Commercial property loans: financing offices, shops, warehouses and factories

There comes a point in many businesses when paying rent starts to feel like funding someone else’s retirement. Owning the building secures your address for good, frees you to renovate on your own terms, and builds an asset alongside the business. Other owners buy commercial property purely as an investment. Both routes usually need a commercial property loan, and lenders treat the two very differently.

Owner-occupier or investor: which kind of borrower are you?

	Owner-occupier	Investor
Who uses the property	Your own business	A tenant
What repays the loan	Your business’s profit	The rent
Lender’s main question	Can the business comfortably afford it?	Is the lease strong, and would the property re-let quickly?
Documents	Financials, tax returns, BAS, business plan for a move	Lease, rent roll, outgoings, tenant details
Main risk	A downturn in your own business	Vacancy if the tenant leaves

Owner-occupiers are judged on the business. A lender will usually calculate how many times your profit covers the loan repayments; our debt service coverage ratio calculator shows how that measure works.

Investors are judged on the lease. Lenders look at how long the lease has left to run (often summarised as weighted average lease expiry, or WALE, for multi-tenant buildings), the tenant’s strength, whether rent is in line with the market, and who pays outgoings such as council rates, insurance and land tax.

How much will a lender advance?

Less, as a share of value, than for a home. Commercial property takes longer to sell, values move with the economy and with leasing, and some buildings only suit a narrow range of users. Lenders reflect that with lower maximum loan-to-value ratios that vary by type:

• Standard industrial and warehouse property in established areas is often well regarded, because demand is broad.
• Strata offices and suburban shops depend heavily on location and leasing.
• Specialised property such as childcare centres, service stations, medical centres, pubs or motels is valued partly on the business inside it, and lenders assess the operator as well as the bricks.
• Vacant or rural commercial land usually attracts the most conservative treatment.

Many buyers bridge the gap with equity from their home or another property. Our page comparing home equity vs commercial property as security explains how lenders weigh each, and the deposit on business property guide covers ways to fund the contribution.

Not sure how the numbers fall for your purchase? Run the deal past our team and we’ll give you a straight read; your credit file stays untouched at enquiry stage.

The GST cash you might need at settlement

This catches out first-time commercial buyers more than anything else.

Selling commercial property is generally a taxable supply for GST when the seller is registered. If you’re buying a vacant building, or one you’ll occupy yourself, the price will often include GST. A GST-registered buyer normally recovers it through an input tax credit on the next BAS, yet the cash itself leaves your account on settlement day and only returns once that BAS is processed. On a $1.1m purchase including GST, that’s around $100k of cash tied up until the credit comes through.

There’s an exception for tenanted buildings. Under ATO guidance, a leased building can change hands GST-free as a going concern, provided several tests are met: for instance, the purchaser holds (or must hold) GST registration, the contract records the going-concern agreement, and every lease passes to the new owner. A vacant building bought to occupy generally doesn’t qualify. Your conveyancer and accountant should confirm the GST treatment in the contract before you sign, and a short-term facility can cover the GST gap if needed. The GST calculator is handy for splitting a GST-inclusive price.

Victoria’s new commercial property tax

If you’re buying in Victoria, the stamp duty maths changed on 1 July 2024. Under the CIPT reform, an eligible commercial or industrial site enters the new system the first time it changes hands after that date. That buyer still pays duty, but can choose to pay it upfront or through a government-backed transition loan over ten years. Ten years after entry, an annual tax of 1% of the land’s unimproved value applies instead, and later sales of that property don’t attract duty.

For borrowers this matters in two ways: a transition loan can lower the cash needed at settlement, and a property already in the system may be cheaper to buy now but carry an annual tax later. Ask your conveyancer whether the property has entered the reform and factor the future tax into your holding costs. Other states still charge conventional transfer duty; in New South Wales, Revenue NSW sets out the duty payable on commercial purchases.

What do lenders check?

Area	Typical evidence
The property	Independent valuation by a commercial valuer, zoning, building condition
The lease (investors)	Term remaining, options, rent reviews, tenant’s financial standing
The business (owner-occupiers)	Two years of financials or equivalent, current trading, other debts
Contribution	Cash deposit, equity in other property, or both
Structure	Who’s buying: company, trust, individuals or SMSF
Costs	Stamp duty, GST, legal fees, valuation and any fit-out

Bank, non-bank or private?

Banks are major commercial property lenders and are often the cheapest choice for an established business with strong, recent financials or a well-leased investment. If you fit their criteria, put a bank offer at the top of your list.

Where banks hesitate (a business with less than two years’ trading, financials not yet lodged, a specialised building, a regional location or a credit issue), non-bank lenders can step in, usually with lighter documentation and higher cost. Private lenders fund short-term commercial deals: settling quickly, covering a shortfall, or holding a property until a bank refinance or a sale. If your current property is the security rather than the purchase, see business loans against commercial property.

Other routes to owning premises

• Inside super. Some owners buy their premises through a self-managed super fund; see SMSF commercial property loans.
• Buy before you sell. Moving from one owned building to another? Bridging finance covers the overlap.
• Build instead of buy. For a new building, look at construction and development finance.

From rent payer to owner

Owning your premises is a big step, and the right loan makes the difference between premises that lift the business and premises that weigh on it. The details, from GST at settlement to lease terms, are where deals succeed or stall.

If you’re weighing up a purchase or refinance, tell us about it. The enquiry is brief, about a minute, and submitting it doesn’t register on your credit history. Your file isn’t sprayed across the market, so there’s no wave of calls; one specialist works through it and phones to talk about the property, your contribution and the timeline. Accurate figures on price, lease and recent trading mean we can talk about real options rather than guesses.

Talk to us about your commercial property →