A commercial property loan in Australia is business finance used to buy or refinance office, retail, industrial and other non-residential property. Lenders assess the property, lease income, valuation, loan-to-value ratio (LVR), borrower cash flow, tenant strength and exit plan together. There is no universal deposit or interest rate. Confirm your borrowing capacity and lender terms before making an offer, then obtain legal, tax, SMSF and financial advice where relevant.
You have found a promising warehouse, a well-located retail strip or a strata office in a growing precinct. The lease looks solid. The numbers appear to work on paper. But before the contract is signed, three questions will shape whether the deal actually proceeds: Will the lender accept the asset? Does the lease support the repayment? And can you complete the purchase with the cash you have available?
The first question for any serious commercial investor is not only "How much can I borrow?" It is also "What repayment source, cash buffer and property characteristics must be present for this loan to remain manageable over its full term?"
Buyers Agency Australia approaches commercial acquisition through strategy, research, negotiation and due diligence, while lending, tax and legal decisions remain with qualified professionals. This guide explains the finance mechanics so investors can engage those professionals from an informed position. For investors who want strategy-led property investment support before making any offer, the finance position should be confirmed first.
What is a commercial property loan in Australia?
A commercial property loan is business credit used to purchase or refinance non-residential property, including office, retail, industrial, warehouse and mixed-use assets. According to APRA's APG 112 guidance, commercial property exposures are distinguished from residential lending partly by the degree to which repayment depends on property cash flows, including the tenancy profile and lease maturity, rather than on personal income alone.
Lenders apply their own business-credit criteria, which may differ materially from residential mortgage policies. Loan terms, LVR, pricing, documentation and structure all vary by lender, borrower profile and asset type.
How commercial property loans differ from residential mortgages
| Feature | Commercial property loan | Residential mortgage |
|---|---|---|
| Primary purpose | Buy or refinance non-residential property | Buy or refinance a home |
| Assessment focus | Borrower financials, property income, lease, valuation, exit plan | Borrower income, living expenses, property value |
| Typical LVR range | Often 60%–75%, varies by lender and asset | Up to 80%–95% with LMI |
| Loan term | Commonly 10–25 years, product-dependent | Commonly 25–30 years |
| Repayment structure | Interest-only or principal-and-interest; review periods apply | Usually principal-and-interest |
| Security | Commercial property; personal or director guarantee often required | Residential property |
| Documentation | Financial statements, tenancy schedule, leases, valuations | Payslips, tax returns, standard bank statements |
Terms shown are general. Actual conditions depend on the lender, borrower and asset.
Which commercial assets can finance support?
Most Australian lenders will consider office buildings, retail premises, industrial and warehouse properties, and mixed-use developments. Specialised assets such as childcare centres, service stations, medical suites and hospitality venues may be assessed under different criteria, with some lenders applying stricter LVR caps or declining entirely. Vacant property and development projects are typically assessed separately from income-producing commercial property.
Who can apply for commercial property finance?
Commercial property finance is available to a range of borrower structures in Australia. Eligibility depends on the lender's credit policy, the borrower's financial profile and the nature of the property being acquired.
Common borrower structures include:
- Businesses purchasing their own operating premises (owner-occupied)
- Individual investors buying leased commercial property as an investment
- Companies and trusts holding property as part of a portfolio or tax-effective structure
- SMSF trustees acquiring business real property under a limited recourse borrowing arrangement (LRBA)
No lender approval is implied for any of these structures. Each application is assessed on its own merits.
Businesses buying premises for their own operations
Owner-occupied commercial lending is designed for businesses that will use the property to run their operations. Lenders typically assess trading history, business cash flow, the suitability of the property for the business, and director guarantees. Some products allow higher LVRs for owner-occupiers with strong financials compared with pure investment purchasers.
Investors buying leased commercial property
When a property is purchased as an investment and already leased to a third party, the rental income, tenant quality, lease term and property valuation may all support the assessment. Some lenders offer reduced-documentation products when the lease and rental income meet defined criteria. These are lender-specific products, not a universal market standard. CommBank's Lease Doc product, for example, assesses rental income against a minimum interest cover ratio, with product-specific LVR, lease-linked term and security requirements (CommBank, Lease Doc loan, checked August 2026).
Companies, trusts and SMSF structures
A company or trust may borrow to acquire commercial property, subject to lender policy, entity financials, guarantees and the nature of the security. SMSF borrowing to acquire commercial property must comply with the ATO's LRBA and superannuation rules, including the sole purpose test and restrictions on related-party transactions. For broad guidance on SMSF property investing guidance, always obtain advice from a qualified SMSF specialist, accountant and solicitor before proceeding. Further context on property investment with superannuation is available, but compliance and tax outcomes require professional advice specific to your fund.
How much deposit do I need for a commercial property loan?
There is no single universal deposit for a commercial property loan in Australia. The cash contribution required depends on the LVR the lender approves, the lender-assessed valuation, the asset type, the lease profile and the borrower's financial strength.
LVR formula: LVR = Loan amount / Lender-assessed property value
So a property valued by the lender at $2,000,000 with an LVR cap of 65% would support a maximum loan of $1,300,000. The borrower would need to fund the remaining $700,000, plus all acquisition costs.
Why the lender valuation can change your cash contribution
A common issue in commercial property acquisition is that the lender's independent valuation comes in below the contract price. When this happens, the LVR is calculated against the lower figure, not the purchase price.
Illustrative example (all figures are for explanation purposes only):
- Contract price: $1,800,000
- Lender valuation: $1,650,000
- Lender LVR cap: 65%
- Maximum loan: $1,072,500
- Cash required to complete (before costs): $727,500
- If acquisition costs total $90,000, total cash needed: approximately $817,500
This gap between the contract price and the lender's approved loan is a real risk that many investors underestimate. Macquarie's commercial lending guide demonstrates that product-specific LVRs and approved valuation amounts drive the calculation, not the purchase contract alone (Macquarie Business Banking, Commercial Lending Guide, checked August 2026).
Can equity or additional security fund the contribution?
Some lenders may consider usable equity in other property, including residential assets, as additional security to reduce the cash required upfront. This is sometimes called cross-collateralisation. Increasing security across multiple properties raises the overall exposure and complexity of your lending position. Legal and financial advice is required before adopting any cross-collateralisation structure.
What do lenders look at before approving commercial property finance?
Lender assessment for commercial property finance is typically structured around four areas: the borrower, the property, the lease and income, and the exit plan.
Borrower income, serviceability and credit history
Lenders assess business revenue, personal income where relevant, existing debt commitments, tax position and the borrower's capacity to meet repayments if the property is vacant or interest rates increase. Credit history and net assets also form part of the assessment. APRA's APG 112 guidance identifies that commercial property exposures require clear assessment of cash flow sustainability relative to debt obligations.
Lease income, tenant strength and interest cover
For investment property, lenders may assess net property income against the debt obligation using metrics including:
- Interest cover ratio (ICR): Net property income divided by interest expense. A higher ratio indicates more income buffer relative to interest costs.
- Debt service coverage ratio (DSCR): Net property income divided by total debt service (principal and interest). DSCR thresholds are product-specific.
- Weighted average lease expiry (WALE): The average time remaining across all leases, weighted by income. A longer WALE generally indicates more stable income over the loan term.
Tenant covenant, lease structure, outgoings and the relationship between lease expiry and loan maturity are all part of the picture. Macquarie's commercial lending guide lists tenancy schedules, rent, outgoings, guarantees and interest-cover criteria as standard assessment inputs (Macquarie Business Banking, Commercial Lending Guide, checked August 2026).
Documents to prepare before applying
Required documentation varies by lender and loan type. Common categories include:
- Two to three years of financial statements and tax returns
- Business Activity Statements (BAS)
- Personal and company tax returns
- Identification and entity documents (trust deed, company constitution)
- Executed contract or heads of agreement
- Tenancy schedule and copies of all leases
- Rent ledger and outgoings schedule
- Existing loan statements
- Valuation instructions (lender arranges an independent valuation)
This list is a guide only. Always confirm exact requirements with your lender or commercial finance broker.
Which commercial property loan structures and finance options exist?
Commercial property finance options cover a range of structures, each suited to different borrower purposes, cash flow profiles and risk tolerances.
Owner-occupied versus investment finance
| Loan type | Primary purpose | Repayment source | Common evidence | Key risk |
|---|---|---|---|---|
| Owner-occupied | Business buys its own premises | Business trading revenue | Financials, BAS, trading history | Business performance risk |
| Investment | Investor buys leased property | Rental income from tenants | Lease, tenancy schedule, valuation | Vacancy and lease expiry risk |
Interest-only, principal-and-interest, fixed and variable options
Commercial property loans can be structured as:
- Interest-only: Lower repayments during the IO period preserve cash flow, but the principal balance does not reduce. IO periods are typically fixed and subject to lender review.
- Principal-and-interest: Repayments reduce the loan balance over time, building equity and reducing refinancing risk at maturity.
- Fixed rate: Provides repayment certainty during the fixed period but may carry break costs if the loan is repaid or restructured early.
- Variable rate: Repayments move with market rates, offering flexibility but exposing borrowers to rate increases.
No single structure suits every borrower. The right choice depends on cash flow requirements, the lease term, the debt reduction objective and the exit plan at maturity.
What is a lease-doc commercial loan?
A lease-doc (or lease documentation) commercial loan is a reduced-documentation product where the lender's primary assessment relies on rental income and lease information rather than full business financials. These products are lender-specific and not available for all property types, borrowers or loan sizes.
CommBank's Lease Doc product assesses rental income against a minimum ICR and applies product-specific LVR, lease-linked term and security requirements. Westpac also offers a lease-doc pathway with eligibility linked to lease terms, borrower structure, property type and LVR (Westpac, Lease Doc simple lending pathway, checked August 2026). These examples must not be treated as universal market rules. Confirm current eligibility, LVR and loan limits directly with the relevant lender.
Lender examples and market context were checked in August 2026. Commercial loan terms, rates, fees and eligibility change, so confirm current details directly with the relevant lender or a qualified commercial finance broker.
What costs should I budget for beyond the loan?
The loan itself is not the full financial commitment. Investors need to plan for both one-off acquisition costs and ongoing ownership costs before making an offer.
A commercial property acquisition cost checklist
| Cost | When it arises | Who confirms it |
|---|---|---|
| Transfer (stamp) duty | At purchase; varies by state, entity and asset | State revenue office, solicitor |
| Legal and conveyancing fees | During contract and settlement | Solicitor or conveyancer |
| Lender application/establishment fee | At loan approval | Lender |
| Independent valuation fee | During finance application | Lender or valuer |
| Building and pest inspection | During due diligence | Building inspector |
| Title search and registration | At settlement | Solicitor |
| Loan interest | Ongoing from settlement | Lender |
| Land tax | Ongoing; varies by state, entity and holding | State revenue office, accountant |
| Property management | Ongoing if using an agent | Property manager |
| Building insurance | From settlement | Insurer |
| Accounting and tax | Ongoing | Accountant |
| Capital works reserve | Ongoing; repairs, vacancies, lease incentives | Property manager, advisor |
Transfer duty, land tax, legal costs and tax treatment vary significantly between Australian states and territories and depend on the entity, asset type and transaction details. Verify all figures with the relevant state revenue office, solicitor and accountant before exchanging contracts.
Why gross yield is not the same as usable cash flow
A common mistake is treating gross rental yield as though it equals available income. The actual flow from a leased commercial property looks more like this:
Gross rent minus outgoings payable by the landlord = Net property income. Net property income minus loan interest = Pre-tax cash position. That figure must then allow for vacancy risk, maintenance, insurance, land tax, management fees and a capital works reserve.
Do not test affordability against gross rent. Test it against net property income under a stress scenario where the property is vacant for three to six months and interest rates are higher than today.
How do lenders assess office, retail and industrial property?
Asset category influences financeability. Lenders consider different risk factors for each commercial property type, and it is important to understand those distinctions before selecting a target asset. Macquarie's commercial lending guide identifies office, industrial and retail as acceptable security examples, each subject to lender criteria (Macquarie Business Banking, Commercial Lending Guide, checked August 2026).
Office property finance considerations
Lenders assess office property based on occupancy, tenant demand, floorplate functionality, fit-out age and condition, lease expiry, capital expenditure requirements and reletting risk. Market vacancy trends in the target location may affect how cautiously a lender approaches the valuation and LVR. A single-tenant office property with a lease expiring within two years of loan maturity carries more refinancing risk than a multi-tenanted building with staggered WALE.
Retail property finance considerations
Retail assessment focuses on tenant covenant (the financial strength and trading history of the tenant), location quality, foot traffic, lease structure, outgoings recovery, specialty use and reletting risk if the current tenant vacates. High-street retail and neighbourhood shopping centres with established daily-needs tenants are generally viewed differently from discretionary specialty retail.
Industrial property finance considerations
Industrial and warehouse properties are often valued for their land component, building functionality, clear-span height, truck access, zoning and site usability. Environmental or contamination due diligence is important, as remediation costs can be significant and may affect both valuation and lender appetite. Tenant demand and long WALE are positive factors for industrial lending.
How does the commercial property loan application process work?
Commercial property finance involves more steps and longer timeframes than a standard residential mortgage. A structured approach reduces the risk of a valuation or documentation problem after a conditional offer has been made.
Prepare finance before making an offer
The acquisition brief should define the maximum purchase price, required cash contribution, acceptable LVR, minimum cash buffer after costs, target asset type and exit plan at loan maturity or lease expiry. Confirming borrowing capacity before making an offer is a core part of the build an Australian property strategy process and avoids committing to a price the lender's valuation cannot support.
Once the finance boundaries are clear, a commercial finance broker can obtain indicative terms from lenders. Indicative terms are not formal or unconditional approval. Book a free strategy session with Buyers Agency Australia to map out the acquisition brief before approaching lenders.
A practical application sequence:
- Establish strategy: define purpose, entity, cash contribution, target asset and exit plan
- Engage a commercial finance broker: obtain indicative assessment and preferred lenders
- Identify a target property: sourcing, market research and off-market access
- Make a conditional offer: subject to finance and due diligence
- Submit formal loan application: provide full documentation
- Lender arranges independent valuation
- Credit approval issued (conditional or unconditional)
- Complete legal, lease, building and environmental due diligence
- Satisfy all conditions, exchange contracts and progress to settlement
For a detailed overview of buying an investment property step by step, the sequence from finance preparation through to acquisition is relevant for both residential and commercial buyers.
Coordinate valuation and due diligence
The lender's independent valuation and the investor's own due diligence should run concurrently during the conditional period. Due diligence on a commercial property typically covers lease review, building inspection, title search, zoning confirmation, contamination assessment, insurance review and contract review. Never move to unconditional exchange before the valuation and all material due diligence items are resolved.
What risks should commercial property borrowers understand?
Borrowing to invest in commercial property carries risks that must be tested before committing. ASIC's Moneysmart resource on borrowing to invest identifies larger potential losses, income shortfalls, interest-rate exposure and the danger of using a home as security as key concerns for leveraged investors.
Refinancing and loan maturity risk
Commercial property loans have a defined term. At maturity, the borrower must repay the loan, refinance or sell the property. Future lending conditions, lender appetite, valuations and interest rates are not guaranteed to be as favourable as at the time of the original loan. Planning for this event before borrowing is part of responsible acquisition strategy.
Vacancy, lease expiry and tenant concentration risk
The income that services the loan can change significantly if a tenant vacates, a lease is not renewed or a single major tenant represents the majority of rental income. Stress-test the property's cash flow against a six-month vacancy and a rent reduction before committing. Lease tail (remaining term at the time of purchase) versus loan maturity is a key timing consideration that lenders also assess, per APRA APG 112.
Interest-rate and valuation risk
Variable-rate commercial loans expose borrowers to rate movements during the loan term. Fixed-rate loans provide certainty during the fixed period but carry break costs if exited early and revert to market rates at expiry. Borrowing to the maximum approved amount leaves little buffer if valuations soften, rates rise or income falls. The Reserve Bank of Australia's cash rate target provides monetary-policy context (RBA cash rate target was 4.35% as of 12 August 2026) but should not be conflated with the rate a lender will offer on a specific commercial property loan.
When should a commercial buyers agent and finance professionals be involved?
A well-structured commercial property acquisition involves a team of professionals, each with a defined and non-overlapping role.
| Professional | Role in the acquisition |
|---|---|
| Commercial buyers agent | Property brief, market research, sourcing, negotiation, due diligence coordination, settlement support |
| Commercial finance broker | Lender comparison, application preparation, indicative and formal approval management |
| Solicitor or conveyancer | Contract review, title, lease review, settlement |
| Accountant | Tax structuring, entity advice, cash flow modelling |
| SMSF specialist | LRBA compliance, fund investment strategy, ATO obligations |
| Qualified financial adviser | Portfolio fit, risk assessment, personal advice |
| Independent valuer | Pre-purchase valuation opinion (separate from lender valuation) |
| Building inspector | Physical condition, capital expenditure requirements |
What a buyer-side property adviser can and cannot do
This section describes Buyers Agency Australia's own buyer-side approach. It is not an independent ranking or personal lending recommendation.
Buyers Agency Australia provides commercial property buying support across office, retail and industrial assets. The service covers acquisition strategy, data-led market research, off-market property sourcing, negotiation and due diligence coordination through to settlement. Dragan Dimovski, with more than 20 years of property investment experience, leads the buyer-side approach.
Buyers Agency Australia does not provide lending advice, approve loans, manage SMSF compliance, prepare tax returns or provide personal financial advice. Those functions remain with licensed and qualified professionals in their respective fields.
The buyer-side adviser's role in the finance process is to ensure the property itself is worth acquiring: that the asset, lease, location, tenant and price make sense as an investment before debt is placed against it. For dedicated commercial buyers advocate guidance, the case for involving a buyer-side specialist from the strategy stage is explained in detail.
When this is not the right fit: Buyers Agency Australia's service may not suit investors who are not yet finance-ready, who need personal tax or lending advice before making any property decision, who prefer to manage the acquisition process independently, or who cannot commit to the relevant advisory fees at this stage. Confirm current fee structures directly with the team.
Commercial property loan checklist for Australian buyers
Before speaking with a lender or making an offer, work through the following:
- Borrower entity confirmed (individual, company, trust, SMSF)
- Purpose confirmed (owner-occupied or investment)
- Cash contribution calculated, including all acquisition costs and buffer
- Usable equity in other assets assessed (if applicable, with legal and financial advice)
- Target LVR and maximum loan amount established
- Repayment source identified (business revenue, rental income or both)
- Lease documents obtained: term, options, WALE, outgoings structure, rent reviews
- Tenant information reviewed: covenant, trading history, concentration risk
- Valuation assumptions tested: what happens if the lender values below contract?
- Acquisition costs confirmed with solicitor and accountant (including transfer duty by state)
- Cash buffer allocated for vacancy, maintenance and holding costs
- Exit plan documented: what happens at loan maturity, lease expiry or rate review?
- Commercial finance broker engaged for indicative assessment
- Solicitor, accountant and any SMSF specialist engaged
- Decision gate: what conditions would cause you to walk away from this deal?
Frequently asked questions about commercial property loans in Australia
What is a commercial property loan?
A commercial property loan is business finance used to purchase or refinance non-residential property such as office, retail or industrial assets. Lenders assess the borrower's financials, the property's income, the lease profile and an independent valuation.
How much deposit is needed for a commercial property loan?
There is no universal deposit. The required contribution depends on the lender's LVR cap, the independent valuation, the asset type, the lease profile and the borrower's financial strength. The total cash needed includes acquisition costs, not just the loan gap.
Are commercial property loan interest rates higher than residential rates?
Commercial property loan pricing is generally bespoke and reflects the lender's assessment of the borrower, property, lease and LVR. Rates are commonly priced above standard residential home loan rates, but the exact margin is not universal. Confirm current indicative rates with a commercial finance broker.
Can a company or trust apply for commercial property finance?
Yes, in some lender structures. Eligibility depends on the entity's financial position, the guarantee structure, property quality and the lender's credit policy. Legal and accounting advice is required before selecting the borrowing entity.
Can an SMSF borrow to buy commercial property?
SMSF borrowing to buy commercial property is permitted in some circumstances under a limited recourse borrowing arrangement (LRBA), subject to ATO rules including the sole purpose test. Consult the ATO's SMSF investment restrictions and obtain SMSF specialist, tax and legal advice before proceeding.
Can rent service a commercial property loan?
Some lenders assess lease income as the primary repayment source, particularly through lease-doc products. Others require evidence of borrower or business cash flow in addition to rental income. Criteria are lender and product specific.
What documents are needed for a commercial property loan?
Common document categories include financial statements, tax returns, BAS, entity documents, identification, lease and tenancy schedule, rent ledger, outgoings schedule and an executed contract. Exact requirements vary by lender, product and borrower structure.
Can I use home equity for a commercial property deposit?
Some lenders may accept residential property as additional security to reduce the required cash contribution. This increases your overall exposure and complexity. Legal and financial advice is required before using your home as security for a commercial loan.
What costs apply besides the commercial loan deposit?
Beyond the equity contribution, allow for transfer duty, valuation fees, legal and conveyancing costs, lender fees, building inspection, title registration, land tax (ongoing), insurance, property management, maintenance and a vacancy reserve. Costs vary by state and entity.
Should I get finance approval before searching for commercial property?
Yes. Confirming borrowing capacity, acceptable LVR and maximum purchase price before searching helps set realistic acquisition targets and avoids making offers the lender cannot support. Indicative assessment is not unconditional approval, but it provides a working brief for property selection.
Next steps for Australian commercial property buyers
Finance-first is not a formality. It is the filter that makes a commercial property acquisition viable. Before committing to any asset, confirm three things: the repayment source is reliable, the property and lease can withstand a realistic stress scenario, and qualified professionals have reviewed the legal, tax, SMSF and lending dimensions.
Buyers Agency Australia supports the buyer-side strategy and acquisition process for office, retail and industrial property nationally. The team's role covers research, sourcing, negotiation, due diligence and settlement support. It does not extend to loan approval, personal financial advice or tax and legal outcomes. For national property investment guidance tailored to commercial acquisition, the process starts with a clear finance position and a defined property brief.
Ready to define your brief and move forward with clarity? Map out your next property move by booking a free strategy session, or contact the Buyers Agency Australia team to discuss how a buyer-side approach can support your commercial property plans.
This article is general information only and does not constitute personal financial, lending, tax, legal or SMSF advice. Commercial property investment involves significant risk. Obtain advice from a qualified commercial finance broker, solicitor, accountant and financial adviser before making any property or borrowing decision.
