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Commercial property loan and rates Australia

A business loan structured around buying commercial property. This includes hotels, motels, office space and warehouses.

Name Product Min. Loan Amount Max. Loan Amount Loan Term Upfront Fee Filter Values
Lumi Unsecured Business Loan
$5,000
$500,000
3 months to 5 years
2.5% establishment fee
Apply for up to $500,000 from Lumi and benefit from short loan terms, no early repayment fees and once approved receive your funds in just one business day.
Valiant Finance Business Loan Broker
$5,000
$20,000,000
3 months to 7 years
$0 application fee
A Business Lending Specialist from Valiant Finance can give you access to competitive business loans from over 80 lenders. Loans between $5,000 and $20 million are available. Request a call – your loan can be funded in 1 business day.
ebroker Business Loan
$5,000
$5,000,000
1 month to 30 years
$0 application fee
Small business loans available between $5,000 and $5,000,000. Get access to 70+ non-bank lenders on this independent platform.
ScotPac Boost Business Loan
$10,000
$500,000
3 months to 3 years
$0 application fee
A business loan for any industry. Borrow between $10,000 and $500,000, with approved loans funded within 24 hours. Minimum monthly turnover of $10,000 and 1 year of trading history required.
Prospa Business Loan
$5,000
$500,000
3 months to 3 years
3.5% origination fee
Small business loans are available from $5,000 - $500,000 on terms of up to 3 years. At least six months trading history and a monthly turnover from $5,000 is necessary.
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What is a commercial property loan and how does it work?

A commercial property loan is a business loan specifically designed for the purchase of property to be used for business purposes. This includes office space, warehouses, motels, or farms - in short, property that isn't being used as a personal residence. These loans can be taken out by individuals, partnerships, discretionary trusts and other groups on behalf of a business or company.

The loan features higher borrowing amounts and higher interest rates compared to a residential property loan. This is because commercial property loans are perceived as more risky. While there is a chance of a bigger return on investment, commercial properties also experience higher vacancy rates. In comparison, residential property is lower risk but may offer lower returns.

As with other loans, commercial property loans feature regular repayments inclusive of interest and fees. Interest can either be fixed or variable. Repayments will have to be made within the loan term, which can range up to 30 years. There will also be fees, such as establishment and even monthly or annual fees. With repayments, you may have the flexibility of making principal and interest payments or interest only payments during certain periods. You could opt to split interest between fixed and variable for certain periods. Additional repayments may be possible.

How can I compare commercial property loans?

There are several factors you should consider when comparing commercial property loans, including:

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The interest rate
How much you pay in interest will affect your monthly repayments and the total cost of the loan. The rate will vary depending on the risk to the lender. Comparing interest rates is a good way to check if the loan is competitive.

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Fees
Fees will vary by lender, so be sure to keep them in mind when comparing commercial loans. You'll most commonly see application and monthly fees, but there may be other fees for early repayments or to access the loan's redraw facility.

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Borrowing amounts
Lenders will have maximum and minimum borrowing amounts. This can range from $200,00 to $5 million. You may be able to borrow more, and lenders will weigh each application on a case-by-case basis.

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Loan term
This is how long you have to repay the loan. With shorter loan terms, you can expect higher monthly repayments. But with longer terms, you pay more in interest and fees.

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Repayment flexibility
You may be able to choose interest only or interest and principal repayments. Some lenders may allow you to adjust this according to the seasonality of your cashflow.

How much deposit do I need for a commercial property?

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Scott O'Neill, Founder & Director at Rethink Investing

"The maximum loan LVR (loan to value) you would usually receive when buying commercial property would be 60–70%, with some banks offering up to 80% loans, unlike the 90–95% now available for residential property," he explains.

"This is because commercial property is deemed more risky in the lender's eyes, resulting in a lower loan to value ratio. Where residential property can be purchased with as little as $50,000, commercial property is $75,000–$100,000 as a minimum."

That said, O'Neill believes that despite the higher upfront cost, a commercial property can be a good investment due to the higher rental returns.

"High-quality commercial property has the potential to pay itself off in 10 years, compared to the traditional 30 years a residential property might take. That means all that money that usually goes to the bank after the debt is paid goes straight into your pocket. It opens up the possibility to leverage equity allowing you to purchase a second, third and fourth property. So the decision to pay a higher deposit in the beginning starts paying dividends afterwards," he says.

What types of commercial property loans can I apply for?

There are a number of commercial property loans you can apply for depending on the type of funding you need. These include:

  • Commercial property loans. This loan is designed for the purchase of commercial property, or if you wish to refinance an existing loan. Borrowing amounts are high and interest rates are higher than residential property loans.
  • Property development and construction loans. These loans are useful for constructing commercial properties, residences and sub-divisions. You can read more about how to finance a residential property development project here.
  • Sub-division finance. Subdividing land can increase the value of the property without the need for further construction. These loans can be used for construction purposes too.
  • Mezzanine finance. You can use mezzanine finance to complete a project or an expansion or to borrow additional capital. This type of loan is used when a bank loan doesn't cover all your finance needs.
  • Business or commercial loans. If you want to purchase an existing business or a franchise, you could apply for a standard business or commercial loan.
  • Factory finance. This loan can be used to finance everything from the purchase of factory equipment to the factory itself. There are lenders specialising in factory finance who can help you navigate this space.
  • Land bank finance. This loan can be used for the purchase of undeveloped or abandoned properties and vacant lots. You can create, hold and develop vacant properties and convert them into marketable assets, doubling or tripling your investment.
  • Rural property loans. These loans are ideal for builders who purchase rural property to sell as hobby farms or residential homes.

What to keep in mind when making a commercial property purchase?

Every commercial property is different. But there are some general tips that can help smooth out the process. These include:

  • Evaluate the risks and benefits before proceeding with the transaction.
  • Get advice from experts. This can include lawyers, accountants, commercial realtors and mortgage brokers.
  • Pick a suitable property with a clear title after checking the applicable zoning laws and development plans.
  • Make sure you have sufficient funds for the deposit. You should have a regular income or revenue stream that can meet the monthly payments. Do the math beforehand and assess how the repayments fit into your budget.
  • Go through every detail of the sales agreement. You need to be aware of your rights and obligations.

When and why should I use a mortgage broker?

Commercial property lending is far more complex than residential home loan lending. Making sense of loan options and features can be confusing. Different lenders specialise in offering loans that suit different types of commercial property buyers. There may be a lender who specialises in offering finance for startup businesses. Another may be able to offer better deals to a commercial property investor or a developer.

This is where a mortgage broker can simplify your task. An experienced broker can use their knowledge of commercial property lending to find a lender that offers the most suitable finance solution. They will assess your current financial situation and your borrowing requirements and help you find a loan that matches your unique needs.

What documents do I need to apply for a commercial property loan?

The information and documents you'll need to provide will vary depending on the lender you select, the type of property you want to buy and the amount you need to borrow. As a general rule, you may be expected to supply:

  • Personal and company information. You'll need to provide your name, contact details and proof of ID. You may be required to provide your ABN or ACN.
  • Financial details. You'll need to provide details of your assets and liabilities, including the size of the deposit you have saved. You'll need to provide cashflow projections. This is for the lender to calculate your ability to meet repayments.
  • Property details. The lender will want to know details of the property you want to purchase, such as its location and features. A professional valuation will determine how much the property is worth. Even if you're buying the property as an investment, you'll need to provide details of the current lease agreement and the type of tenants currently residing on the property.

Other information, like your business experience may be required. Your mortgage broker can help you prepare an application that addresses the necessary criteria and gives you the best chance of approval. If your application is rejected or delayed, a broker can help you work out what you can do to improve your chances of accessing finance.

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Frequently asked questions

Justine Mclean is a business finance expert, author, speaker, financial educator and host of the Secrets of Successful Business podcast. With 30 years of experience in small business, Justine is on a mission to help business owners increase their financial literacy, build solid financial foundations and create profitable and sustainable businesses.

Justine released her book Become A Business Money Magnet - Simple habits to manage your money and supercharge your profits in 2024; she is a registered BAS Agent, Ladies Finance Club Ambassador, and named one of Coach Foundation's Top Female Business Coaches for 2022.

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To make sure you get accurate and helpful information, this guide has been edited by Richard Whitten and reviewed by Justine Mclean, a member of Finder's Editorial Review Board.
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As an authority on all things personal finance, Sarah Megginson is passionate about helping you save money and make money. She is an editor and money expert with 20 years’ experience and an extensive background in property and finance journalism. Sarah holds ASIC RG146-compliant Tier 1 Generic Knowledge certification, and she's a regular media commentator, appearing weekly on TV (Sunrise, Channel 7 news, Nine news), radio (KIIS FM, Triple M, 3AW, 2GB, 6PR) and in digital and print media. See full bio

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2 Responses

    Default Gravatar
    FrancoMay 26, 2017

    hello,

    me and 2 other partners are thinking to start a new business, we found a site and we intend to build 5 town houses, with the view of selling some and keeping some.
    would you be able to advise on what would be the best financing and exit strategy?

      AvatarFinder
      DeeMay 29, 2017Finder

      Hi Franco,

      Thanks for your question.

      If you are building townhouses, you may consider getting a subdivision loan to finance your project.

      Additionally, for expert advice on the most suitable home financing and exit strategy, you may want to consider getting in touch with a mortgage broker.

      Cheers,
      Anndy

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