Commercial Loan Refinance

Refinancing a commercial property loan can help your business secure a sharper rate, improve cash flow, consolidate debt, or unlock equity for growth. But it is not just about chasing a lower interest rate.

You also need to weigh the savings against upfront costs, lending criteria, and the value of switching lenders. This guide explains when refinancing makes sense, how it works, and what to consider before making the move.

Key Takeaways

• Refinancing can secure lower commercial loan refinance rates, potentially saving your business tens of thousands of dollars over the loan lifespan.
• Most lenders cap borrowing at a 60-70% LVR (Loan to Value Ratio), though specialized options exist up to 80% LVR.
• You can utilize equity release to secure cash out for business expansion, equipment purchases, or better cash flow.
• Always weigh the long-term savings against upfront exit fees, break costs, and commercial valuation expenses.

Is It The Right Time To Refinance Your Commercial Property Loan?

The right time to make the switch is when your current fixed-rate term is ending, or if your business requires better cash flow, debt consolidation, or equity release. If you can recoup upfront costs like break fees within two to three years through lower rates, a commercial refinance is usually a smart financial move.

Commercial rates are highly negotiable. Depending on the size and strength of your loan, lenders are often willing to offer substantial discounts and fee waivers to win your business.

What Are the Types of Commercial Loan Refinance Options?

There are several commercial refinance options tailored to different business needs. These include low doc loans for self-employed borrowers, bad credit loans for those with past financial issues, and lease doc loans based strictly on rental income.

Low Doc Commercial Loan Refinance

Lenders tend to favor applicants who are releasing equity to buy more properties or invest in their business, rather than those borrowing to cover cash flow shortages. If your financials improve over time, you can provide full financials later to refinance back to a prime lender for cheaper interest rates.

Bad Credit Commercial Refinance

You can typically borrow up to 75% of the commercial property purchase price at a maximum lend of $10 million. This is an excellent tool for debt consolidation. Some lenders will accept your application even if your current loan is in arrears, allowing you to consolidate business credit cards, overdrafts, and tax debt. Once defaults are paid and cleared from your credit file, a broker can help you transition back to a major bank.

Lease Doc Commercial Refinance

Featuring similar lending criteria to a low doc loan, a lease doc loan allows you to borrow up to 70% of the commercial property purchase price. This is done through a specialist lender and relies on the property’s rental income rather than complex business financials.

How Does A Commercial Refinance Work?

The commercial refinancing process involves comparing lender options, completing a new application, getting the property revalued, discharging your old mortgage, and settling the new loan.

To ensure a smooth transition, follow this step-by-step process:

Review your current loan

Check your existing terms to identify potential exit fees, break costs, and your current interest rate.

Compare lender options

Speak to a commercial mortgage broker. They can compare loans from a wide panel of lenders and negotiate better terms on your behalf.

Submit a new application

Complete a commercial loan application with the new lender, providing updated business financials and forecasts.

Complete a property valuation

The new lender will require a fresh valuation of your commercial property to establish your current LVR.

Discharge the old mortgage

Your new lender will submit a discharge form to your state’s Land Titles Office to close the old account and pay out the old loan.

Begin new repayments

You will start making your new, optimized commercial loan repayments within a month of settlement.

How Much Does It Cost to Refinance?

Refinancing a commercial loan involves several upfront costs, typically ranging from $10,000 to $20,000 or more, largely dependent on the property valuation fee and stamp duty. However, the long-term interest savings usually far outweigh these initial expenses.

Should You Stay or Switch Your Commercial Lender?

Before switching, always ask your current lender if they can offer a better deal.

Retaining an existing customer is cheaper for banks, so their retention teams often provide heavy rate discounts or fee waivers (such as covering stamp duty) to keep your business. Furthermore, you must consider the broader relationship.

For example, does your current lender understand your industry? If you run a high-turnover service business, you need fast access to trade finance and EFTPOS facilities. The time and effort involved in moving transaction accounts to another lender can be daunting, so the new deal must be comprehensively better to justify the move.

Can I Refinance a Commercial Loan to Get Cash Out?

Yes, you can secure a cash out refinance on a commercial property to unlock equity. This released capital can be used to purchase new equipment, renovate the property, expand operations, or simply improve overall business cash flow.

Most lenders support equity release for investment or business growth purposes. However, mainstream banks generally will not allow cash out specifically to pay off ATO tax debt, though specialist lenders will.

What Else Should I Keep in Mind Before Refinancing?

Lower Interest Rates & Better Terms

Unlike residential loans, commercial rates are rarely advertised and do not strictly follow the RBA cash rate. Instead, they are heavily influenced by the Bank Bill Swap Rate (BBSY), your specific property type, and the overall strength of your application. An expert broker can help negotiate these opaque pricing structures.

Switch to No Annual Review Loans

Many banks require updated commercial valuations every 3 to 5 years. However, you can negotiate to waive these annual reviews. If you own the property as a freehold going concern, and possess strong business financials, certain lenders will drop annual reviews entirely.

Protect Your Credit Score

Every formal application adds an enquiry to your credit file. Too many enquiries can cause your score to drop and result in rejection from prime lenders. Therefore, it is best to use a mortgage broker to secure an indicative approval before submitting a formal application.

Commercial Refinance Case Study – The Garbage Tip

A customer wanted to purchase a landfill site (a garbage tip) that had a waste management company operating as a long-term tenant. He viewed it as a massive investment opportunity. He already held commercial property loans and business finance with his current lender, but they refused to accept the landfill site as security.

The customer worked with a commercial mortgage broker and found a new bank willing to offer the loan on the condition that he brought his existing debt facilities across to them.

The customer had to calculate whether the $40,000 upfront refinancing costs (including discharge, valuation, application, and stamp duty fees) were worth the move.

Ultimately, the $10 million facility allowed him to secure a highly profitable asset. Because his cash flow forecasts were so strong, absorbing the initial refinance costs was a highly successful business decision.

Do You Want To Refinance?

We’re experts in commercial loan refinance.

Give us a call on 1300 889 743 or complete our free assessment form to speak with one of our mortgage brokers.

We can properly assess your financial needs and let you know if you can get a better commercial loan deal from our panel of lenders.