Funding the deposit on a business property

Buying your own premises quietly builds wealth for many small business owners. The rent cheque stops going to a landlord, lease renewals stop being a worry, and over time the property becomes equity you can borrow against. The hard part is the start. Commercial lenders ask buyers to put in far more of their own money than a home loan does, and the cash is needed at three different moments, not one.

This page is about that buyer’s share: where it goes, how owners usually fund it, and how to size it without leaving the business short.

Where does a property deposit actually go?

“The deposit” is really three separate amounts, each with its own deadline.

1. The exchange deposit. Paid when contracts are exchanged or signed, commonly 10% of the price, held in trust until settlement. It’s due weeks before the main loan funds.
2. The settlement contribution. Whatever the purchase loan doesn’t cover. If the bank lends 65% of the price, your contribution is the other 35%, less the exchange deposit already paid.
3. The costs. Transfer duty, legal and conveyancing fees, the lender’s valuation and establishment fees, building and pest reports, and sometimes GST.

Owners who plan for the first two and forget the third are the ones who end up scrambling the week before settlement. In many purchases, the costs alone run to five or six figures.

Why is the gap bigger than on a house?

Lenders see commercial property as harder to sell in a hurry. A specialised building, a regional location or a single tenant on a short lease can all stretch the selling time if the lender ever needs to recover its money. So they lend a smaller share of value.

Lender type	Typical approach to commercial property	What it means for your deposit
Major and regional banks	Often lend around 60% to 70% of value on standard property, more for strong owner-occupiers in some cases	Usually the cheapest money, with the largest deposit required
Non-bank lenders	May lend a higher share on some property types, with flexible documentation	Smaller deposit, higher total cost
Private lenders	Lend on property value and exit, often short term	Useful to bridge a gap, rarely a long-term home

Banks are well worth approaching first. If your business has clean financials, the property is a standard warehouse, shop or office, and you can find the deposit, a bank offer will often be the cheapest long-term option you get. If the bank’s share leaves a gap you can’t fill from savings, the next question is where the rest comes from. Our commercial property loans page compares lender appetite in more depth, and the LVR calculator shows what a given loan amount means as a share of value.

Which kinds of finance can fund the deposit?

Source	How it works	Best for	Watch for
Equity in your home	A separate loan or top-up secured on the house, used for the deposit and costs	Owners with solid equity at home	Your home is on the line; size it carefully
Equity in an investment property	Same idea, using a rental or other property	Owners with spare property equity	Rental income may be counted differently by lenders
Cross-collateralised loan	One lender takes both properties as security for the whole debt	Getting a single, simpler facility	Ties the properties together when you sell or refinance
Deposit bond	A guarantee given at exchange instead of cash	Covering the exchange deposit while equity is released	The vendor must accept it; full cash is still due at settlement
Vendor finance	The seller leaves part of the price owing	Motivated sellers, hard-to-finance properties	The main lender must agree to it
SMSF purchase	Your super fund buys the property and leases it to the business	Owners with large super balances	Strict rules; the fund pays its own deposit
Short-term property-secured loan	A second mortgage or caveat loan for a few months	Timing gaps, such as waiting on another sale	Higher monthly cost; needs a clear exit

The most common pattern we see is the first one: a loan against the family home for the deposit and costs, with the purchase loan secured only by the new property. Keeping the two loans separate means each property can be sold or refinanced later without unpicking the other. Our page on home equity business loans covers how lenders treat that kind of borrowing, and the property equity calculator gives a quick read of how much is usable.

The GST question that changes the cash you need

GST is the line item most first-time commercial buyers don’t see coming. If the vendor is registered for GST and the sale is taxable, the price is usually expressed “plus GST”, and you hand over an extra tenth at settlement.

Two things can take GST off the table. A leased property sold with its tenancy intact can qualify as a GST-free sale of a going concern, provided both parties are registered and agree to it in writing in the contract. And some sales use the margin scheme, where GST is worked out on the vendor’s margin rather than on the full price, which makes the amount payable smaller.

If GST does apply, a registered buyer can generally claim it back as an input tax credit. But the credit arrives through your BAS, not on settlement day. Some buyers therefore switch to monthly GST reporting around the purchase so the credit is refunded sooner, and why short-term funding is sometimes arranged just for the GST amount. Our paying BAS and GST page looks at the other side of that cycle. Ask your accountant to confirm the GST treatment before you exchange, not after.

Duty, and Victoria’s new property tax

Transfer duty is a state tax and the bill differs sharply between states, so get an estimate from your conveyancer as early as possible.

Victoria now does things differently for commercial and industrial property. From 1 July 2024, the first qualifying purchase of such a property brings it into the state’s commercial and industrial property tax reform. That entry purchase is the final time duty is charged. Ten years later, the property starts paying an annual tax based on its land value instead, and future buyers no longer pay transfer duty on it. If you’re buying in Victoria, ask whether the property has already entered the reform, because a property that has may carry no duty at all, which shrinks the cash you need on day one.

Running the numbers on a purchase right now? Share the purchase with us and we’ll map out where your share could come from. It takes about a minute, with nothing lodged against your credit file.

How to size the deposit loan

Work it as a cash schedule, not a single figure.

1. Price plus every cost. Add duty, legal, valuation, lender fees and inspection costs. Add GST if the sale is taxable.
2. Subtract the purchase loan. Use a realistic share of value from the lender you’ll actually use, based on their valuation, not the price you agreed.
3. Subtract the cash you can safely spare. Keep enough in the business account to run through a slow month or two after settlement.
4. What’s left is the deposit loan. If GST is part of it, consider funding that slice separately for a short term, since it comes back within months.
5. Test the combined repayments. The purchase loan and the deposit loan both need to fit comfortably within the business’s cash flow, particularly if the rent you’ll stop paying is less than the new repayments.

Remember the valuation risk. If the lender’s valuer comes in below the contract price, the loan shrinks and your share grows. Leave room for it.

Worked example: a Brisbane strata warehouse

This is an illustration only. Priya runs a joinery business and agrees to buy the vacant strata warehouse next door to her current lease for $1m plus GST. Because the unit is vacant, it isn’t a going concern, so GST of $100k is payable at settlement.

Item	Amount
Price	$1m
GST at settlement	$100k
Duty (conveyancer’s estimate)	$38k
Legal, valuation, lender fees, reports	$17k
Total cash needed	$1.155m
Bank purchase loan (65% of valuation)	$650k
Buyer’s share	$505k

Priya has $140k she can spare without draining the business. She pays the 10% exchange deposit of $100k from that. For the rest, she takes a $265k loan secured on the family home, which has plenty of equity, and a separate $100k short-term facility for the GST, repaid when the credit comes back through her BAS. She switched to monthly GST reporting before settlement, so the refund arrives within weeks.

The bank checks that the joinery’s profit covers both long-term loans with room to spare. It does, partly because the old rent disappears once Priya owns the building.

Mistakes that make the deposit harder

• Exchanging before the deposit source is approved. If home equity takes three weeks to release and the exchange deposit is due tomorrow, you’re stuck. Line up the deposit loan, or a deposit bond, first.
• Assuming the price is GST-inclusive. Read the contract. “Plus GST” can add a tenth to your cash need.
• Using the contract price, not the valuation. Lenders lend on their valuer’s figure.
• Cross-securing by default. It may be simpler on day one and painful when you later want to sell the house.
• Stripping the business account bare. A property you can’t afford to run doesn’t help the business it was meant to house.

Ready to fund your share of the purchase?

Buying your premises is a long-term decision, and the right deposit structure makes it feel like one rather than a cash squeeze. We look at property purchase deposits regularly, including ones where the bank has said yes to the building but left a gap the buyer can’t fill alone.

Filling in the form is roughly a sixty-second job, and your credit file is left alone while you ask. What you send is read in-house, never forwarded to a queue of finance companies, and a real specialist works through your figures before picking up the phone. Give us the true price, the property you could borrow against and the settlement date, so our first suggestion is a workable one.

Talk to us about funding your deposit →