Loan-to-value (LTV) explained for business borrowing

What loan-to-value means

Loan-to-value, or LTV, measures how much you are borrowing against the value of the asset securing the loan, written as a percentage. Borrow £150,000 secured against a commercial property worth £250,000 and the LTV is 60%. It applies wherever a loan is backed by collateral — typically property, but sometimes plant, vehicles or other assets.

LTV matters because it tells the lender how much cushion sits between the debt and the value of what backs it. The lower the LTV, the more the asset is worth relative to the loan, and the more comfortably the lender could recover its money if things went wrong. It is one of the first numbers a secured lender looks at.

How LTV is calculated

The formula is simple: divide the loan amount by the asset's value and multiply by 100. The complication is the value. Lenders rely on a professional valuation rather than what you paid or hope the asset is worth, and they often value conservatively — sometimes on a forced-sale or open-market basis that comes in below your own estimate.

That conservatism directly limits how much you can borrow. If a lender caps lending at 70% LTV and values your property at £200,000, the most they will advance is £140,000, however much you wanted. Where you already have borrowing secured on the same asset, that existing charge counts too, reducing the headroom left for new lending.

Why LTV drives price and availability

LTV does two jobs. First, it sets a ceiling: most secured lenders publish a maximum LTV they will go to, and you simply cannot borrow above it against that asset. Second, it influences the rate. A lower LTV means less risk for the lender, which usually earns a better rate; pushing towards the maximum LTV tends to cost more, because the lender's safety margin is thinner.

This is why two businesses borrowing the same amount can be quoted very different rates — the one pledging a more valuable asset, and therefore borrowing at a lower LTV, is the safer bet. It mirrors the broader logic of secured versus unsecured finance.

When LTV does not apply

LTV is a feature of secured lending. If a loan is unsecured — backed by the company's trading and affordability rather than a specific asset — there is no asset to measure against, so LTV is irrelevant. The lender's focus shifts entirely to cash flow, trading history and creditworthiness instead.

That is the model Credicorp uses. As a commercial lender to limited companies, it assesses the company's ability to repay rather than requiring property or other collateral, and it takes no personal guarantee. You can explore our business loans or register to apply. This guide is educational and not financial advice.