Quick answer
A commercial property loan is a mortgage over a shop, office, warehouse or similar building. For an owner-occupier, lenders commonly lend somewhere between about 65% and 80% of the valuation, depending on the property type, so plan on a deposit of 20% to 35% plus stamp duty, legal costs and a valuation fee. The lender assesses the building and the business that will pay for it.
Key points
- The deposit is only part of the cash you need: duty, legals, valuation and a buffer are on top
- Lenders value the building for resale and look at your business earnings for repayments, so both have to stack up
- Industrial and well-located premises usually attract higher lending limits than offices, retail or specialised buildings
- A bank is often the cheapest source when you fit its policy; a non-bank or second-tier lender is the fallback when you don't
- Check the contract's finance clause and settlement date against how long valuation and approval will really take
Your lease has two years to run, rent keeps rising, and the building next door has just gone on the market. Buying your own premises starts to look sensible. Then you ask a bank about it and discover that borrowing for a warehouse is a different exercise from borrowing for a house.
The mechanics are not mysterious, though. Here is how a first commercial property loan works, what it costs beyond the price, and how lenders decide.
What is a commercial property loan, exactly?
It is a loan secured by a mortgage over a property used for business: an office, shop, workshop, warehouse, medical suite, or a mix. When the business itself will occupy at least part of the building, lenders call it owner-occupied, and they generally treat it more kindly than an investment property let to strangers. The reason is simple. Your business has a reason to protect the premises, and the rent you currently pay becomes the repayment you make.
Our commercial property loans page covers the product itself. This guide is about the first-time experience.
How much will a lender actually lend?
The lender lends against its valuation, not the contract price, and applies a maximum loan-to-value ratio (LVR) that varies by property type. Broker and lender information published in 2026 points to a rough pattern:
| Property type | Typical lending limit (share of valuation) | Why |
|---|---|---|
| Industrial, warehouse, factory unit | Up to about 80% | Deep buyer pool and tight supply in most cities |
| Office, suburban or metro | About 65% to 75% | Vacancy risk and changing demand |
| Retail and shopfronts | Often towards the lower end | Depends heavily on location and foot traffic |
| Specialised (childcare, medical, hospitality, service stations) | Lower, and lender-specific | Fewer buyers if the business fails |
These are indicative, not a promise from any lender, and policies move. What matters is the logic: the harder the building would be to sell, the less the lender will advance against it.
A worked example. A Perth electrical contractor finds a $1.2m workshop. The valuer says $1.15m. At a 75% limit the lender advances about $862,500, not 75% of the price. The shortfall between price and valuation, $50k, comes out of the contractor’s pocket on top of the deposit. If the lender had applied 80%, the loan would be $920,000. A five-point difference in the limit moved the cash needed by $57,500. You can test your own numbers in the LVR calculator.
What cash do you need beyond the deposit?
First-timers tend to budget for the deposit and forget the rest. Put these on the list:
- Stamp duty (transfer duty). Charged by your state or territory, and commercial rates differ from residential. The state revenue offices publish calculators, and the amount on a $1m purchase is large enough to change the deal.
- GST. Commercial sales often carry GST, depending on how the sale is structured. Your conveyancer should confirm the treatment in the contract.
- Legal and conveyancing fees. Commercial contracts with leases, outgoings and special conditions take longer to review than a home contract.
- Valuation and lender fees. The lender orders its own valuation, and you normally pay. See how valuations work.
- Due diligence. A building inspection, environmental check for older industrial sites, and zoning confirmation that your business can legally operate there.
- A working capital buffer. Moving costs, fit-out and a few slow months. Draining every dollar into the purchase is a common first-timer error.
What do lenders check?
Two separate questions are asked, and passing one doesn’t excuse the other.
Is the building good security? Valuation, type, location, zoning, condition, and (if part is tenanted) the leases. A single-purpose building tailored to your trade is harder to resell than a generic unit, and the valuation and LVR reflect that.
Can the business carry the loan? Lenders look at tax returns, financial statements, BAS and bank statements, and compare earnings with the new repayment plus outgoings such as rates, insurance and maintenance. A useful reframe: the rent you pay today is evidence of what you can afford, but your new costs are repayments plus the outgoings your landlord used to cover. Our guide to what lenders mean by serviceability goes deeper.
Lenders also care about who owns what. Many owner-occupiers buy through a separate property trust or company and lease the building back to the trading business. That structure can protect the asset, but it usually means guarantees from the operating business and its directors.
How do you compare the options before you sign?
Do the comparison on total cost over the period you will realistically hold the loan, not on the headline.
- Ask each lender for the full list of fees, including establishment, valuation, ongoing and exit fees.
- Check the term and repayment structure. Interest-only periods help cash flow but leave the balance untouched.
- Read the covenants. Some commercial loans let the lender re-test your financials each year.
- Check how the loan treats early repayment. If you may sell or refinance in three years, break costs matter.
- Ask what happens at the end of the term. Some commercial loans are short, with a refinance due at maturity.
Banks are often the strongest first stop. If you fit their policy and the property suits, an offer from a bank may well be the cheapest money available, so take it seriously and compare. If your bank has already said no, that is where the wider market comes in.
Want a second opinion on whether your purchase would stack up? Tell us about the property and a specialist can talk through how lenders are likely to see it.
What does the lease on a building you buy change?
If the property comes with tenants, the lender treats part of the income as rent from third parties. Long leases to solid tenants can lift the valuation and support the loan. Short leases, expiring soon or to tenants in weak industries, do the opposite. If you plan to move your business in and the existing tenant is leaving, tell the lender how you will cover the vacancy period, because the building may be valued as empty or part-empty at the start.
It is also worth asking the vendor for the lease, outgoings statements and any notices from council. These documents often explain a low valuation before the valuer does.
Should you buy at all, or keep leasing?
Ownership builds equity and removes landlord risk, but it ties up capital that could grow the business. The right answer depends on your cash, the tenure you need, and what the building would be worth to someone else if you wanted out. We set out both sides in buying your premises vs leasing. If your super fund could be the buyer instead, see SMSF and business property.
What if timing or the bank gets in the way?
Contracts run on dates, and valuations and approvals run on lenders’ calendars. If the finance clause is about to expire, ask for an extension in writing early rather than hoping. If the bank declines or reduces the amount, the usual alternatives are:
- a lender with a higher LVR for that property type
- extra security, such as your home, to bridge the gap (see business loans against your home)
- a short-term second mortgage or bridging finance while a longer-term facility is arranged
- renegotiating the price after a low valuation
Get the finance question answered before the auction hammer
Property decisions move quickly, and the finance answer shouldn’t be the thing that holds them up. Our enquiry takes about a minute, and asking doesn’t leave a mark on your credit file. Nothing gets scattered across a list of lenders; one person reads what you’ve entered and rings you to talk through realistic structures. The more accurate your figures for the price, your deposit and your business turnover, the closer the first option will be to something that works.
Frequently asked questions
How much deposit do I need for a commercial property?
Owner-occupiers commonly need 20% to 35% of the purchase price, with industrial buildings at the friendlier end and offices, retail strips and specialised properties higher. Some lenders set a floor around 30% to 40% for particular deals. You also need cash for stamp duty, legal fees and the valuation, so the total outlay is well above the headline deposit.
Can I use equity in my home as part of the deposit?
Often, yes. Many lenders will take a mortgage over your home as additional security so you can borrow a higher share of the commercial purchase price. The risk is that your home then secures a business debt, which is worth discussing with your accountant first.
Do lenders look at my business or the property?
Both. The property is the security, so its value, type and location matter. The business is the source of repayments, so lenders want to see tax returns, financial statements or bank statements showing it can carry the loan, ideally including the rent you will no longer be paying.
How long does a commercial property loan take?
Allow several weeks from application to settlement. The valuation, legal review of the contract and any special conditions are what stretch the timeline. Contracts usually carry a finance clause with a fixed date, so ask your lender how long it realistically needs before you sign.
Is GST charged on commercial property?
Often, yes, unlike most residential purchases. Whether GST applies depends on the sale, for example whether it is a going concern or uses the margin scheme. Ask your conveyancer or accountant to confirm treatment in the contract before you commit, because it changes the cash needed at settlement.
What if the bank says no?
Banks are conservative on specialised buildings, thin trading history and weak documentation. A different lender may accept the same property under another policy. A short-term option such as a second mortgage or bridging finance can also cover a gap while a longer-term loan is arranged.