eaves height, access, yard space and use class. They also look for environmental risk, because past industrial use can leave contamination. An environmental search, and sometimes a fuller report, is common on factories and workshops.

Specialist buildings, such as units with heavy plant fixed in place or sites with past chemical use, are usually lent on at a lower loan-to-value or need a specialist lender. Standard light industrial units on established estates are the easiest for lenders to value and finance.

Factory mortgages differ on loan-to-value, term, fixed or variable pricing, fees and how lenders treat the business or the tenant. Banks, challenger banks and specialist lenders all lend on industrial units, and their appetite for specialist buildings varies. Comparing on the total cost over the term gives the clearest picture.

How pricing is built up for industrial property, and what moves the rate, is set out on the industrial mortgage rates page. A broker who arranges industrial lending regularly can say which lenders accept a particular building and business.