No Deposit Business Loans
If you don’t have a deposit, you can use a guarantor, offer property or an asset as security to get a 100% commercial loan.
Key takeaways
- Many business loans do not require a deposit, but it depends on the type of loan you're looking for.
- A loan for commercial property will usually require a deposit, as with any property purchase.
- There can be alternatives to paying a deposit, such as using a guarantor or offering other property as collateral.
What is a 100% commercial loan?
A 100% commercial loan is where you borrow all of the funds you need to for your business without paying a deposit. Most standard business loans which are used for cash flow or equipment do not require a deposit, although you may choose to put down some cash as security against the loan.
With commercial property loans you may need to put down a deposit, but not always. It is possible to buy commercial property with a 100% commercial loan.
Finder survey: How many Australians of different ages have taken out a business loan?
| Response | 75+ yrs | 65-74 yrs | 55-64 yrs | 45-54 yrs | 35-44 yrs | 25-34 yrs | 18-24 yrs |
|---|---|---|---|---|---|---|---|
| No | 85.07% | 91.43% | 90.12% | 96.11% | 92.37% | 87.1% | 90.53% |
| Yes | 14.93% | 8.57% | 9.88% | 3.89% | 7.63% | 12.9% | 9.47% |
Source: Finder survey by Pure Profile of 1145 Australians, December 2023
How can I get a 100% commercial loan?
You may be able to use any one of these options to secure a 100% commercial loan, or you can combine them.
1. By putting up property.
The most common way to increase your loan-to-value ratio (LVR) is by offering property as security for the loan. This can include residential or commercial property.
For general business loans this would be a secured business loan. You could be able to get a higher loan amount and a better interest rate.
Securing an existing property against a commercial property loan can help you get 100% of the purchase price. This does depend on the type and price of the property you intend to buy, and the value of your existing property.
As an example, you can borrow up to 80% of the equity you have in a residential property to buy commercial property. Or, if you own a standard commercial property (and by standard, that means retail shops or warehouses etc), you can borrow up to 70% of your equity for any finance you need. If you have a more specialist commercial property you could borrow up to 70% of your equity.
2. By applying with a guarantor.
Applying for a business loan with a guarantor is usually similar to using property. This is because a guarantor, although not a true party to the loan, is putting up their own residential property as security for your business loan.
Residential property offered by a guarantor will fetch a loan amount of up to 80% of the value of a residential property or up to 70% of the value of the commercial property.
3. By using business assets.
Another way to get a no deposit loan is by offering your own business assets as additional security. This can include business equipment, vehicles, client books or even the goodwill in the business. The latter is when a lender extends a commercial loan against the value of the business itself. The lender will usually base their business valuation on the balance sheets of the business over the past 2 years. They may also ask for up-to-date asset valuations.
Business assets will never trigger a 100% commercial loan by themselves. But in combination with other means of securing the loan, they can lead to an increase in the amount offered under a commercial loan.
4. By combining the above
The trick to creating a 100% commercial loan is to combine security and find a lender willing to accept the combination.
For example, your residential property may have enough equity to give you 70% of the value of the loan. You may then be able to introduce a guarantor who will offer their own residential property as additional security to bring it up to a 100% loan. Alternatively, the lender may be willing to take some of your business assets to increase the loan amount to 100%.
Did you know?
Some lenders do offer 100% loans for commercial property. This is more likely the case if you're buying your own medical practice, rather than if you're buying a retail store to rent out.
How can I find the right lender?
Getting that 100% commercial loan comes down to finding a lender willing to accept multiple forms of security. But commercial lenders are not subject to the same regulations as residential mortgage lenders. This means that commercial lenders are free to impose interest rates, fees, charges and other terms as they see fit, and lenders vary significantly.
It can be hard to compare commercial lenders because of this, as they don't advertise their rates and fees in the same way. But as a basic guide, here's what you should look out for:
- Interest, fees and comparison rates. These factors will impact how much the loan costs. You should compare to make sure you receive the most competitive rates and fees.
- Loan type. You should consider whether a fixed or variable interest rate will be more suitable for your business.
- Loan term. To figure out whether a longer or shorter term would work for you, take into account the purpose of the loan. If you're buying commercial real estate, a long loan term may be better. This will spread out your repayments over more time, making the repayments more affordable. But if you're buying equipment, you might prefer a shorter loan term to avoid paying off equipment that has long since expired or fully depreciated.
- Loan flexibility. Consider how your business's financial needs may change in the future. Look into whether the loan is flexible enough to accommodate these needs. For instance, does your loan allow you to pay out the remaining balance early without penalty? Or will early exit fees prevent you from exiting the loan earlier in the event of a financial windfall?
- Eligibility criteria. Check the lender's criteria and see if you meet them. This can narrow down your choices to find a loan you can apply for. If you don't meet the eligibility criteria, you shouldn't apply for the loan. Every loan application will appear on your company's credit file. This could downgrade your score.
You can use a business loan calculator to get an idea of what your repayments will be like with different rates, fees and loan terms.
Our expert says: Seek help for complex commercial loans
"Although it is possible to get a 100% commercial loan using property or a guarantor as security (depending on the lender), some people do need to use a combination of securities. Because this involves different valuations and a bit more complexity, it's probably worth engaging with a commercial broker. They can help you gather the right documents and put forward a compelling proposal for a better chance of approval. They will also have a good idea of the market, understanding which business lenders are more likely to approve a 100% commercial loan."
What are the alternatives to a 100% commercial loan?
If you don't have or don't want to put down a deposit, and can't get a 100% commercial loan with a combination of security, there is another option. You could apply for an unsecured business loan.
Unsecured loans don't require either deposits or security. The catch is that borrowing amounts are lower and interest rates are typically higher. This is because having zero security or deposit is risky for the lender. How much you can borrow will also be limited by the turnover of your business.
How can I apply for a no deposit loan?
1. Work out what kind of security you can offer, its value, how much you need to borrow and what you can afford.
2. Start comparing lenders and loan products. Don't forget to compare interest rates, fees and eligibility criteria. You can use the comparison table on this page.
3. Select a lender. Click "Go to site" to be directed to the lender's page or "More info" if you want to read about the lender.
4. Organise and prepare the required documentation. This will make the application process easier.
5. Apply. Most lenders have their applications online. Alternatively, contact the lender directly if you have any queries.
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