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Commercial property finance: what to prepare before you apply

Christian Tucker
6 days ago
6 min read

Insights from AGFB · Checked 2 October 2026 · About 6 minutes

In brief

  • Loans mainly for business, or for a commercial investment property, generally sit outside the National Credit Code, so the responsible lending rules that cover home loans usually don't apply.

  • Expect a larger deposit, shorter terms, interest-only periods and regular reviews, though each lender sets its own limits.

  • The lease, the tenant, how well the rent covers the interest and the valuation matter as much as your income.

  • Check the GST position and your state's stamp duty before you sign.

How is a commercial property loan different from a home loan?

A loan for a home, or a residential investment property, is generally covered by the National Credit Code. ASIC's guidance says the Code doesn't apply to credit wholly or mainly for business purposes, or for investments other than residential property, and loans to companies are outside the credit legislation.

The responsible lending obligations sit in the National Credit Act, which deals with credit the Code covers, so they generally don't apply to a commercial property loan. The lender still assesses the deal against its own credit policy.

Some protections remain, such as bans on misleading or unconscionable conduct and on unfair terms in standard form small business contracts. AFCA can hear complaints from small businesses with fewer than 100 employees, but ASIC notes that lenders offering only commercial loans don't have to be AFCA members.

Deposits, terms, interest-only and reviews

Lenders usually want more equity than for a home loan. Reserve Bank research in 2023 found most commercial property bank loans were written at loan-to-value ratios (LVRs) below 65%, with borrowers' earnings covering the interest more than twice. In October 2026 the Reserve Bank noted that competition had eased some lending terms in recent years, so limits vary by lender.

Terms are often shorter than a home loan's, and the Reserve Bank has described loans to commercial property investors as mostly interest-only. Some facilities run for a set number of years, then are reviewed, extended or refinanced.

Many also carry covenants, such as keeping the LVR or interest cover within a limit and supplying yearly financials. A breach may let the lender ask for more security, a higher rate or repayment, depending on the contract.

Buying for your business or as an investment?

If your business will occupy the premises, the lender usually looks to its trading profit to meet the repayments. If you are buying to lease out, the rent and the tenant carry most of the weight.

Buying through a company or trust changes who is liable and how tax applies, and lenders often ask directors or trustees for personal guarantees. A self-managed super fund can borrow for property only under strict rules, so get licensed advice first.

How lenders assess a commercial property

The lease and the tenant

Lenders read the lease closely: the tenant, the rent, review clauses, who pays outgoings and how long it has to run. With several tenants they look at the WALE, the weighted average lease expiry, usually weighted by rent. A longer WALE means the income is secured for longer.

Rental yield and interest cover

Yield is the rent as a percentage of the price, and lenders focus on net rent after any outgoings the owner pays. The interest cover ratio (ICR) divides that net income by the interest, and it can cap the loan even when the deposit is enough.

Take a hypothetical $1.5 million property earning $97,500 a year in net rent. A 65% LVR would allow $975,000, but if rent must cover interest twice at 7.0% (an example rate only, not an offer), interest can't exceed $48,750, which supports only about $696,000. Here the rent, not the value, sets the limit.

The valuation

The lender usually orders its own valuation. Commercial valuers often capitalise the net income and test it against sales and yields on similar properties. In the example, $97,500 capitalised at 6.5% gives $1.5 million, but at 7.0% it gives about $1.39 million, and a lower valuation means a bigger deposit.

Property type, location and specialised assets

Well-located shops, offices and warehouses with broad appeal are usually easier to finance. In October 2026 the Reserve Bank noted that some markets, including lower-grade offices and properties in high-vacancy areas, remained weaker.

Specialised properties, such as service stations, motels or childcare centres, are harder again because their value is tied to one use or to the business inside. Lenders may lend less, want trading figures and a specialist valuation, or decline.

Using your home as extra security

If the deposit is short, many lenders will accept your home as additional security, which lowers the overall LVR. The catch is that the lender can look to your home if the loan isn't repaid.

Because the Code generally turns on what the loan is for, securing a business loan over your home doesn't of itself bring it under the consumer rules. Consider independent legal advice before you sign any mortgage or guarantee.

GST: check the contract early

The ATO says the sale of commercial premises is generally subject to GST when the seller is registered or required to be registered. A registered buyer that will use the property in its business, including leasing it out, may be able to claim the GST back as a credit. It is still paid at settlement, so plan for the cash.

A tenanted property may instead be sold as a GST-free going concern. Broadly, the sale must be for payment, the buyer must be registered or required to be registered, both parties must agree in writing, and the seller must hand over everything needed to keep the leasing enterprise running. Ask your accountant and solicitor to check the GST clause before you sign.

Stamp duty varies by state

Stamp duty (transfer duty) is set by each state and territory. In Queensland, commercial property pays general rates, so duty on a $1.5 million dutiable value is $66,775, and where GST applies it is worked out on the GST-inclusive amount.

Victoria is replacing stamp duty on commercial and industrial property with an annual tax. A qualifying property sold from 1 July 2024 pays duty on that sale, and later sales may be exempt. After a 10-year transition, a yearly tax of generally 1% of site value applies, on top of any land tax.

A practical checklist before you apply

  • The contract of sale, including the GST clause and any going concern terms.

  • Every lease, a tenancy schedule and the outgoings.

  • Rent statements showing the tenants pay on time.

  • For owner-occupiers, two years of business financials and tax returns.

  • Company or trust documents, and who will give guarantees.

  • Funds for the deposit, stamp duty, any GST due at settlement, fees and a cash buffer.

  • Details of any property you could offer as additional security.

  • Building, zoning and environmental checks, especially for older or specialised properties.

Common questions

Can I buy a vacant commercial property?

Often, yes, but there is no rent to support the loan. Lenders may lend less, rely on your other income, or want a lease signed before settlement.

Who pays for the valuation?

The lender usually orders it, and the borrower usually pays. Commercial valuations can cost more and take longer than residential ones.

Try the numbers

Use our Repayments calculator to test repayments at different rates and terms, and the Property Fees calculator as a starting point for stamp duty and purchase costs. Find Your Next Step asks a few short questions and points you to the right tool or enquiry, and our commercial property finance page explains how Christian can help.

Talk it through

Christian can compare how lenders would view the lease, the valuation and your structure before you commit.

Sources

General information only. This article does not take into account your objectives, financial situation or needs. Your full financial situation and requirements must be considered before any offer or acceptance of a loan product. It is not tax or legal advice; speak with your accountant or adviser. All lending is subject to the lender's assessment and criteria, and fees and charges apply. Figures and rules are correct as at the checked date shown and can change.

Avantgarde Financial Brokerage Pty Ltd, Corporate Credit Representative 580346, authorised under Australian Credit Licence 389328 held by Connective Credit Services Pty Ltd.

BUYING OR REFINANCING COMMERCIAL PROPERTY?

See how Christian structures commercial property finance, then tell him about the property and your plans. No credit check to enquire. Christian replies the same business day.

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