Loan to Value on Secured Business Loans Explained
What is loan to value on a secured business loan? Learn how LTV works, typical ranges by asset, and how it shapes your borrowing. Compare the market with Greenwood.
Loan to value (LTV) is the size of a secured loan expressed as a percentage of the value of the asset used as security. A £300,000 loan against a property valued at £500,000 has an LTV of 60%. On secured business loans, LTV is one of the biggest factors deciding how much you can borrow, what it costs, and whether a lender will proceed at all.
This page explains how LTV is calculated, the typical ranges lenders work to, how it affects pricing and risk, and how to think about it for your own situation. Greenwood Capital is a whole-of-market broker, and this is general information rather than financial advice.
What does loan to value mean on a secured business loan?
Loan to value is the ratio between what you borrow and what your security is worth, written as a percentage. The formula is simple: loan amount divided by asset value, multiplied by 100.
So a £180,000 loan secured against commercial premises valued at £300,000 gives an LTV of 60%. The lower the LTV, the more equity or headroom sits between the debt and the asset value, and the safer the loan looks to the lender.
LTV matters because it measures the lender’s exposure. If a borrower cannot repay and the asset has to be sold, a lower LTV gives more room for the sale to clear the debt, costs and any drop in value. That is why LTV drives both the decision to lend and the price of the money.
How is the asset value decided?
Lenders base LTV on a formal valuation, not on what you paid or what you hope the asset is worth. For property this usually means a RICS surveyor’s report, and lenders often use the “market value” or sometimes a more cautious “90-day” or forced-sale figure.
This is a common surprise. If your building would sell for £400,000 on the open market but a surveyor down-values it to £360,000, every LTV calculation uses £360,000. A gap between your expectation and the valuation directly reduces how much you can raise.
How does LTV work across different types of security?
Maximum LTV varies by asset type because different assets carry different risk, resale liquidity and price volatility. Property tends to support the highest LTVs, while specialist or fast-depreciating assets support lower ones.
The figures below are typical market ranges to illustrate the pattern. They are not offers, and actual limits depend on the lender, the specific asset and your business profile, so always confirm current terms.
Property (commercial and residential investment)
Property is the most widely accepted security and usually supports the highest LTVs, often up to around 70% to 75% on commercial property and sometimes higher on residential. Standard, easily saleable premises in good locations attract the most generous terms.
Specialist property such as care homes, petrol stations or unusual buildings tends to support lower LTVs because it is harder to sell quickly.
Business assets and equipment
Plant, machinery and equipment generally support lower LTVs than property because they depreciate and can be harder to resell. A lender may advance a smaller percentage of a machine’s value, and used or highly specialised kit attracts more caution.
Debtors, stock and other assets
Assets like the sales ledger (through invoice finance) or stock can be used as security, but the advance rate against them is usually well below property LTVs and reflects how reliably they convert to cash.
What are the key trade-offs of LTV?
The core trade-off is simple: a higher LTV lets you raise more money against the same asset, but usually costs more and is harder to secure, while a lower LTV is cheaper and easier to arrange but frees up less cash. Choosing your target LTV is about balancing how much you need against price and approval odds.
The table below sets out the main trade-offs across the LTV range. Costs are described directionally rather than with specific rates, because pricing varies by lender, asset and borrower profile.
| Factor | Lower LTV (e.g. up to 50%) | Mid LTV (e.g. 50% to 65%) | Higher LTV (e.g. 70%+) |
|---|---|---|---|
| Cash raised against the asset | Less | Moderate | More |
| Typical pricing direction | Lowest, most competitive | Middle of the range | Highest, more risk priced in |
| Range of lenders willing to consider | Widest | Broad | Narrower |
| Sensitivity to a down-valuation | Low | Moderate | High |
| Underwriting scrutiny | Lighter | Standard | Heavier, more conditions likely |
Two things are worth stressing. First, the highest advertised LTV is a ceiling, not a guarantee, and you may be offered less once the valuation and affordability checks are done. Second, cost rises as LTV rises because the lender is taking on more risk, so borrowing the maximum is not always the cheapest way to hit your goal.
How do you decide the right LTV for your situation?
The right LTV is the one that raises what you genuinely need while keeping the cost affordable and the deal deliverable, rather than simply the highest number a lender will allow. Work backwards from the amount you need and the repayments you can comfortably sustain.
A useful way to approach it is to consider these points in order.
- Start with the amount you actually need, not the maximum available. If a 55% LTV covers your purpose, there is rarely a reason to push to 75% and pay more.
- Check affordability at the resulting repayment. A higher LTV means a larger balance and usually a higher rate, so the monthly cost can rise faster than the extra cash you receive.
- Leave headroom for a cautious valuation. If your plan only works at the very top of the LTV range, a modest down-valuation can leave a shortfall.
- Think about the exit or repayment route. Lenders look at how the loan will be repaid or refinanced, and a stretched LTV can make future refinancing harder.
- Consider the asset mix. Combining assets, or offering additional security, can sometimes achieve the amount you need at a lower blended LTV and better price.
Because lenders price and cap LTV differently, the same request can produce very different offers across the market. This is where comparing multiple lenders matters, and it is the kind of legwork a whole-of-market broker can do on your behalf.
Worked examples
Example 1: raising working capital against premises
A wholesaler owns freehold premises independently valued at £500,000 with no existing charge. It wants to raise £250,000 for stock and expansion.
That request is an LTV of 50% (£250,000 divided by £500,000). Because there is generous equity behind the loan, this sits comfortably within typical property LTV limits, is likely to attract competitive pricing, and appeals to a wide pool of lenders. If the business only needed £150,000, the LTV would fall to 30% and the terms could improve further.
Example 2: a stretched request meeting a down-valuation
A manufacturer expects its unit to be worth £400,000 and applies to borrow £300,000, a 75% LTV. The surveyor values the unit at £360,000 instead.
At the lender’s maximum of 70%, the £360,000 valuation supports only £252,000, not the £300,000 requested. The borrower now faces a £48,000 shortfall and must either reduce the amount, add further security, or find a lender willing to consider a higher LTV, which usually costs more. This shows why stretched LTVs carry more valuation risk.
Common mistakes and things people overlook
Most LTV problems come from confusing your own view of value with the lender’s, or from focusing on the headline percentage rather than the total cost. Watch for the following.
- Assuming your valuation figure. The lender uses a professional valuation, which can come in lower than you expect, especially for specialist property.
- Forgetting existing charges. If the asset already has a loan against it, the new borrowing is measured on top of that, so the combined LTV is what counts.
- Chasing the maximum LTV. The highest advance often carries the highest rate, so borrowing more than you need can be an expensive habit.
- Ignoring fees and costs. Valuation fees, legal costs and any arrangement or lender fees affect the real cost of the deal, so always confirm the full picture with the lender.
- Overlooking net versus gross. On some facilities, fees and interest can be added to the loan, which affects the effective amount you receive and the LTV, so ask how the figure is calculated.
- Thinking LTV is the only test. Lenders also assess affordability, trading history and the repayment route, so a good LTV alone does not guarantee approval.
Compare the market with Greenwood Capital
LTV limits, pricing and appetite differ widely from lender to lender, so the same request can produce very different offers. Greenwood Capital is a Manchester-based, whole-of-market broker, and we can compare lenders across the market and match options to your situation.
Tell us what you are looking to raise and the security you can offer, and we will do the legwork of finding and comparing suitable options. This is general help rather than financial advice, and any figures should be confirmed directly with the lender before you proceed.