Commercial property loan rates Australia. Lenders, rates and fees

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Name	Min. Loan Amount	Max. Loan Amount	Loan Term	Upfront Fee
Lumi Unsecured Business Loan	$5,000	$300,000	3 months to 3 years	2.5% establishment fee	Apply for up to $300,000 from Lumi and benefit from short loan terms, no early repayment fees and once approved receive your funds in just one business day.	Go to site More Info	Compare	loading Fetching your data...
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.	Enquire now	Compare	loading Fetching your data...
Valiant Finance Business Loan Broker	$5,000	$1,000,000	3 months to 5 years	$0 application fee	A Business Lending Specialist from Valiant Finance can give you access to competitive business loans from over 70 lenders. Loans between $5,000 and $1 million are available. Request a call – your loan can be funded in 1 business day.	Enquire now	Compare	loading Fetching your data...
Moula Business Loan	$5,000	$250,000	1 to 2 years	2% Establishment fee	A loan of up to $250,000 that can be approved and funded within 24 hours. Available to businesses with 6+ months operating history and $5,000+ monthly sales.	Go to site More Info	Compare	loading Fetching your data...
Max Funding Unsecured Business Loan	$3,000	$30,000	1 month to 1 year	$0 application fee	An unsecured business loan from $3,000 that offers convenient pre-approval and no early repayment fees.	Go to site More Info	Compare	loading Fetching your data...
OnDeck Business Loans	$10,000	$250,000	6 months to 2 years	3% of loan amount	Apply for up to $250,000 and receive your approved funds in one business day. Minimum annual turnover of $100,000 and 1 year of trading history required.	Go to site More Info	Compare	loading Fetching your data...
Earlypay Equipment Finance	$20,000	$1,500,000	2 to 5 years	$750 - Establishment fee	Upgrade or expand your business's equipment with equipment finance from Earlypay. Borrow from $20,000 to $1,500,000.	Go to site More Info	Compare	loading Fetching your data...
Prospa Business Loan	$5,000	$500,000	3 months to 3 years	3% 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.	Go to site More Info	Compare	loading Fetching your data...

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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:

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.

A receipt with a dollar symbol and the word fee

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.

Maximum LVR

Find out how much each lender will let you borrow, as your LVR will determine the size of your deposit.

A calculator, receipt and stack of coins

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.

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?

Profile image of Scott O'Neill

Scott O'Neill, Founder & Director at Rethink Investing

"The maximum loan LVR 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.

Frequently Asked Questions

Commercial property loans are perceived by lenders to be more risky than residential property loans. This is largely due to the fact that commercial property has higher vacancy rates. These vacancy periods can be extensive. As a result, there are some key differences between commercial and residential property loans. These include:
- Higher interest rates. In general, you can expect to pay higher interest for commercial property. This is because the risk to the lender is higher.
- Lower maximum LVRs. With residential property, you may be able to borrow 90% of even 95% of the property's value. With commercial loans, lenders offer a maximum of 70% of the property's value. This means that you will need to offer a larger deposit to qualify for the loan.
- Higher fees. Apart from establishment and ongoing fees, there may be other fees that add to the cost of the loan. This can include valuation fees.
You will often find interest rates for residential home loans widely publicised on the lender's website and marketing materials. This is not the case with commercial property loans. This is because several factors influence the rate of your commercial property loan. These include:
- The location of the commercial property
- The performance of the local property market
- The location of the property offered as security for the loan
- Your financial situation and ability to repay the money you borrow
- The LVR (in other words, the size of the deposit you have saved)
- The length of time remaining on the lease and the kind of tenants in place (this applies to commercial residential properties).
- Your assets and liabilities
- Your experience as a commercial property owner
The appetite for risk will differ from lender to lender, along with lending policies. The type of commercial property finance you need will also play a role.
The kind of property you offer as security can have a big impact on the amount you'll be able to borrow. This is because of the risks attached to the security itself.
Standard commercial properties are usually ideal security for your loan. These are properties that have a broad appeal to buyers, are in a good location and are zoned appropriately for their desired use. Standard commercial properties include:
- Offices
  Retail spaces
  Factories
  Warehouses
  Residential properties (such as a block of units)
You could offer specialised commercial property as security. But the lender will need to perform a detailed valuation of the property and assess the risks associated with the property. As a result, it's likely that you'll qualify for a much lower LVR. Specialised commercial properties include:
- Restaurants and pubs
  Hotels, motels, caravan parks and other accommodation properties
  Childcare centres
  Private schools
  Aged care facilities
  Farms
  Shopping centres
You could offer your own home as collateral. This will help you access a higher LVR and a better interest rate. But, this route comes with its risks so you should seek expert advice before committing to this.

Thank you for your feedback!

Sarah Megginson

A finance and property journalist for more than 15 years, Sarah leads a team of passionate, experienced writers and editors as the Head of Editorial at Finder. She was previously managing editor of Your Investment Property magazine, Australian Broker magazine, and home loan comparison site, Your Mortgage. She's written for The Sydney Morning Herald, Canstar, Bupa and Tourism Australia, and has ghostwritten or edited over 25 books. Sarah also has a Bachelor of Arts in Communication from Griffith University. She is a regular media commentator and is passionate about showing Australians how to make their money work harder.

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2 Responses

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?
Reply
- finder Customer Care
  DeeMay 29, 2017Staff
  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
  Reply

Commercial property loan and rates Australia