Quick answer
In business lending, a deposit is usually the money you put towards a purchase yourself, with the lender funding the rest. When buying property it also means the contract deposit paid at exchange and held in trust until settlement. Commercial property lenders commonly expect a bigger contribution than home lenders, because lenders mortgage insurance generally isn't available, so owners often fund it from equity elsewhere.
Key points
- The contract deposit secures a property purchase at exchange; your contribution is what the loan doesn't cover
- Commercial property lenders often want 20% to 35% of the price from the buyer
- Stamp duty, legal costs and any GST sit on top of the deposit
- Equipment finance can need a small deposit or none at all
- Equity in another property is a common way to fund a business deposit
Ask three people what “the deposit” is on a warehouse purchase and you might get three answers: the cheque handed over at exchange, the cash the buyer puts in alongside the loan, or the savings sitting in the business account. All three are deposits. Lenders care most about the second.
The three meanings you’ll meet
1. Your contribution. This is the share of a purchase you fund yourself. If a lender advances 70% of the price, your contribution is the other 30%. It’s the flip side of the loan-to-value ratio.
2. The contract deposit. When you exchange contracts on property, you pay a deposit, commonly 10% of the price, which is held in trust by the agent or a conveyancer until settlement. If the buyer pulls out without a valid reason, it can be forfeited. A deposit bond can sometimes take its place until settlement.
3. Money on deposit. Funds held with a bank, credit union or building society, known collectively as authorised deposit-taking institutions. Lenders sometimes take cash on deposit as security, covered in our term deposit security entry.
Why commercial deposits are bigger
On a home loan, lenders mortgage insurance lets buyers borrow with a small contribution. That safety net generally doesn’t exist for commercial property, so lenders protect themselves by lending less against the value. As a rough guide:
| Property and borrower | Common lender limit | Buyer contribution |
|---|---|---|
| Owner-occupied warehouse or factory, full financials | Up to around 70% to 80% | 20% to 30% |
| Leased investment property | Around 60% to 70% | 30% to 40% |
| Specialised property (childcare, hotel, service station) | Often lower | Larger again |
These figures vary between lenders and change over time. Purchase costs come on top. Transfer duty is payable to the state revenue office and runs into tens of thousands of dollars on most commercial buildings. Add legal fees, valuation and, unless the sale qualifies for a GST exemption such as a going concern, possibly GST.
Short of the deposit on a business property? Tell us about the purchase and we’ll look at ways to bridge it.
How business owners fund the gap
Few owners keep 30% of a building’s price in cash. Common approaches include:
- drawing on equity built up in the family home or a rental;
- a second mortgage over existing property, used just for the deposit;
- combining business savings with a smaller equity loan;
- vendor finance, where the seller carries part of the price;
- an SMSF purchase, which has its own strict rules and lending products.
Our funding a deposit on business property page compares these in detail.
An example
A Penrith joinery business agrees to buy its leased factory for $1.2m. Its lender will fund 70%, or $840k, leaving $360k, plus duty and legal costs. The business has $110k spare. The two directors own their homes with healthy equity, so one takes a $320k second mortgage over their home to cover the remaining contribution and costs. The $120k contract deposit is paid at exchange from savings and borrowed funds, and the factory loan settles six weeks later. (Illustrative only.)
Related terms
The LVR calculator shows how a deposit changes the loan-to-value ratio. Commercial property loans explains the purchase finance itself, and our guide on buying premises vs leasing helps decide if buying makes sense at all.
Need help putting the deposit together?
Plenty of good property purchases stall on the contribution, not the main loan. Tell us the price, the contract dates and what you own, and we’ll map out the options. Sending the enquiry is about a minute’s effort, and it won’t leave a footprint on your credit history. Your file isn’t handed to a crowd of funders to bid on; instead a specialist reads your situation personally and rings to talk it through. Be exact about the price, your existing loans and what each property is worth, because that’s what lets us suggest a structure that actually reaches settlement.
Frequently asked questions
How much deposit do I need to buy commercial property?
It depends on the lender, the property type and your financials. Many lenders cap lending somewhere between 60% and 80% of value, so buyers often need 20% to 35% of the price plus purchase costs. Specialised properties tend to need more.
Is the contract deposit the same as my loan deposit?
Not always. The contract deposit, often 10%, is what you pay the seller's agent or conveyancer at exchange. Your total contribution is the difference between the price and the loan, which can be larger. The contract deposit counts towards it at settlement.
Can I borrow the deposit for a business property?
Often, yes, by using equity in another property you own. A second mortgage or line of credit over your home can fund the deposit, with the purchase loan secured by the new property. Both loans then need to be serviceable.
What is a deposit bond?
A guarantee from an insurer or bond provider that stands in for a cash deposit at exchange. The full amount is still payable at settlement, so it buys time rather than replacing the money.
Do I need a deposit for equipment finance?
Not necessarily. Many equipment loans fund the full price, especially for established businesses buying new equipment. A deposit or trade-in can reduce the amount financed and the total interest paid.