GUIDES & RESOURCES

Commercial Property Loans

If you’re looking to buy commercial property as an investment or as premises for a business, then a commercial property loan could be a potential financing option.
business meeting in commercial property
*iSelect does not arrange business loans products, but can refer you to Valiant who does provide such services and can help you compare business loan products. Valiant Finance Pty Ltd (ABN 95 606 560 150) holds Australian Credit Licence 500 888. iSelect and Valiant do not compare all providers in the market, or all products offered by all providers. If you click through to the Valiant website and acquire a business loan through Valiant, iSelect earns a commission from Valiant. Learn more

Easily compare business loans*

Find a loan for your business from over 80 leading lenders across Australia, powered by Valiant.

Here’s some helpful tips you may want to consider when looking for a suitable commercial property loan for your business, whether you’re just starting out, or you’ve been around a while.

What is a commercial property loan?

Commercial Property loans are designed to help businesses buy property which will be used for commercial purposes. It may be property used as a business premises, or simply a business investment.

Is it the same as a home loan?

In the main, a commercial property loan, or mortgage, works much the same as a home loan. There are some important differences however.

How is a commercial property loan different?

While the principal of the loan is the same between commercial and residential, there are several areas of difference when it comes to the details, these include:

  • Deposit: A commercial loan will generally require a higher deposit than a residential loan. This is often a minimum of 20% of the value of the property. This of course varies between lenders and the exact circumstances of the arrangement If there is not an actual cash deposit, it can sometimes be negotiated to leverage off existing property that is owned. So, it’s worth checking out the possibilities with your potential lender.
  • Interest rates: These tend to be higher for commercial mortgages than for residential ones.
  • Fees: As well as higher interest rates, commercial property loans also tend to attract more fees, such as legal costs and application fees.
  • Loan terms: Whereas home loans tend to be for a standard 30-year term, commercial property loan terms are generally shorter, ranging from 15 to 30 years.

What are commercial property loans used for?

Commercial property loans can generally be used for a wide range of property that is used for business, including shops, offices, storage facilities and warehousing, and factories, right through to galleries and kids play spaces.

Are different types of properties treated differently by lenders?

No, generally lenders split commercial property into two camps:

Standard commercial property:

These properties are versatile and can be used by a wide variety of businesses. That means they are in greater demand and appeal to a wider group of potential tenants. As a result they are often preferred by the lenders and in some cases may attract cheaper finance rates. Standard properties can include:

  • Offices
  • Factories
  • Warehouses
  • Shops

Specialised properties:

No prizes for guessing that specialised commercial properties have a more ‘specialised’ usage, and therefore have a smaller audience of potential buyers. As a result, they can usually be more expensive to secure finance for. With specialised properties you can often only borrow between 50-65% of the property’s value. Examples of specialised properties can include:

  • Hotels, restaurants and pubs
  • Gyms / recreational centres
  • Childcare and Aged care facilities
  • Supermarkets
  • Car yards
  • Farms

Location, location, location.

When assessing a loan, lenders will also look very carefully at the location. Certain lenders will only approve loans for specific, low risk, postcodes. Rural properties for example, are considered a greater risk than those in a city area. As a result, the rates and fees may well be higher, as well as the eligibility criteria being tighter.

What are the types of commercial property loans available?

Business comes in many shapes and sizes, as does the ability to take a loan. As a result, there are a range of commercial property loans, each with their own specific characteristics.

  • Full-doc loan: This is the full monty, where you’ll need to provide all your income and liability documentation and all your tax and financials. The good news is, once you’ve done the full monty upfront, you may be rewarded with more competitive rates, because you’ll have satisfied your lender that you’re a potentially lower risk.
  • Low-doc loan: This requires a lot less documentation, as the name suggests. In fact, details of your income, and evidence that you are able to make the repayments, could be sufficient. The lenders who take on low-doc loans generally take a higher risk , so you’ll probably find you get a slightly higher interest rate. Though, the low doc route generally makes the application process a lot quicker.
  • No-doc: So, no documentation at all required, just enough security to repay the lenders should you default. As you’d expect, the risk to the lender is higher, and typically so are the rates. But the application process is usually the fastest of the three.

Am I eligible for a commercial property loan?

Your eligibility can depend and vary with each individual lender. Here’s a few things that may help:

  • Have at least 20% deposit or equivalent equity.
  • Keep your credit score in good form.
  • Make sure the purchase will add value to your business.
  • Get your docs in a row. You’ll usually need: identification, contract of sale for the property, evidence of your deposit, tax returns and evidence of income etc.

What should I look for in a lender?

  • Reputation: Like anyone you deal with in business, you want your lender to have a solid reputation, and treat you like a valued customer.
  • Value: Comparing rates, fees, and terms carefully (with Valiant’s help of course), will help you make sure you don’t just fall for a cheap looking interest rate and then get lumbered with huge fees.
  • A good fit: Especially with business, you need to work with people who understand how your business and industry works, someone who can support you as well as advise and help.

The good news is, iSelect have partnered with Valiant who can lend their expertise (pun intended) when it comes to finding a suitable commercial property loan for you.

Looking for a commercial property loan? Compare from Valiant’s range of products and providers

At iSelect we’ve partnered with Valiant to make it easy for iSelect customers to find a business loan that suits their business. Valiant compare a range of products from over 80 lenders across Australia, and can manage the process of finding and applying for your finance solution, as well as settling funds. Get started comparing online today!

Last updated: 18/10/2021

Feedback