Finance for buying commercial property

For many owners, the moment to buy comes after years of watching rent go out the door. Sometimes it’s forced: the landlord sells, or the business needs a building that simply isn’t available to lease. Either way, buying commercial property is two decisions stitched together. One is a property decision. The other is a business decision about tying up capital that could otherwise fund stock, staff or growth.

This page is about getting the finance side of that right, from the first budget to the day of settlement.

Should the business own its premises at all?

Lenders will ask why you’re buying, so it’s worth being clear in your own head first.

Reasons owning makes sense:

• Rent stops rising on someone else’s schedule, and repayments build equity instead.
• You control the fit-out, signage and future alterations.
• A specialised operation (a cold store, a workshop with heavy power, a medical suite) can be hard to relocate.
• The property can later serve as security for other business borrowing.

Reasons to keep leasing:

• A deposit and costs tie up cash at a time the business may need it.
• Owning concentrates risk: if the business struggles, the property and the business can fail together.
• Relocating to a bigger or better site gets slower and more expensive.

Neither answer is right in general. A business with strong, steady profit and spare cash is a very different buyer from one stretching to make the deposit.

Which entity should hold the title?

This is the decision most often left too late. Your accountant and solicitor should settle it before you sign, because changing the buyer after exchange can trigger extra duty and lender headaches.

Owner	Typical reasons	Finance points
Your trading company	Simple; one set of books	The property is exposed to trading risks and creditors
A separate company or family trust	Keeps the property apart from the trading business; the business pays rent to the property entity	Lenders often want guarantees from the trading business and directors
A self-managed super fund	Long-term ownership inside super, often leased to the business	Needs a limited recourse loan from a specialist SMSF lender; strict rules on use and related parties
You personally	Sometimes chosen for tax or simplicity	The loan is assessed on your income and the rent

Our comparison of SMSF versus company ownership covers the trade-offs in more detail. Whichever you choose, the rent the trading business pays the property owner should be at market rates and properly documented, because lenders read that lease as part of the deal.

What cash do you need on settlement day?

The deposit is the start. A realistic budget for a commercial purchase looks something like this:

• The contribution. The difference between the price and what the lender will advance.
• Transfer duty. Charged by the state on most purchases. The rates, thresholds and concessions differ between NSW, Queensland and the others, so get an estimate from your state revenue office or solicitor early.
• Victoria’s commercial and industrial property tax. Since 1 July 2024, qualifying Victorian commercial and industrial properties have been moving into a new system. Duty is paid on the transaction that brings the property in, then an annual tax applies ten years later, and later sales of that property are generally free of transfer duty. If you’re buying in Victoria, ask whether the property has already entered the scheme, because it changes both the upfront cost and the long-run holding cost.
• GST. Commercial property sold by a registered seller is usually a taxable supply, so 10% GST sits on top of the price unless the sale qualifies as a going concern or the margin scheme applies. A GST-registered buyer claims it back through the BAS, but the money must still be available when the keys change hands. Some buyers arrange short-term funding for those few weeks.
• Professional costs. Solicitor or conveyancer, building and pest inspections, and for older buildings, an asbestos or compliance check.
• Lender costs. Valuation, application or establishment fees, and the lender’s legal costs.
• A buffer. Holding costs between settlement and moving in, any repairs, and a few months of repayments.

Want an early read on whether the numbers stack up? Run the purchase past our team. The form is a minute’s effort and doesn’t trigger any credit enquiry.

How do lenders size a commercial property loan?

Commercial property lending turns on three numbers and one story.

The loan-to-value ratio. Lenders cap the loan as a share of the property’s value, and that cap is usually lower than for housing. It drops again for specialised property, rural or regional locations and properties with a single unusual use. Our LVR calculator shows how the cap translates into dollars.

Serviceability. For an owner-occupier, the lender looks at whether the trading business’s profit covers the repayments, with room to spare. For an investor, the focus shifts to the rent, the lease term and the quality of the tenant.

Security. If the purchase property alone doesn’t cover the loan, lenders may take additional security, most often over a home. That can reduce the cash contribution but puts more on the line.

The story. Why this property, why now, and how the business uses or benefits from it. A clinic buying the suite it has occupied for ten years is a simple story. A first-time buyer purchasing a large vacant warehouse on spec is a harder one.

Which finance options fit a commercial purchase?

Option	Suits	Notes
Bank commercial property loan	Established businesses and investors with clean financials	Often the lowest total cost; slower approvals and stricter criteria
Non-bank commercial property loan	Buyers with self-employed income, lighter documentation or credit marks	Faster and more flexible; costs more; refinance later
Home equity for the contribution	Owners with equity in residential property	Reduces cash needed; ties the home to the deal
SMSF limited recourse loan	Super funds buying business premises	Specialist lenders only; strict structure
Vendor finance	Sellers willing to carry part of the price	Rare but possible in slow markets or with specialised assets
Short-term bridging or caveat loan	Covering a gap at settlement until long-term finance lands	Short-term only, with a clear exit

Banks deserve the first call. A bank commercial loan for a well-run business buying sensible premises is often the cheapest long-term money available, and if your bank says yes on terms that work, take that offer seriously. If it says no, offers less than you need, or can’t move by the settlement date, non-bank and private lenders are well used to stepping in.

Worked example: a physiotherapy practice buys its rooms

This is an illustration with simplified numbers. A physiotherapy practice in Brisbane’s north has leased the same strata suite for nine years. The landlord offers to sell it for $1.1m plus GST, with the practice’s lease in place.

The practice owners set up a family trust to buy the suite and keep it separate from the clinic. Because the suite is sold with its existing lease to the practice as tenant, their solicitor confirms with the seller’s solicitor whether the sale can be treated as a going concern, and both sides agree to that in the contract, so no GST is added.

Item	Amount
Purchase price	$1,100,000
Queensland transfer duty, legal, valuation, lender fees (estimate)	$70,000
Buffer for repairs and repayments	$30,000
Total needed	$1,200,000

The bank offers a commercial loan of 65% of the valuation, about $715k, secured by the suite, with the clinic company and both directors as guarantors. The remaining $485k comes from $185k in savings and a $300k loan secured against the owners’ home. The clinic’s profit, after the owners’ wages and the new rent paid to the trust, covers both sets of repayments comfortably, and that serviceability is what gets the deal approved.

Had the bank declined because the practice’s latest accounts weren’t lodged yet, a non-bank lender could have funded the purchase on recent bank statements and BAS, with the owners refinancing to a bank a year later once the accounts were up to date.

Pitfalls that cost buyers money

• Signing before the entity is set up. Nominating or changing the buyer after exchange can create extra duty.
• Forgetting GST on settlement day. A GST-inclusive price with no going concern agreement means finding an extra 10% in cash, even though it comes back later.
• Under-reading the lease. For investors, the remaining lease term, rent reviews and tenant strength drive the valuation and the loan.
• Skimping on due diligence. Zoning, building defects, fire compliance and strata levies all affect value. A lender’s valuer may spot what you missed, after you’ve exchanged.
• Leaving no working capital. Emptying the business account to fund the deposit can trade one kind of security for another kind of risk.

From tenant to owner: let’s work out the finance

Buying your own premises is one of the bigger calls a business owner makes, and the finance should make the property decision easier, not dictate it. We talk with owners about commercial purchases every week, from first-time buyers of a small strata unit to established businesses buying their warehouse from the landlord, including deals a bank has turned down.

The enquiry is quick, around a minute, and asking leaves your credit history completely untouched. What you send is kept by a single team rather than circulated to a queue of lenders. A lending specialist studies it and phones you to work through the purchase. Please be accurate about the price, the property, who will own it and your settlement date, because that’s what lets us match a realistic option at the first attempt.

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