Commercial Property Loans from 6.49% p.a.

Understanding Commercial Property Finance

Commercial property loans operate differently from residential home loans in several important ways. The lending criteria, assessment methods, property valuations, and loan structures are all tailored to the unique characteristics of commercial real estate. Understanding these differences is essential for securing the best terms.

Commercial properties are valued based on their income-producing potential (capitalisation rate or "cap rate") rather than comparable sales alone. Lenders assess both the property's quality and income potential alongside your business's financial strength. A strong lease to a quality tenant can significantly improve the terms you are offered.

Loan-to-Value Ratios (LVRs) for commercial property are lower than residential, typically ranging from 60% to 80%. This means you need a larger deposit or equity contribution. For a $1 million commercial property at 70% LVR, you would need a $300,000 deposit. Some lenders allow you to use residential property equity to top up the deposit.

Types of Commercial Property We Finance

Our lending panel covers the full spectrum of commercial property types. Each has specific considerations that affect your loan terms:

• Office space: CBD and suburban office suites are well understood by lenders and typically attract competitive rates. Quality of tenants and lease terms are key factors.
• Retail: Shops, shopping centres, and retail premises. Location and foot traffic are important valuation factors. High-street retail in capital cities attracts good LVRs.
• Industrial and warehouse: Growing demand from e-commerce and logistics has made industrial property a favoured asset class. Good infrastructure access is valued.
• Medical and childcare: Specialised properties with long-term tenants are viewed favourably. Purpose-built facilities may attract specialist lending.
• Mixed-use: Properties with both commercial and residential components. These can sometimes be split between commercial and residential loan products for optimal terms.

Owner-Occupied vs Investment Commercial Property

When you occupy the commercial property for your own business, it is classified as owner-occupied. This often attracts slightly better rates because lenders view the owner's commitment to the property positively. The business must demonstrate sufficient revenue to cover the loan repayments alongside other operating costs.

Investment commercial properties are assessed primarily on rental yield and tenant quality. Lenders want to see long-term leases with creditworthy tenants, realistic market rents, and well-maintained properties. Vacancy risk is a key consideration — a vacant commercial property is harder to finance than one with established tenants.

For owner-occupiers, buying your business premises rather than renting offers significant long-term advantages. You build equity in the property, protect yourself from rent increases, and gain the flexibility to modify the premises to suit your business. The loan repayments may also be comparable to or less than market rent, making it a financially sound decision.

LVR Requirements and Deposit Options

The Loan-to-Value Ratio determines how much of the property value a lender will fund. Standard LVRs by property type are approximately 65% to 70% for standard commercial property, up to 75% to 80% for prime office and industrial in major cities, 60% to 65% for specialised properties like hotels or service stations, and up to 80% for SMSF commercial property with strong serviceability.

If you do not have a sufficient cash deposit, there are strategies to bridge the gap. Using equity in existing residential or commercial property is the most common approach. Some lenders accept a combination of cash deposit and additional security. Others offer higher LVR products for well-qualified borrowers with strong business financials.