In Australia it’s difficult to find information on the internet about commercial property loans.

Lending policies and interest rates are rarely found on lender websites. Unlike normal home loans, the pricing of a commercial property loan is rarely set in stone and many of the terms can be negotiated.

So which lender is best for your commercial purchase or are you looking to refurbish or get fitouts? It depends on many factors.

Need help buying a commercial property?
Talk to our experts and get a free assessment.

The Basics

About the size of a commercial property loan

Australian banks and other commercial lenders each have their own risk profiles and maximum loan amounts. The maximum available from our lenders are:

  • 100% of the property value using a guarantor to secure your loan.
  • 80% of the property value for loans up to $1,000,000.
  • 75% of the property value for loans up to $2,000,000.
  • 70% of the property value for loans up to $5,000,000.
  • Commercial property loans from $5,000,000 to $50,000,000 are on a case by case basis.

Aside from the lender, the type of commercial property loan and nature of your security will have an affect on the amount that you can borrow:

  • If a residential property is used as security, you may be able to borrow 100% of its value.
  • Lease doc, low doc, and no doc loans will require a larger deposit.
  • Specialised security properties will require a larger deposit.

Security for a commercial property loan

Different types of security represent different risks to the banks. Standard commercial properties are usually the best type of security for a commercial property loan. For example:

Standard security is classed as having a wide appeal, is in a good location and is zoned as residential, commercial, industrial or mixed.

Specialised commercial properties are more difficult to value and sell so they are a higher risk to the lender:

Specialised properties will require a detailed valuation and risk assessment from the bank. You’ll normally be required to have a sizeable deposit to get your loan approved.

With some types of commercial transactions, you can buy the leasehold, which is the right to occupy and run the business but not the freehold property itself.

Where a property can be used in several ways then the lender may request an alternative use valuation, which can work for you or against you depending on the transaction.

Commercial property loan purpose

Commercial property loans that are used for business or investment purposes, with the exception of residential investment properties, are not regulated by the National Consumer Credit Protection (NCCP) Act.

This means that most commercial borrowers do not have the same protection as home buyers.

The purpose of your commercial property loan will affect how your loan is assessed:

  • Investment (low risk): To buy or refinance a commercial property that will be leased.
  • Owner occupied (medium risk): To buy or refinance a commercial property that is leased to or occupied by your own business.
  • Working capital (high risk): Financing the day to day operations of your business or liquidity shortfalls.
  • Other purposes: All other commercial, business or investment purposes are considered on a case by case basis, e.g. buying an insurance broking practice.

Remember, it isn’t what your commercial property loan is secured on that determines the purpose but what your loan is used for.

Be careful if you’re using a commercial property as security for a loan that is not used for business or investment purposes such as buying a house by using your office as additional security. In this case, the loan would be regulated under the NCCP Act and some commercial lenders would not be able to approve your application.

Proving income for a commercial property loan

As there is less legislation governing commercial property loans, the banks have more freedom with their lending policies.

In particular, they are not required by law to prove that a borrower can afford a loan. This has given rise to several income verification options:

  • Full doc: This is a standard loan application where you provide full financial statements.
  • Lease doc: You must prove that the income from the lease is more than the interest repayments.
  • Low doc: You must provide partial income evidence such as an accountants letter, bank statement or BAS statements.
  • No doc: You won’t need to no evidence that you can afford the debt.
  • Forecasts: You must provide a profit and loss forecast showing that this loan will allow your business to earn additional income which will be sufficient to cover the repayments.

Of course, it is still good practice to lend to people that can afford to repay the commercial property loan! Don’t expect the banks to approve your loan if it represents a high risk. Non-bank and specialist commercial funders may consider a higher risk application such as a no doc loan.

Commercial property loan features

What are the typical features of a commercial property loan?

  • Full doc: Individuals, companies, trusts and self-managed superannuation funds are acceptable.
  • Term: Up to 15 years (longer on application) or 30 years for residential security.
  • Interest only: Up to 5 years (longer on application).
  • Interest rate type: Variable, fixed (up to 5 years) or bank bill facilities.
  • Additional repayments: Allowed on variable loans.
  • Redraw: Allowed for amounts that you have pre-paid.
  • Offset accounts: Normally not available.
  • Line of credit (LOC): Available at higher interest rates.
  • Capitalised interest: Available for development or land sub-division finance.

Each lender has their own target market, products and pricing so it is important to get matched with the lender that can accommodate your needs. This is where an experienced commercial mortgage broker can help.

What is a general security agreement?

When applying for a commercial property loan, you’re usually required to provide a residential property as security.

Despite the collateral you provide, most banks will also ask for a General Security Agreement (GSA) over the property and any and all of your business assets.

However, as long as you have you can afford the loan or you have sufficient equity, your mortgage broker can argue against a GSA or Guarantee and Indemnity (G&I).

To explain, if your income from the property itself can service the debt then some banks will consider just the property as security without a personal guarantee from the directors.

If you need directors income then you must have a directors’ guarantee.

Please check out the ‘Avoiding A General Security Agreement‘ page if you want to learn more.

Commercial loan without switching business banking

If you need a loan to buy your own commercial premises, you usually need to transfer your business banking to the new lender as part of the deal.

However, there are ways to avoid this requirement.

You can find out how you can avoid this on our ‘Commercial Loan Without Switching Banking‘ page.


Choosing a lender

Getting a commercial property loan approved

The method that banks use to assess commercial property loans is extremely complicated as each application and security property is unique. Working out which lender is right for you isn’t easy because no bank is going to tell you that they aren’t the market leader in a particular area.

Step 1: Choose the right lender

Which lender specialises in the type of finance that you are after? As mortgage brokers, we tend to see one or two banks dominate each niche within the commercial funding market.

For example, we would recommend different banks for different client types:

  • Startup businesses.
  • Low risk commercial property investors.
  • Highly-geared commercial property investors.
  • Corporate borrowers.
  • SMSFs.
  • Developers.

By choosing a lender that has more experience lending to people with properties like yours, you’ll be much more likely to get your commercial property loan approved.

Step 2: Present a strong case

Don’t just fill in the application form and provide the documents that they ask for! You need to highlight the strengths of your application and present your situation in the way that the bank prefers to receive it.

Often, banks have their own templates and forms that they want filled in. Some banks like to see as much information as possible whereas with others it is best to provide the bare minimum.

Most of our mortgage brokers have actually worked in a bank’s credit department, approving and declining home loan applications. So this is something that we can help you with.

Step 3: Mitigate their concerns

What if the bank doesn’t approve your application right away? Then it’s time to negotiate and see if you can resolve the problem.

There are two main ways to do this:

  • Provide additional information to show that their concern is unjustified.
  • Change your situation to better match their lending guidelines.
  • Negotiate pricing to match the risk of your application.

For example, maybe the lender sees that you have a bad credit history from a dispute with one of your suppliers.

You can provide additional information in the form of a letter from your solicitor explaining what happened and a bank statement showing that you could have paid the debt if you had wanted to.

Or maybe the lender isn’t comfortable with the size of your loan considering that you are a new borrower to the bank.

In this case, changing your situation by reducing your LVR would lower the risk to the bank and enable them to consider your application.

Getting a low interest rate

Firstly, each lender has a different cost of funds depending on where they obtain the money that they lend out. Naturally, the lenders with lower risk appetites tend to have lower interest rates.

Secondly, many lenders have a risk matrix which they use to price a larger commercial property loan. This risk matrix will take into account:

  • Location of the security property.
  • Diversification of the property portfolio.
  • Condition and appeal of the security property.
  • Current and future state of the local property market.
  • Level of interest cover (ability to repay the debt).
  • Loan to Value Ratio (LVR).
  • Length of time until the lease(s) expire.
  • Strength of the tenant(s).
  • Asset position of the borrower.
  • Management experience / track record.

This risk matrix is a lot different to smaller commercial transactions where the LVR, loan size, and loan amount are the main determiners of the interest rate and fees.

Which lender will offer someone in your situation a low interest rate? Call us on 1300 889 743 or enquire on our website and one of our mortgage brokers will call you back.

What other things do I need to consider?

As always, be careful who you do business with! You should see your lender as a business partner and you should know who you are doing business with.

Some private lenders are known for trying to take possession of development sites or for finding excuses to charge the default rate of interest.

The reputation of your lender matters. For small transactions with large lenders you will have little bargaining power to negotiate specific terms. On other hand, with a larger commercial loan you may be able to negotiate a loan contract that is more favourable.

The major banks can be incredibly ruthless with commercial customers so make sure that you negotiate from a position of strength and don’t push your boundaries! When push comes to shove they will look after themselves and not you.

Why do annual reviews matter?

For a small commercial property investment there is rarely any need for the bank to conduct annual reviews. However, where the risk to the bank may change from year to year, they may require a review.

The most common situations where a lender will require an annual review are:

  • If the commercial property loan is over $2,000,000.
  • Unsecured facilities.
  • Specialised security properties.
  • High-LVR, interest only loans.
  • If you are struggling with your repayments.

The lender will ask you to provide a profit and loss, balance sheet and cash flow forecast. In some cases, they may also revalue your security property.

The bank may use this as an excuse to label your commercial property loan as a higher risk and change the margin on your loan.

If this is likely to be a problem for you then let us know upfront and we can apply with a lender that doesn’t require annual reviews.


Should you use a mortgage broker?

Applying for a commercial property loan is much more complex than a residential property, banks don’t publish their pricing and lending policies vary widely.

It is for these reasons that many high net worth investors choose to deal with a specialist commercial mortgage broker when buying a commercial investment property.

  • Experience: A great mortgage broker won’t just get you a loan, they’ll help to guide you through your purchase.
  • Specialisation: Are you involved in a complex transaction? A mortgage broker that specialises in that type of finance can get you a better result.
  • Relationships: Knowing the decision makers with each lender can make all the difference.
  • Competitive pricing: When a loan is submitted by a broker, the banks know they have more competition and a well-informed borrower.
  • Flexible lending policies: Access to lenders with different risk appetites and funding sources allows for larger loan sizes and less restrictive terms.

How we can get you a better deal than going direct?

Getting the best deal

It may sound counter-intuitive but we can often negotiate with your bank to get a cheaper loan than if you went to them directly.

Commercial bank managers are measured on their budget and their return on equity. In other words, they are focused on the banks profit whereas most other bank employees don’t really care.

As a result, many borrowers lose out when they deal with the bank directly.

  • If you are in a difficult situation then they’ll use this as an excuse to overcharge you.
  • If you don’t know what competitors can offer then they’ll charge as much as they can.
  • If you are a loyal customer with many accounts then they think you will be far less likely to leave so they will charge you more!
  • And of course, they’ll never tell you if a competitor has a sharper interest rate!

What does a commercial broker do?

Initially, we’ll have a discussion to determine if we are a good fit for you and your business direction.

Once you have sent us all of your documents and we have a clear understanding of what you want then we’ll negotiate with our lenders to see which are most likely to approve your commercial property loan with favourable terms at a competitive interest rate. This also includes unique purchases such as a financial planning practice loan.

After this, we’ll provide you with an Indicative Funding Proposal (IFP) to confirm the likely conditions of the loan. Once you accept the proposal, we can then arrange a valuation and submit a full loan application for approval by the lender.

During the process, we will liaise with your solicitor and accountant to ensure that their advice is taken into account to get you the best result possible.

Our mortgage brokers also know what it takes to increase your commercial property value to attract potential buyers or tenants without spending too much.

How to apply for a commercial property loan

Are you buying a commercial investment property? Talk to our mortgage brokers about your commercial property loan!

Give us a call on 1300 889 743 or enquire online and one of our mortgage brokers will call you to discuss your needs.

  • Sukhvindar

    I own a petrol station and a store as well in the same location, which I’ve been leasing for a while. The owner wants to sell it, so I thought it would be a good idea to buy it. Will the bank finance this purchase?

  • Hi Sukhvindar, typically you will have to come up with a deposit of 20-40% depending on various aspects of your situation. Most of the banks will consider this under their commercial lending, so it would be great if you could speak with a mortgage broker about your situation.

  • Arjuna Ridge Retreat Bed & Bre

    we own a bed and breakfast and need a loan top up, which will take our percentage of loan above 80% of property value. The property value is less than a million. Our bank knocked us back because the LMI considers our home a commercial property – where can we go to get the top up?

  • Hi there,

    We can consider this on a case by case basis. We’d have to look at the overall situation.

    Where your property can be used for other purposes i.e. minimal changes <$10,000 and it can be used as a house, then we may be able to lend more using a home loan.

    Where your property can only be used as a B&B then we'd use commercial property finance. Potentially with a portion unsecured we could lend more than 80% of the value. This would be possible if your business income and income from other sources can be proven well. Please provide all of your documents to one of our brokers and then ask them to 'refer to Otto' and I'll look at this myself. Thanks

  • Arjuna Ridge Retreat Bed & Bre

    thanks, our property is our home and a b&b as well, is that what you mean?

  • It’s a bit more complex than that. The best way to describe it is if the property was sold then would the new buyer be likely to use it as a B&B or would they be more likely to use it solely as a home. Also what is its ‘highest and best use’ for valuation purposes.

    Don’t worry if this doesn’t make sense. Our broker can ask you questions to determine this. I just did a quick look at some pics of your B&B online and it looks to me like it would be assessed as a commercial property.

  • Madden

    How much can I borrow if I want to buy church premises? Will this be considered a standard property?

  • Hey Madden,

    A church will be considered specialised property because it’s purpose-built, unless you’re simply looking for a standard house that you’ll be conducting your church services in. You can borrow between 50-60% of the property value to buy a church building (freehold). To find out more, you can check out the place of worship loan page:
    https://www.homeloanexperts.com.au/commercial-property-loan/place-worship-loan/

  • Rupp M

    I want to refinance $820k mortgage secured on my house to invest in my business and need around $1 mil at 60% LVR. I have 2 small paid defaults relating to telco accounts. Can you help?

  • Hi Rupp M, if you can provide at least an accountant’s letter and income declaration then we may be able to help you borrow up to 70% LVR. Please call 1300 889 743 to discuss this with one of our mortgage brokers.

  • Tim

    Hi,
    My business partner and I are looking to purchase a commercial property of about $1m and move our business into it rather than continuing to rent a premises. We are looking at making a cash contribution from the business of around $300k but based on reading the above, it appears we wouldn’t have to if I use my house and my business partner uses his so we could borrow the 100%. Or would it be better to use the business as guarantor with the building as security?

  • Hi Tim,
    We’d need to do a full assessment and also discuss your requirements and objectives before we could decide the best way forward. I find that we do a better job when we understand your long term plans. E.g. if one of you plans to sell your home soon or the business needs cash to fund growth then this would change our recommendation.

    Certainly it is possible to include other properties that you own as security and then you can hold onto your funds in case you need it. Having cash on standby is very important and so in most cases we would recommend including one or both properties as security.

    If you’d like our help then please contact us here https://www.homeloanexperts.com.au/free-quote/

  • John

    Hi
    Firstly can someone outside of Australia, use this mortgage if they were to setup a new company. If we go by the 80% Loan.

    Secondly Can the Loan be used to purchase rental property, such as a 5 -10 plex. or fund a development on apartment complex.

    Can it be secured against the rental income.

    If it was used for developement, can the interest be rolled-up.

    Thanks.

  • Hi John,

    We will need more information such as if you’re an Aussie Expat or a non-resident, if you’re looking to purchase through a company name and more. Please call us on 1300 889 743 if you’re in Australia or +61 2 9194 1700 if you’re overseas to discuss things directly with one of our experts. You can also enquire online if that’s more convenient and one of us will contact you:
    https://www.homeloanexperts.com.au/free-quote/

  • Mark

    Hi

    I would like to invest in a commercial property for 2.2 milion. The property has secured tenants returning approx 300k. What would I need to deposit to satisfy a mortgage on this property? I currently have 2.5 million in cash but would prefer to hold as much in reserve as possible.

    Thanks

  • Hi Mark
    Typically you could borrow 70% at good rates. Higher is possible but you’d pay a bit more for it or have a short loan term on the portion above 70%.
    Eg 70% over 15 years and 10% over 3 years.

  • Mark

    Thanks for the reply. Would this be on a lease doc loan?

  • Hi Mark,
    The above info is for a full doc loan. That means you’d provide full evidence of any other income you have as well, not just the lease.

    If you did want a lease doc then typically you’d get approved for 60% to 70% of the property value. https://www.homeloanexperts.com.au/commercial-property-loan/lease-doc-commercial-loan/

    The rates for lease docs are much cheaper at 65% and below at around 5.8% whereas for a 70% lend you would be looking at around 7% p.a.

  • Mark

    Ok thanks. What is the best number to contact you on?

  • Ph 1300 889 743 and ask for a commercial loan specialist. Thigee is available this morning if you call around 9am

  • Ishteaq Malik Ahmed

    Hi, I want to mortgage the commercial real state to start my restaurant business because, i have experience in cooking and managing it. Now, my monthly salary is $4800 after tax with permanent employment. how and how much may i get commercial property loan?
    Malik

  • Hi Malik,
    We’d assess the loan based on the proposed business income not your current salary. However the most important thing is that you either have a deposit (30% approx) or you own a residential property which can be used as security for the loan as well.

  • Patrick

    Our current commercial property loan is 1.5m, about 60% of the property value, is it possible to use our own home as security to borrow more money? If yes, then what is the maximum % that we can borrow? Are these interest fully tax deductible?

  • Hi Patrick
    Yes you can use your home as security for a business / commercial loan. The policies are complex but as a general rule you can borrow up to 100% of the value of a residential property up to a loan of $1m and up to 80% of the property value for higher loan amounts. For luxury residential properties >$3m the banks drop the amount you can borrow to 60% or 70%.
    The interest is tax deducible based on what you use the loan for. If you use it to buy shares or invest in property then this would be tax deductible. If you used the money to buy something for yourself then it wouldn’t be. The ATO looks at the purpose of the loan not the security. Note that I am not an accountant so please seek financial advice before proceeding.
    If you’d like our help then please call 1300 889 743 and ask for Thigee.

  • Smith Branden Sylverster

    SANDERS FINANCIAL HOME

    Email: info@sandersfinancialhome.biz

    FAX: 0864161947 TEL: +27614035810 +27746044357

    Do you need a Loan ? Sanders Financial Home, Offers long term investment loan (Maximum of 20 years period ) at the rate of

    5% interest rate for small and big time projects/businesses, We offer loans ranging from $5,000 (Five Thousand Dollar’s) to

    $5,000.000 (Five Million Dollar’s) With one year defer grace period for Re-payment .

    We also offer personal and business loans, to individuals, companies, financing of Governmental project with public and

    private sectors in a broad range of areas including Real Estate, Energy, Agriculture, Oil and Gas, Construction.

    We’ve developed a lending program that makes it easy for us to meetup with our clients needs. working closely with advisors

    across the world, we have been offering investment loans for more than 10 years and for project assistance and execution.

    We also provide quick and easy short term small loans in any viable projects that requires funding, On review of your

    project plan. We offer high approval rates.

    Blacklisted / Itc /debt review are welcome to apply Confidential and secure on-line service Fortnightly and weekly earners

    can apply.

    Interested Applicants are advised to contact us via our Email above for immediate processing of your Loan .

    Warmest Regards,

    Mr Smith Branden Sylverster

  • paul kubler

    im looking at leasing a property bakery retail space and house all on one title for 3500 per week with the option to buy the freehold for 820000 how will the banks look at it commercial or res and if I put up my house 280000 what % of the purchase price would they loan and
    the fact that the current rent is higher then the loan repayment would be will that help me to get approved

  • Hi Paul,
    It would depend on many things, in particular the location. But assuming your house was fully paid off you may be able to borrow 100% of the purchase price. My concern is that it sounds like you’d be starting a new business in which case the banks would want to look at your experience and what you project the income to be.

  • paul kubler

    sorry the bakery is currently trading and is turning over 600,000 per year but is only trading 5 days per week and and is closed 3 weeks a year it also has about 150,000 in equipment the rent is for everything including the business with the option to by everything for 820,000 at any thim I am also a baker pastry cook with 30 years in the industry

  • Hi Paul
    It’ll be a close one. As a general rule you can borrow 50% secured on a business and 80% (max) secured on commercial property and 100% (max) secured on residential property. So it depends on the value of the business vs the value of the property itself is.
    If you’re just buying the business and not buying the property itself then you’d need more security for the loan to make it work

  • Jacob

    Hi there,

    We have a commercial building fully owned by our self managed superfund.We would like to build another commercial property through our company.Is it possible to offer the SMSF owned property as security.Thank you

  • Hi Jacob
    Unfortunately it can’t be done as far as we are aware due to restrictions on non-recourse SMSF loans.
    We can lend against the new property, however not for construction, just standard investment. Basically SMSF loans are for standard buy and hold properties not refinancing to release equity and not for development loans.

  • Jacob

    Thank you for your reply.The new loan is not through the SMSF.Our company which is a seperate entity will be looking at seeking the finance.My query was whether we are able to offer our SMSF property for security to get finance for the company to build the new property.Thank you

  • Unfortunately no that cannot be done

  • Jacob

    Thank you.

  • Chen V-Style

    Hi experts. I have couple commercial office and I want to refinance those property. does small size office can do refinance?

  • Hi Chen
    Yes we can help with refinancing offices. What size in m2 are they?

  • Chen V-Style

    46m2 and 22m2

  • Hi Chen,
    We’d need to assess these on a case by case basis. If the LVR is low then usually they would be acceptable.

  • Chen V-Style

    The properties are no any loan on it.

  • Ok then likely we can lend 60%. It just depends on the properties. I’ll email you with more info

  • Bert

    I’m running a business and I own a small office building (freehold). Can this be used to help me secure a 100% commercial property loan?

  • Yes, if you own your business premises (freehold), you can borrow against your property for any working capital or equipment finance that you need. Because it’s a standard commercial property (office), you may be able to borrow anywhere up to 70% of the property value in equity.

  • Arjun Paliwal

    Could you give a run down of extras involved in purchase? E.g. residential = stamp duty, title, solicitor, bank package fee.

    The commercial breakdown for extra costs on a say $450k shop at 80% lend would be helpful. Also are 30 years available for commercial loans?

  • Hi Arjun,
    When you buy a property, you can expect to spend up to 5% of the contract price on fees, duties and charges. So for a purchase of $450,000, there may be up to $22,500 of costs involved in order to complete the purchase. The typical commercial loan term is 15 years but if you can get the help of a guarantor, you may be able to get a 30-year term. You can find out more about it here:
    https://www.homeloanexperts.com.au/commercial-property-loan/commercial-property-guarantor-loan/

  • Kate Candlish

    Hi, I have found a residence with a shop so its zoned commercial. I am trying desperately to get a loan of 75% but everyone i speak to is only offering 70%. (eg NAB, CBA) You mention commerical loans are available up to 75% – can you provide lenders names? The property is only $419,000. I have the 25% plus costs saved. thanks a lot

  • Hi Kate,
    Yes, 75% of the property value can be done for loans up to $2 mil. You can discuss lenders directly with one of our commercial mortgage brokers by calling 1300 889 743 or completeing our free online assessment form:
    https://www.homeloanexperts.com.au/free-quote/

  • Trev the Truckie

    ANZ does a 80% but interest rate is 8.5%….15 yr term….
    We got this info from ANZ broker 2days ago…good luck

  • There’s cheaper options available in particular if you borrow 75% rather than 80% as more lenders can help.

  • Nae Tai

    Hi there, I have found a commercial investment property currently tenanted by a childcare organisation. The commercial property is $650k and I prefer NOT to cross securitise my residential home (value $560k) but rather access the equity as a cash deposit. Would banks consider this option? If yes, what maximum % would banks lend and what would be the maximum loan term please? Thank you.

  • Hi Nae,
    Yes you can do this and in fact it’s a smart strategy to split the properties between two different banks. The reason for this is that some of our residential lenders will give home loan rates as long as your home is security for the loan, even if you use the loan to buy a commercial property.
    Likely you can borrow 80% approx on your home and 60% – 80% on the childcare centre. As it’s a specialised security property the max loan amount would need to be assessed on a case by case basis.
    If you’d like our help I’d suggest you call 1300 889 743 and ask for Thigee as she’s an expert in this type of loan.

  • Nae Tai

    Thank you for the advice, I will schedule a call soon.

  • Nguyet

    We are planning to buy a premises, we need a commercial property loan expert to help us with the matter. Can you introduce us one? He/she would better contact us via email that we register on this page. Thanks.

  • Hi Nguyet,
    Yes I’ll get someone to contact you via email. Please note that as a regulatory requirement we must talk over the phone later on to arrange finance for you.