Commercial Property Loan Calculator

Buying commercial property is not just a question of whether you can afford the repayments.

A lender also needs to be comfortable with the property itself, how much you want to borrow against it and whether you have enough cash or equity to complete the purchase.

Use our commercial property loan calculator to get an initial indication of:

• Whether the property may fit standard commercial lending
• The Loan-to-Value Ratio (LVR) of your proposed loan
• Whether your cash or equity covers the contribution towards the purchase price
• How the property type may affect lender appetite
• The additional funds you may need for purchase and lending costs
• For an investment property, how the rent and remaining lease can affect the lending position

It is a starting point rather than a loan approval. For an owner-occupied property, your business income, expenses, debts and financials still need to be assessed by a lender.

What Does My Commercial Property Calculator Result Mean?

The result tells you whether the basic property, LVR and funding position appears to fit the calculator’s indicative commercial-lending ranges. It does not mean your loan has been approved.

Likely To Fit Standard Commercial Lending

This means the property type, requested LVR and available cash or equity appear broadly within the calculator’s standard ranges.

The next question is whether your income or business can support the debt and whether a lender’s valuation confirms the property value.

Potential Fit

This usually means the deal is possible but one or more parts of the scenario are close to a typical lender limit.

You may need a larger contribution, a different loan amount or a lender with a better appetite for the property.

Specialist Lending Required

This means the property cannot be reliably assessed using a standard commercial LVR.

It does not necessarily mean the property cannot be financed. It means lender selection becomes critical because only some lenders may accept that security.

How Much Can I Borrow For A Commercial Property?

For a standard commercial property, planning around a 70% LVR is a sensible starting point. This would mean borrowing about 70% of the property value and contributing about 30% yourself, plus purchase costs.

Some suitable commercial properties may qualify for borrowing of up to 80% of their value. More specialised, harder-to-sell or higher-risk properties can be restricted to 60% or less.

For example, on a $1 million property:

But the maximum LVR is not necessarily the amount you can actually borrow.

Commercial lenders usually have two important limits:

• Property limit: How much they are willing to lend against that particular property.
• Servicing limit: How much debt your business income, rental income or other acceptable income can support.

Your actual loan can be restricted by whichever amount is lower.

For owner-occupied business premises, most lenders generally restrict commercial lending to around 70-75% of property value, although borrowing of up to 80% can be available in some suitable scenario, like buying business premises.

How Much Deposit Do I Need For A Commercial Property Loan?

You would need a deposit of around 30% of the purchase price plus buying is a useful starting point for someone buying commercial property for the first time.

That does not mean every commercial property requires a 30% deposit.

A 20% contribution may be possible if a lender accepts the property at 80% LVR. But if the same property is restricted to 70% LVR, you would need 30%. If the lender will only advance 60%, you would need 40%.

This is why commercial property buyers should avoid assuming that an advertised maximum LVR is the deposit they will actually receive.

Your required contribution can change because of:

• The type of commercial property
• Where it is located
• The lender’s valuation
• Whether it is owner-occupied or an investment
• The tenant and lease, if it is rented
• Your business or personal financial position
• The lender’s appetite for that particular security

What Makes A Commercial Property Acceptable To A Lender?

Lenders generally prefer commercial properties that have a broad resale and leasing market. The more specialised the property, the fewer lenders may be willing to accept it and the lower the available LVR may be.

For example, a standard warehouse in an established industrial area could potentially suit dozens of different businesses.

A property purpose-built for one unusual activity may have a much smaller group of potential future buyers or tenants.

Commercial lenders can therefore look at:

• Property type: Is it an office, warehouse, industrial unit, retail property, clinic, childcare centre, hospitality property or another type of commercial security?
• Location: Is there a healthy commercial-property market in the area?
• Alternative use: Could another business reasonably occupy the property?
• Valuation: Does the lender’s valuer support the purchase price?
• Condition and configuration: Has the property been heavily modified for a specialised use?
• Occupancy: Will your business occupy it, or will another business lease it?

For an investment property, the lender can also care about the tenant, lease and rental income.

This means a financially strong borrower can still have trouble financing the wrong property. The property has to fit the lender’s security policy as well as the borrower fitting its credit policy.

Why Does The Remaining Lease Matter When Buying A Commercial Investment Property?

A longer remaining lease can make the property’s rental income more dependable from a lender’s perspective, while a short or expired lease can reduce lender options.

For example, a lender looking at a tenanted commercial investment property wants to know whether the rent used to support the loan is likely to continue.

That is why it can look at:

• How many years remain on the lease
• Whether the tenant has options to renew
• Who the tenant is
• Whether the rent is at a sustainable market level
• Who pays the property outgoings
• How easily the property could be leased again

A strong headline rental yield alone therefore does not tell you whether a commercial investment property will qualify for the loan you want.

For someone moving from residential property into commercial property for the first time, this is an important difference: The quality of the lease can matter almost as much as the amount of rent being paid.

The Three Numbers To Take Away From Your Calculator Result

If you are buying commercial property for the first time, don’t focus only on the biggest loan figure shown.

The three figures that matter are:

• 1. Your LVR: How much of the property’s value you want to borrow.
• 2. Your contribution towards the purchase price: The difference between the property price and your proposed loan.
• 3. Your total funds required: Your property contribution plus the additional costs of completing the purchase.

If those numbers look workable, the next step is to confirm the part the calculator cannot fully determine:

Found A Commercial Property You Want To Buy?

The calculator gives you the starting numbers. A commercial loan assessment can then look at the actual property, your business or rental income, lender valuation, and lending policy to determine what options may be available.

Call us on 1300 889 743 or enquire online to speak with our commercial brokers.