1. The purpose of the loan
A lender will want to know why the finance is needed. The purpose shapes the assessment and can affect which lenders are suitable.
- Purchasing an owner-occupied business premises.
- Buying a commercial investment property.
- Refinancing an existing commercial property loan.
- Using commercial property equity to support business growth.
- Funding a property acquisition, fit-out or business expansion.
- Consolidating business debt into a more suitable structure.
The clearer the purpose, the easier it is to match the application with the right lender.
2. The commercial property itself
Commercial security can vary widely, and lenders will assess different property types differently. A standard office or warehouse in a strong location may be viewed differently to a highly specialised property, regional asset or property with limited alternative use.
- Property type and location.
- Condition, zoning and permitted use.
- Owner-occupied or tenanted status.
- Lease terms, tenant quality and rental income for investment properties.
- Vacancy risk and alternative use if the property had to be leased or sold.
- Valuation and marketability.
A lender is not just asking what the property is worth today. They are also considering how reliable the security would be if circumstances changed.
3. Deposit, equity and loan-to-value ratio
Commercial property loans often require a stronger deposit or equity position than standard residential lending. The loan-to-value ratio, or LVR, depends on the lender, property type, borrower profile and loan purpose.
Some scenarios may allow a higher LVR, while more specialised or higher-risk properties may require a larger deposit. It is important to understand the full cash contribution needed, including purchase costs, GST considerations where relevant, valuation fees, legal fees and any fit-out or working capital needs.
4. Income and repayment capacity
For an owner-occupied commercial property, the lender will usually assess the business cash flow and whether the business can afford the loan repayments.
For a commercial investment property, the lender may look closely at rental income, lease terms, outgoings, vacancy risk and whether the rent comfortably supports the debt.
- Business financial statements and tax returns.
- BAS, bank statements and management accounts where relevant.
- Existing debts and repayment commitments.
- Rental income and lease documentation.
- Director or guarantor position.
- Any related business or property entities.
5. The borrower structure
Commercial property may be purchased by an individual, company, trust, partnership or SMSF, depending on the situation and advice received. The borrower structure can affect the documentation, lender options and assessment process.
Your accountant and solicitor should be involved where ownership structure, tax, GST, leases or asset protection need to be considered. A broker can help with the lending side, but legal and tax advice need to come from the appropriate professionals.
6. The exit strategy
A commercial lender may want to understand how the loan will be repaid over time. For some borrowers, that is through normal principal and interest repayments. For others, it may involve refinance, sale of an asset, business cash flow or a planned restructure.
This is especially important where the loan term is shorter, interest only is requested, or the transaction involves a bridging, development or cash flow component.
Why commercial lending needs careful packaging
Commercial property lending is often more flexible than residential lending, but it can also be more nuanced. Two lenders can look at the same deal in very different ways.
A well-packaged application explains the property, the borrower, the business, the income and the reason the loan makes sense. That can make a real difference when lender policy is not black and white.
