Commercial property loans, in three clear steps

What is a commercial property loan?

It’s a loan secured by a property used for business rather than living: a shopfront, a suite of offices, a warehouse, a factory, a medical centre. The property sits behind the loan as security, in much the same way your home sits behind a home loan.

Businesses use commercial property loans for three distinct jobs, and the first step is knowing which one is yours:

1. Buying premises, either to occupy or to hold as an investment by the business.
2. Refinancing an existing commercial loan, perhaps because a term is ending or the current lender wants out.
3. Releasing equity from a property you already own to fund something else in the business.

Why buy premises instead of leasing?

There’s no universal answer, but owners usually weigh up the same handful of factors:

Buying	Leasing
Control over the space and fitout	Flexibility to move or resize
Repayments build equity over time	Rent builds no equity
Larger upfront costs: deposit, duties, fees	Lower upfront costs
Your capital is tied up in the building	Capital stays available for the business

Many owners find the decision comes down to how settled the business is in its location, and whether tying up capital in property would starve the business itself of working capital.

What do lenders look at for commercial property?

More than the price tag. Expect questions about:

• Property type. A suburban office strata unit and a specialised cold-storage facility are viewed very differently.
• Location. Busy, well-serviced areas tend to be easier to lend against than isolated or single-industry towns.
• Occupancy. Owner-occupied, leased to a tenant, or vacant? A solid lease or a stable owner-occupier helps.
• Condition. Major repairs or compliance issues can affect value.
• Your exit or repayment plan. Business income over a long term, or a sale or refinance in a shorter one.

Property-secured lending runs from $20,000 to $5,000,000. Residential property can sometimes be offered alongside the commercial property to strengthen the position.

Unsure how your property would be viewed? Ask a specialist with a 60-second enquiry. There’s no credit check involved.

What does it really cost to buy commercial property?

The purchase price is only the headline. Build a full budget:

• Deposit, depending on the lender and property
• State duties. For example, Victoria’s State Revenue Office explains that land transfer duty is paid when you buy property in that state. Each state has its own rules and rates.
• Legal and conveyancing fees
• Valuation and loan establishment fees
• Building and pest inspections, and any compliance work
• Fitout and moving costs, if you’ll occupy the space. See fitout finance.
• A working capital buffer, so the business isn’t left short after settlement

Illustrative example only. A printing business buys a small warehouse it has leased for years. Its budget covers the deposit, duty, legal costs and an upgraded electrical supply for new machinery. It also keeps three months of operating costs aside, because moving into ownership shouldn’t mean running the business on empty.

What if I’m buying before I sell?

If you need to buy new premises before selling your current ones, a bridging loan can cover the gap, repaid when the sale settles. It’s a common move for growing businesses that have outgrown their space.

Can I use a commercial property I already own?

Yes. If your premises have equity, a first mortgage or second mortgage can release funds for working capital, equipment, clearing tax debts or expansion. The questions are the same: the property’s value, any existing loan, and how you’ll repay.

Owner-occupied or investment: does it matter?

It does, because the lender is looking at different things in each case.

Owner-occupied premises are bought by the business to trade from. The lender looks closely at the business itself: its trading history, profitability and ability to meet repayments that replace rent. A strong, stable business occupying its own premises is often an attractive proposition.

Investment premises are leased to an unrelated tenant. Here the lender looks at the lease: who the tenant is, how long the lease runs, what the rent is and how easily the property could be re-let if the tenant left. A long lease to an established tenant helps; a short lease or a vacancy makes lenders more cautious.

Many business owners do a bit of both, for example buying a building with two tenancies, occupying one and leasing the other. In those cases, lenders weigh up both stories.

Whichever applies, the budgeting steps are the same: realistic value, every transaction cost and a working capital buffer. If you’re upgrading premises before selling your current ones, the bridging loans page explains how to cover the gap. And if your existing premises already have equity, a first mortgage business loan may release funds for the purchase or for a fitout.

Let’s map out your property plan

Commercial property is one of the biggest financial decisions a business makes. The right structure depends on the property, the business and the plan, so it’s worth a proper conversation.

When you enquire, there’s no credit check. A real person reads your details and calls you back, and your information isn’t sprayed across a list of lenders. Help us get it right first time: describe the property, any existing loan and what you want to achieve as accurately as you can. Ask about commercial property finance.