Commercial property loans

Why buy commercial property at all?

For many owners, the attraction is control. When you own your premises, no landlord can decline to renew the lease, force a relocation or push the rent beyond reach. Every repayment builds equity in an asset you control, instead of paying rent that disappears. Over time, that building can become security for future business borrowing.

Investors come at it differently. They want a building with a reliable tenant that produces steady rental income, and they borrow against both the property and the lease.

Owner-occupier or investor: how lenders see you

Owner-occupier	Investor
Your business pays the repayments	The tenant’s rent pays most of the repayments
Lender assesses your business income	Lender assesses the lease and tenant
Swap rent for loan repayments	Rental yield versus loan cost matters
Equity builds in your own premises	Equity builds in an investment asset

Many owners set up a separate entity, such as a company or trust, to own the property and lease it to the operating business. Talk to your accountant about structure before you sign anything, because changing it later can trigger costs.

How do lenders value commercial security?

Commercial valuations look at more than bricks and mortar. A valuer considers location, condition, zoning, the lease in place, what similar buildings have sold for, and how quickly the property could be sold if needed. Specialised buildings (a purpose-built childcare centre or a cold-storage warehouse, for example) can be valued more conservatively because fewer buyers want them.

That’s why lenders generally want more equity in commercial deals than residential ones. If you don’t have the deposit in cash, equity in other property can often help. The equity release page explains how.

What will I need to provide?

• Contract of sale or details of the property you’re refinancing.
• The lease, if the property is tenanted.
• Recent financial statements, BAS or bank statements for the business.
• Details of any other debts and assets.
• Identification for all borrowers and guarantors.

Some lenders will accept lighter documentation for strong deals. Our documents checklist shows what full-doc and alternative-doc lenders typically ask for. When you’ve got the basics together, tell us about the property.

Timing a commercial purchase

Commercial settlements can be tight, and selling one building while buying another rarely lines up neatly. A bridging loan can cover the gap. If you’re moving because the business has outgrown its space, the business expansion loans page covers funding the fit-out, staff and stock that usually come with a bigger site.

Don’t forget the costs around the purchase: stamp duty (set by your state or territory revenue office), legal fees, building and pest inspections, valuation fees and possibly GST, depending on how the sale is structured. Your accountant and conveyancer should check the GST position before you sign.

An illustrative example

A physiotherapy clinic has rented the same suite for eight years. The building owner offers to sell. Using equity in the principal’s home to cover the deposit and costs, and a commercial loan secured by the suite itself, the clinic becomes its own landlord. (Illustrative only.)

What else is commercial property loans called?

Lenders, accountants and search engines don’t all use the same words. You’ll also see this entry described as Commercial mortgage, Factory loan and Warehouse loan. In our A–Z index every one of those names points back to this page, so whichever term you searched, you’ve landed on the same thing. If a lender uses a name you don’t recognise, ask them to describe how the security, the term and the repayments work; that tells you far more than the label.

Where does it sit in the directory?

This entry lives on the property-secured shelf. It’s most often used for property and projects, buying, starting or growing a business, and the security usually involved is residential or commercial property. It usually involves a little more paperwork and assessment than the quickest options, so start early. Its closest neighbours are:

• First mortgage business loans — The lender holds first place on title — usually the largest amounts and longest terms.
• Bridging loans — Covers the gap between buying one thing and selling or refinancing another.
• Private business loans — Non-bank lenders who assess the deal and the security, not just the credit score.
• Land loans — Buy or borrow against vacant land, rural blocks and sites awaiting approval.

To compare all of them at once, filter the Loan Finder by purpose and security.

Common mistakes to avoid

• Guessing the property value. Use a recent appraisal or comparable sales rather than the figure you’d like it to be; an inflated estimate only creates a gap later.
• Forgetting what’s already on the title. Every existing mortgage, caveat or private loan affects how much room is left, so list them all upfront.
• Leaving the exit vague. With property-backed lending, the plan for repayment carries as much weight as the security itself. Write it down in two sentences.
• Not involving co-owners early. Everyone on the title will need to sign, and a late surprise can stall settlement for weeks.
• Borrowing the bare minimum. Fees, adjustments and small overruns add up; a modest margin is far cheaper than a second loan.

What should I ask before signing up for commercial property loans?

A short list of questions saves a lot of regret. Put these to any lender or specialist before you commit:

1. What is the total repayable, in dollars? Ask for one figure covering interest over the full term plus establishment, legal, valuation and any line or discharge fees.
2. How is the property value being assessed? Some lenders order a formal valuation, others rely on desktop data or agent evidence. Knowing which helps you plan timing.
3. What happens if my exit takes longer? Get extension terms in writing before you sign, including any default or holding charges.
4. Can interest be prepaid or capitalised? For short terms this can protect cash flow, but it changes what’s owed at the end.
5. Who needs to sign? Confirm early whether every owner, director and spouse on title must sign or seek independent advice.

If an answer is vague, ask again or ask for it in writing. Good lenders are happy to explain their terms clearly.

Thinking of owning your premises?

If you’re looking at a commercial purchase or refinance, a quick enquiry is the right first step. It doesn’t involve a credit check, and it isn’t handed out to a crowd of lenders. A specialist who understands commercial property reads it and calls you back.

Be precise about the property, the price, any lease and how much you can contribute. Good information gets you a useful answer quickly. Start your commercial property enquiry.