# Commercial Property Finance in Australia: Complete 2025 Guide
Commercial property finance works differently from residential mortgages. Here's everything Australian business owners and investors need to know about financing commercial property in 2025.
## Commercial vs Residential Property Finance
**Key Differences:**
| Factor | Residential | Commercial |
|--------|-------------|------------|
| **LVR** | Up to 95% | Typically 50-70% |
| **Rate** | 6-7% p.a. | 7-12% p.a. |
| **Term** | 25-30 years | 5-25 years |
| **Assessment** | Income focus | Property/business focus |
| **Approval Time** | 4-8 weeks | 1-4 weeks (private lenders) |
## Types of Commercial Property Finance
### 1. Commercial Property Purchase Loans
For buying office, retail, warehouse, or industrial property.
- **LVR**: 60-70%
- **Rates**: 7-10% p.a.
- **Term**: 15-25 years
### 2. Commercial Refinance
Switching existing commercial loans or releasing equity.
- **LVR**: Up to 70%
- **Rates**: 7-9% p.a.
- **Purpose**: Better rates, equity release, debt consolidation
### 3. Commercial Construction Loans
For building new commercial premises.
- **LVR**: 60-65%
- **Rates**: 8-11% p.a.
- **Progressive drawdowns**: Paid as construction advances
### 4. Owner-Occupied vs Investment
**Owner-Occupied**: Your business operates from the property
- Lower rates (7-9% p.a.)
- Better terms
**Investment**: Property leased to tenants
- Higher rates (8-11% p.a.)
- Rental income assessed
## What Lenders Assess
### Property Factors
1. **Location**: Prime locations get better rates
2. **Property Type**: Office/retail easier than specialty
3. **Condition**: Modern, well-maintained preferred
4. **Tenancy**: Existing leases strengthen application
5. **Valuation**: Professional valuation required
### Borrower Factors
1. **Business Strength**: Trading history, profitability
2. **Deposit/Equity**: 30-40% typically required
3. **Experience**: Property/business experience helps
4. **Credit**: Important but not as critical as residential
5. **Servicing**: Can you afford repayments?
### Rental Income Assessment
Lenders typically assess at:
- **80% of rental income** (to account for vacancies)
- Existing lease agreements reviewed
- Market rent assessments for vacant properties
## Private Lenders vs Banks for Commercial
**Banks Offer:**
- Lower rates (7-9% p.a.)
- Longer terms (20-25 years)
- Stricter criteria
- Slower approval (4-8 weeks)
**Private Lenders Offer:**
- Faster approval (1-2 weeks)
- More flexible criteria
- Higher LVRs sometimes
- Higher rates (9-15% p.a.)
- Shorter terms (1-5 years typical)
**Choose Private Lenders When:**
- You need fast approval
- Banks have declined you
- Property is unique/specialty
- You're self-employed with complex income
- You want to maximize LVR
- You need short-term funding before refinancing
## Commercial Property Loan Rates 2025
**Bank Rates:**
- Owner-occupied: 7.0-8.5% p.a.
- Investment: 7.5-9.5% p.a.
**Private Lender Rates:**
- Standard: 9-12% p.a.
- Higher risk: 12-18% p.a.
- Short-term/bridging: 1-3% per month
## Real Example: Sydney Warehouse Purchase
*Michael, logistics business owner, buying $2M warehouse*
**Property Details:**
- Purchase price: $2,000,000
- Existing tenant: 3-year lease, $180,000 p.a. rent
- Location: Western Sydney industrial area
**Bank Offer:**
- LVR: 60% ($1.2M loan)
- Deposit required: $800,000
- Rate: 8.2% p.a.
- Approval time: 6 weeks
- **Deal risk**: Vendor gave 4-week settlement
**Private Lender Solution:**
- LVR: 70% ($1.4M loan)
- Deposit required: $600,000
- Rate: 10.5% p.a.
- Approval time: 10 days
- **Settled on time**
Michael's plan: Use private lender for 12 months, then refinance to bank once settled.
Cost of private lending: Extra $27,600 in interest over 12 months
Cost of losing deal: Losing $200,000 deposit + opportunity cost
**Decision: Worth it for deal certainty**
## Common Commercial Property Types
**Easiest to Finance:**
- Office buildings (standard fit-out)
- Retail shops in good locations
- Industrial/warehouse (good areas)
- Medical suites
**Harder to Finance:**
- Pubs/hotels
- Service stations
- Car washes
- Unique/specialty properties
- Properties needing major work
## The Application Process
**Step 1: Pre-approval (Optional but recommended)**
- Submit basic details
- Get indication of borrowing capacity
- Shop for properties with confidence
**Step 2: Formal Application**
- Property contract
- Business financials (2 years)
- Personal financials
- Deposit evidence
**Step 3: Valuation**
- Lender arranges professional valuation
- Typically costs $1,500-$5,000
- Takes 1-2 weeks
**Step 4: Approval**
- Full assessment completed
- Formal approval issued
- Conditions outlined
**Step 5: Settlement**
- Legal documentation
- Final checks
- Funds released
**Timeline:**
- Banks: 4-8 weeks total
- Private lenders: 1-3 weeks total
## Key Documents Required
**Property Documents:**
- Contract of sale
- Section 32 (VIC) or equivalent
- Building/pest inspection reports
- Current lease agreements
- Rental statements
**Business Documents:**
- 2 years business financials
- Business tax returns
- BAS statements
- Business plan (sometimes)
**Personal Documents:**
- Personal tax returns (2 years)
- Bank statements (3-6 months)
- Asset/liability statement
- Credit check authorization
## Strategies to Improve Approval
1. **Increase Deposit**: Every 5% above minimum improves terms
2. **Strong Tenant**: Long lease to quality tenant is gold
3. **Improve Business Financials**: Show steady/growing profit
4. **Clear Exit Strategy**: If using private lender, show refinance plan
5. **Professional Presentation**: Quality property photos, reports
6. **Use Broker/Introducer**: We help match you with right lender
## Tax Considerations
**Deductible Costs:**
- Interest on commercial loans (usually 100%)
- Building depreciation
- Loan establishment fees
- Ongoing property costs
**Speak to accountant about:**
- GST implications
- Land tax
- Capital gains tax planning
- Structure (individual, trust, company)
## Red Flags That Reduce Approval Chances
- Poor property condition
- Declining area
- Very short remaining lease
- Significant rental arrears
- Unusual/limited-market property
- Business showing losses
- Poor personal credit
- Insufficient deposit
## FAQs
**How much deposit do I need?**
Typically 30-40% deposit (60-70% LVR maximum). Private lenders sometimes go to 75% LVR for strong properties.
**Can I buy commercial property through my super?**
Yes, via Self-Managed Super Fund (SMSF). Specific rules apply - seek specialist SMSF advice.
**Do I need tenants before applying?**
Not required, but existing quality tenants significantly strengthen applications and improve rates.
## Your Next Steps
1. **Determine Your Budget**: Calculate how much you can afford
2. **Property Search**: Find suitable commercial properties
3. **Pre-Approval**: Get borrowing capacity confirmed
4. **[Connect with commercial lenders](/connect)**: Get multiple options
Whether you choose banks or private lenders, Introducr can connect you with options suited to your needs.
**Ready to finance your commercial property?** [Connect with lenders now](/connect) or [explore commercial loan options](/loan-types/commercial-loans).