Commercial property loans: borrowing against business premises

A company that owns its own premises holds an asset many lenders are glad to work with. Commercial property can secure substantial business loans, but it isn’t assessed the same way as a house. Understanding the differences helps you predict how much a lender will advance and what will slow things down.

Which commercial properties can secure a loan?

Most standard commercial property types are accepted, with appetite varying by lender:

Property type	General lender view
Strata office in a capital city or major centre	Widely accepted
Retail shopfront on a strong strip	Widely accepted, depends on location
Warehouse or industrial unit	Widely accepted in established estates
Freestanding factory	Accepted, valuation depends on use and fit-out
Mixed-use (shop with residence above)	Often accepted, sometimes on residential terms
Specialised (service station, childcare, hotel)	Specialist lenders, more conservative
Rural or vacant commercial land	Limited, lower ceilings

The more specialised the property, the fewer potential buyers and the longer a sale could take. Lenders account for that with lower loan-to-value ratios and sometimes shorter terms.

How commercial property is valued

Commercial valuations are done by specialist valuers and often take longer than residential ones. The valuer looks at comparable sales, but also at the property’s income potential: current leases, market rent, vacancy risk and the building’s condition. For a tenanted property, the length of the lease and the strength of the tenant can materially affect value.

For owner-occupied premises, where your own company is the occupant, the valuer may assess market rent and consider the property as if leased to a third party. If the building is heavily customised to your operation, expect a more cautious valuation. Our property valuations page explains the process.

What loan-to-value ratio to expect

Commercial property generally carries lower LVR ceilings than residential, because of the narrower buyer pool and the dependence on leasing. The exact ceiling depends on the lender, property type, location, loan position and the rest of the application. As a planning tool, the equity and LVR calculator uses an illustrative lower ceiling for commercial property; the LVR explainer covers how lenders set these bands.

What lenders check beyond the property

• Who owns it. Commercial property is often held in a related trust or a separate company. The owner provides the security, and the business is usually the borrower.
• Existing debt. Any current commercial mortgage and whether the new loan will refinance it or sit behind it.
• Leases. Copies of leases, rent rolls and any arrears.
• Holding costs. Council rates, land tax, insurance and strata levies, which affect how sustainable the debt is. State revenue offices, such as Revenue NSW on land tax, explain the land tax rules for each state.
• The business. Trading performance, particularly for owner-occupiers, and the purpose of the funds.

Common uses

Companies borrow against commercial property to fund expansion, buy equipment, consolidate debt, release equity for working capital, pay out a partner or bridge into a larger site. A bridging loan is common when upgrading premises before selling the old one. For straightforward equity release on property you already own, see equity release for business.

Things that slow commercial deals down

The most common delays are valuation lead times, missing or expired leases, unclear ownership structures and existing lenders taking time to provide payout figures or consent. Having leases, title details and the ownership structure documented before you apply can shave weeks off the process.

Practical tips before you apply

Gather the title search, current leases and any recent valuation or rental appraisal before you speak to a lender. If the property is held by a trust, have the trust deed handy, because the lender’s solicitor will check the trustee can give security. And if the building has unusual features, such as a large cool room, heavy power supply or specialised fit-out, mention them upfront. They can add to value for the right buyer but reduce it in a valuer’s eyes, and knowing early helps set expectations.

Owner-occupied versus investment property

Lenders treat a building your company trades from differently from one it leases to others. With owner-occupied premises, the business itself is the tenant, so the lender looks hard at your trading figures because the same cash flow pays the rent and the loan. With an investment property, the focus shifts to the tenant: the length of the lease left to run, the tenant’s strength, any rent reviews and how easy the space would be to re-let if they left. A long lease to a well-established tenant can lift what a lender will offer, while a short lease or a vacancy usually pulls it back. If you own both kinds, say so early, because a lender may prefer one property as the main security and treat the other as support.

Put your premises to work

If your company or a related entity owns commercial property, it may support more borrowing than you expect. Tell us the property type, location and what you need through our enquiry form. Enquiring involves no credit check, your enquiry stays with one team, and a real person will tell you what a commercial valuation is likely to support. Accurate details about leases and existing debt help us give you a sound first answer. Ask about your property.