Owner-occupied or investment
Lenders treat commercial property differently depending on who uses it. If your business occupies the property, the lender looks at the business's financials to see whether it can carry the loan. If it's an investment, the lender looks mostly at the lease: the rent, the tenant's strength and how long the lease has to run.
Who lends on commercial property
| Lender type | Usually suits | Trade-off |
|---|---|---|
| Banks | Strong financials, standard property, longer terms | Lowest rates, most paperwork, slowest approvals |
| Non-bank lenders | Self-employed, low-doc, recent credit issues, specialised property | Higher rates, more flexible policy, faster decisions |
| Private lenders | Urgent settlements, short-term needs, complex deals | Highest rates, short terms, focus on the exit |
Deposit and loan to value
Commercial lenders usually want a bigger contribution than residential lenders. Many lend up to around 65% to 70% of value, with some going higher for owner-occupiers with strong financials. Vacant, regional and specialised property, such as childcare centres or service stations, usually attracts lower limits. Equity in other property can sometimes be used in place of a cash deposit.
Full-doc and low-doc
A full-doc loan is assessed on tax returns and financial statements. A low-doc loan relies on alternatives such as an accountant's letter, BAS statements or bank statements, which suits businesses whose financials are behind or don't show recent growth. Low-doc loans are mostly offered by non-banks and usually need a larger deposit.
What lenders look at in a lease
- Rent and rent reviews against the loan repayments.
- The tenant. National tenants and established businesses carry less risk.
- Lease term remaining. Longer leases support larger loans.
- Vacancy risk in the property's location and type.
Development, construction and residual stock
Development and construction loans are assessed on the project: the site, approvals, the builder, the budget and pre-sales. Once a project is complete, a residual stock loan can carry unsold units while they sell, which frees you from the construction lender's deadline. These loans need a lot of detail up front, so involve your broker early.
Costs and timeframes
Allow for valuation, legal and establishment fees on the loan, plus stamp duty and other purchase costs. Bank approvals commonly take four to eight weeks. Non-bank lenders are usually faster, and private lenders can settle in one to three weeks when the deal suits them.