Commercial Property Loan FAQ Australia

Individuals, companies, trusts, SMSFs and partnerships can all apply for commercial property loans in Australia. Companies and trusts are common ownership structures for commercial property, and most lenders require personal guarantees from all directors or trustees regardless of the borrowing entity's structure. First-time commercial borrowers face the same eligibility requirements as experienced investors, though lenders may apply more conservative terms where there is no prior commercial property history.

Yes, self-employed borrowers can obtain commercial property loans, though documentation requirements are more demanding than for PAYG borrowers. Most mainstream lenders require the most recent two years of personal and business tax returns and notices of assessment. Businesses operating for less than two years may have limited options with mainstream lenders and may need to approach specialist commercial lenders. Low doc commercial loans are available but typically carry higher rates and lower LVR limits, often capped at 60 to 65% LVR.

Yes, companies and trusts are common and accepted borrowing structures for commercial property in Australia. Most lenders accept both discretionary and unit trusts as borrowing entities, provided all trustees, directors and guarantors can provide personal guarantees and meet the lender's credit criteria. The trustee company structure adds an additional layer of documentation and legal review to the assessment process. Some lenders impose additional conditions on multi-beneficiary trusts or complex trust deeds, and legal costs are higher than for individual borrower applications.

Yes, an SMSF can purchase commercial property, including business premises used by a fund member's own business. This arrangement is permitted under specific ATO rules governing related-party transactions. SMSF commercial loans must be structured as limited recourse borrowing arrangements (LRBAs) and are available from a limited range of lenders. Most SMSF commercial lenders cap LVR at 65 to 70%, and interest rates are typically higher than for equivalent non-SMSF commercial loans. The property must be acquired on arm's length terms and meet the fund's investment strategy and ATO compliance requirements. The ATO's SMSF property investment guidance sets out the compliance requirements in full.

Commercial property lending with adverse credit is possible through specialist and private lenders, but the pool of willing lenders is much smaller than for residential lending. Mainstream banks and most non-bank lenders require a clean credit history for commercial applications. Specialist lenders may consider paid defaults, discharged insolvency or limited adverse conduct, typically at rates 3 to 5% above standard commercial pricing and LVR limits of 55 to 65%. The severity, recency and context of the credit issue, combined with the strength of the commercial security and tenancy, all affect assessment outcomes.

No. Property Finance Help is not a lender, broker, credit provider or financial adviser. We provide general information and referral support only and may connect you with a suitable finance contact where appropriate. Any credit decision is made by the lender or broker you are connected with, not by Property Finance Help.

Commercial property loan interest rates in Australia typically sit 1 to 3% above equivalent residential investment loan rates, reflecting the higher risk profile of commercial security. Rates vary by lender, LVR, property type, borrower strength and loan size, and are not publicly advertised with the same consistency as home loan rates. Low LVR loans, large loan sizes and premium metropolitan properties with strong long-term tenants generally attract sharper pricing. Rate context for business and commercial borrowers is also covered on ASIC's MoneySmart business loans page.

Commercial property loans carry higher upfront costs than residential mortgages. Application and establishment fees typically range from $500 to $3,000 for standard transactions, with some lenders charging 0.5 to 1.5% of the loan amount as an establishment fee on larger facilities. Commercial property valuations typically cost $1,500 to $5,000 depending on property size and complexity, compared to $300 to $500 for a standard residential valuation. Government stamp duty, mortgage registration and legal costs also apply and vary by state. Ongoing fees such as annual review fees, line fees or facility fees are common in commercial lending and should be factored into any total cost comparison.

Commercial property loan terms in Australia typically range from 3 to 15 years, significantly shorter than residential home loan terms of up to 30 years. Most lenders offer terms of 3, 5, 10 or 15 years. At the end of the term, the outstanding balance is generally due as a balloon payment, meaning refinancing at maturity is a normal feature of commercial lending rather than an exception. This introduces refinancing risk: if property values have fallen or the borrower's circumstances have changed at maturity, re-approval on the same terms is not guaranteed.

An interest-only commercial loan requires repayments that cover only the interest charge, with no reduction in the principal balance over the interest-only period. Interest-only structures are common in commercial lending, particularly for investment properties, and can run for the full loan term in some cases. This reduces monthly outgoings and preserves cash flow for business operations or further investment. Lenders typically assess the borrower's ability to service the loan on a principal-and-interest basis at maturity when interest-only periods are included in the application.

Fixed rate commercial loans are available in Australia, though the range of lenders and fixed terms is narrower than for residential lending. Commercial fixed periods typically range from 1 to 5 years, after which the loan reverts to the lender's variable rate or is re-fixed at the prevailing rate. Unlike residential fixed rates, commercial fixed rates often carry significant break costs if repaid or refinanced during the fixed period, calculated using swap rate movements since the rate was set. Variable rate loans are more common for short-term or construction facilities, while fixed rates suit borrowers seeking payment certainty on established investment properties.

Commercial loan serviceability is assessed using a combination of the borrower's income and the net rental income from the property. Rental income is typically assessed at 80 to 100% of the contracted rent, depending on lease terms, tenant quality and lender policy. Most lenders apply a serviceability buffer of 1 to 2% above the actual loan rate to test capacity under higher rate conditions. For owner-occupied business premises, the business's trading income, cash flow and two years of financial statements are used in place of rental income. A strong WALE, or weighted average lease expiry, and a creditworthy tenant improve serviceability outcomes significantly.

The primary security for a commercial property loan is a first registered mortgage over the commercial property being purchased or refinanced. Most lenders also require a general security agreement (GSA) over business assets when the borrower is a company or trust. Personal guarantees from all directors, trustees and controlling parties are standard regardless of the borrowing entity's structure. Cross-collateralisation of residential property is sometimes used to supplement commercial security, allowing a higher LVR or improving approval prospects, though this approach ties the residential asset to the commercial lending and introduces risk if either property needs to be sold independently.

Yes, commercial property refinancing and equity release are available through most mainstream and specialist commercial lenders. Usable equity depends on the current property value, existing loan balance and the lender's maximum LVR. For example, a commercial property valued at $1,000,000 with an existing loan of $400,000 at a lender cap of 70% LVR would have usable equity of approximately $300,000. A fresh commercial valuation is required, and equity release is subject to full credit assessment including income, updated lease documentation, property condition and loan purpose.

Yes, purchasing owner-occupied business premises is one of the most common uses for commercial property loans in Australia. Lenders assess owner-occupied commercial applications using the business's trading income, cash flow and two years of financial statements, rather than rental income. Business premises can also be purchased through an SMSF under a limited recourse borrowing arrangement, allowing the business to pay rent to the fund at an arm's length rate. This approach can offer tax and succession planning advantages. Any SMSF purchase of related-party business premises must satisfy the ATO's compliance requirements for related-party transactions.