Commercial Property Loans in Australia: Complete Guide (2026)

What Is a Commercial Property Loan?

A commercial property loan is finance used to purchase, refinance, or renovate a property that is used for business or investment purposes rather than as a residential dwelling. This includes office buildings, retail shops, warehouses, industrial units, medical centres, childcare centres, mixed use properties, and development sites.

Commercial property loans are assessed and priced differently from residential home loans. Lenders place significant weight on the income generating capacity of the property (its rental yield and tenant quality) alongside the borrower personal financial position. This dual assessment means that a strong property with a blue chip tenant on a long lease can sometimes compensate for a borrower whose personal income alone might not support the application.

In Australia, commercial property loans are offered by the major banks, regional banks, credit unions, non bank lenders, and specialist commercial financiers. Each has different risk appetites, LVR limits, and pricing, which is why using a broker who specialises in commercial lending can make a significant difference to the terms you receive.

Types of Commercial Property

Lenders categorise commercial property into several types, and the category affects the LVR, rate, and terms they will offer.

Office

Office buildings and suites, ranging from small suburban offices to CBD towers. Lenders assess office properties based on tenant quality, lease length, location, and the building grade. A-grade CBD offices with ASX listed tenants on long leases attract the best terms. Suburban offices with short leases or multiple small tenants carry higher perceived risk.

Retail

Shops, shopping centres, and retail premises. Retail property has faced structural headwinds from online shopping, which has made some lenders more cautious. However, well located retail with strong foot traffic, essential services tenants (supermarkets, pharmacies, medical), or food and beverage operators remain attractive to lenders.

Industrial and Warehouse

Factories, warehouses, distribution centres, and light industrial units. Industrial property has been one of the strongest performing commercial property sectors in Australia, driven by growth in logistics and ecommerce. Lenders are generally comfortable with industrial properties, particularly in established industrial precincts near major transport routes.

Medical and Childcare

Purpose built medical centres, dental clinics, veterinary practices, and childcare centres. These are considered specialised commercial properties. Lenders often view them favourably because the tenants tend to be long term (relocating a medical practice or childcare centre is disruptive and expensive), and the income is relatively stable. Some lenders offer higher LVRs for these property types.

Mixed Use

Properties with both commercial and residential components, such as a ground floor shop with apartments above. Mixed use properties can be more complex to finance because lenders need to assess both the commercial and residential components, and zoning rules vary by council.

How Commercial Loans Differ From Residential

If you have only ever borrowed for a residential property, commercial lending will feel noticeably different in several key ways.

Commercial Property Loan Rates and Fees

Commercial property loan rates in Australia vary more widely than residential rates because each application is assessed on its individual merits. However, as a general guide for 2026:

Factors that influence your rate include: the LVR, the property type and location, the tenant quality and lease length, your personal financial strength, the loan amount, and the lender you choose.

Common Fees

Commercial loan fees tend to be higher than residential fees. Expect to encounter: application or establishment fees (0.50% to 1.00% of the loan amount in some cases), valuation fees ($2,000 to $5,000 or more for commercial valuations, which are more complex than residential), legal fees (the lender will charge for their legal costs in documenting the loan), ongoing or line fees (some lenders charge annual fees on commercial facilities), and early repayment or break fees on fixed rate products.

LVR Requirements for Commercial Property

The Loan to Value Ratio (LVR) is one of the most important factors in commercial lending. Commercial LVRs are significantly more conservative than residential.

Standard commercial (office, retail, industrial): Most major banks will lend up to 65% LVR for standard commercial properties. Some will stretch to 70% for strong applications with quality tenants and long leases.

Specialist commercial (medical, childcare): Certain lenders offer up to 70% to 75% for specialist commercial properties with established operators and long lease terms.

Vacant or development: Vacant commercial properties or sites being purchased for development are assessed much more conservatively, typically 50% to 60% LVR at most.

Using additional residential security: If you own residential property with available equity, you can use it as additional security to boost your effective LVR on the commercial purchase. For example, using $200,000 of equity from your home as additional security on a $1 million commercial property purchase effectively gives the lender more security, which can improve your rate and terms.

What Lenders Assess in a Commercial Loan Application

Commercial loan assessments are more holistic than residential. Lenders evaluate multiple dimensions of risk.

The Property

Lenders want to understand the property itself: its location, condition, zoning, building age, any environmental concerns, strata versus freehold title, and its position within the local market. A commercial valuation, which is more detailed than a residential valuation, will be commissioned to assess the property market value, its rental potential, and any risks.

The Tenant and Lease

For tenanted properties, the lease is a critical document. Lenders look at: the remaining lease term (longer is better), the tenant financial strength and reputation, whether the rent is at, above, or below market levels, any rent review clauses, options to renew, and the tenant obligation for outgoings. A national tenant on a 10 year lease with annual CPI increases is vastly more attractive to a lender than a small business on a month to month arrangement.

The Borrower

Your personal financial position still matters. Lenders assess your income (both personal and business), your existing debts and liabilities, your net asset position, your credit history, and your experience with commercial property. First time commercial property buyers may face additional scrutiny or more conservative terms.

Serviceability

Can the rental income from the property (plus any other income) comfortably service the loan repayments? Lenders typically apply a buffer of 1.5x to 2.0x, meaning the net rental income should be 1.5 to 2.0 times the annual loan repayment. This interest cover ratio (ICR) is a key metric in commercial lending.

Commercial Loan Structures

Commercial property loans can be structured in several ways depending on your investment strategy and tax position.

Principal and Interest

Standard repayment structure where each payment reduces the loan balance. This builds equity over time and results in lower total interest paid. Most lenders offer P&I terms of 15 to 25 years for commercial property.

Interest Only

Interest only periods of 1 to 5 years are common in commercial lending, particularly for investors. IO reduces cash flow pressure in the early years and can be tax efficient (interest is fully deductible for investment properties). However, the loan balance does not reduce during the IO period.

Line of Credit

Some lenders offer commercial line of credit facilities where you can draw down and repay funds as needed, up to an approved limit. This suits borrowers who need flexibility, such as those funding renovations or managing cash flow across multiple properties.

Low Documentation

For self employed borrowers who cannot provide traditional financial documentation, some non bank lenders offer low doc commercial loans. These typically require higher deposits (50% or more), higher interest rates, and alternative income verification such as BAS statements or accountant declarations.

Buying Commercial Property Through Your SMSF

One of the most attractive features of commercial property is the ability to purchase it through a self managed super fund (SMSF). Unlike residential property (which cannot be leased to a related party in an SMSF), commercial property can be leased to your own business, making this a powerful wealth building strategy for business owners.

How It Works

Your SMSF purchases the commercial property using a combination of super fund savings and a limited recourse borrowing arrangement (LRBA). The property is held in a separate bare trust until the loan is fully repaid, at which point it transfers into the SMSF. Your business pays market rate rent to the SMSF, which uses the rental income to service the loan and build your retirement savings.

Key Requirements

• The property must meet the sole purpose test (it must be held for the benefit of the SMSF members in retirement).
• The lease must be at arm length (market rate rent, standard commercial terms).
• The LRBA must be properly structured with a separate bare trust holding the property.
• LVR is typically limited to 65% to 70% for SMSF commercial loans.
• The SMSF must have sufficient cash reserves to cover repayments, maintenance, and other property costs without relying solely on rental income.

Tips for Getting Your Commercial Loan Approved

• Prepare comprehensive financials. Have at least two years of business and personal tax returns, financial statements, and six months of bank statements ready before you apply. The more organised your documentation, the faster and smoother the process.
• Secure a strong tenant before settlement. If you are purchasing a vacant property, having a signed lease or heads of agreement with a quality tenant significantly strengthens your application.
• Choose the right lender for your situation. Not all lenders have the same appetite for commercial property. Some specialise in certain property types or locations. A commercial finance broker can match you with the lender most likely to approve your application on the best terms.
• Have a clear investment rationale. Explain why this property is a sound investment. Include details on the tenant, the lease, the location, comparable rents, vacancy rates in the area, and any value add opportunities.
• Maintain a strong personal balance sheet. Lenders want to see that you have assets beyond the property being purchased and that your personal financial position is sound. Reduce personal debts and clean up your credit history before applying.
• Consider additional security. If you have equity in residential property, offering it as additional security can improve your LVR, rate, and approval likelihood. Discuss the risks and benefits with your broker.

Common Commercial Lending Mistakes

• Underestimating the deposit requirement. Many first time commercial buyers are surprised by the 30% to 35% deposit required. Plan your equity position well in advance.
• Ignoring tenant risk. A high rental yield means nothing if the tenant defaults or vacates. Assess tenant quality and financial stability carefully. A lower yield with a blue chip tenant on a long lease is often a better investment than a high yield with a risky tenant on a short lease.
• Not budgeting for commercial property costs. Commercial properties have additional costs that residential investors may not be familiar with, including council rates (which are higher for commercial), land tax (which applies in all states for commercial), building insurance (more expensive than residential), and maintenance of common areas if applicable.
• Going direct to one bank. The commercial lending market has far more variation in pricing and appetite between lenders than the residential market. A rate difference of 0.50% to 1.00% is common between the best and worst offers for the same application. Use a broker who has access to the full market.
• Overlooking lease renewal risk. If your tenant lease expires shortly after purchase, you face the risk of vacancy, re leasing costs, and potentially lower rental income. Lenders also view short remaining lease terms unfavourably. Factor in the cost of a potential vacancy period when assessing any commercial purchase.