Commercial property loans: buying, refinancing and releasing equity

Commercial property finance is where business lending and property lending meet. The loan is secured by a building, but the lender also cares about the business inside it, the lease that pays the rent and how easy the property would be to sell. That makes these loans quite different from a home loan, and quite different from each other depending on what you’re trying to do.

What can a commercial property loan be used for?

• Buying your own premises, so you stop paying rent to a landlord.
• Buying an investment property leased to someone else.
• Refinancing an existing commercial loan to a better structure or term.
• Releasing equity from a building you own to fund the business.
• Bridging between buying a new building and selling the old one.

How do the main options compare?

	Buy owner-occupied	Buy investment	Refinance	Equity release
What lender focuses on	Your business’s ability to pay	The tenant and lease	Current loan and property	Purpose and exit
Lease matters?	Your own lease to the business	Very much	Yes	Yes
Typical term	Longer	Longer	Matches new needs	Varies
Upfront costs	Duty, legals, valuation	Duty, legals, valuation	Legals, valuation, discharge	Legals, valuation
Key risk	Business and building tied together	Vacancy	Break costs on old loan	Over-borrowing

Buy or keep renting?

This is the comparison most owners actually need. Owning your premises can make sense when:

1. You plan to stay for many years.
2. The business has steady cash flow to carry the loan and property costs.
3. The building suits you: location, size and zoning.
4. Capital tied up in the deposit won’t starve the business.

Renting can make more sense when the business is still growing quickly, may need to move, or needs its cash for stock, staff and equipment.

	Owning	Renting
Control over the building	High	Limited by the lease
Cash needed upfront	Large	A bond or bank guarantee
Ongoing costs	Loan, rates, insurance, maintenance, land tax	Rent and outgoings
Flexibility to move	Low	Higher at lease end
Builds equity	Yes	No

What do lenders check?

• The property: type, location, zoning, condition and valuation.
• The lease: tenant, rent, term and options, or your own lease if owner-occupied.
• Your business: financial statements, tax returns and trading history.
• Your contribution: cash deposit or other security.
• Existing debts and how the new loan fits with them.

Specialised buildings, such as a purpose-built facility that few other businesses could use, are harder to value and may need a larger contribution.

Illustrative example. A Sunshine Coast joinery business has rented the same factory for nine years. The landlord offers to sell for $1.4 million. The owners have $200,000 in cash and equity in their home. A lender proposes a loan over the factory plus a second mortgage over the home to cover the shortfall. They compare the total yearly cost of owning, including rates, insurance and maintenance, with their rent and expected increases, and decide owning makes sense because they plan to stay at least another decade.

What costs should you budget for?

• Stamp duty or transfer duty through your state revenue office.
• Legal and conveyancing costs.
• Valuation, establishment and other loan fees.
• Building, pest and environmental inspections.
• GST, which can apply to some commercial property sales.
• Ongoing rates, insurance, maintenance and land tax.

Our fees page explains loan fees, and the loan term page helps match the term to how long you’ll hold the property.

Comparing commercial property offers

Line offers up on total cost over the period you expect to hold the loan, not just the repayment. Check:

• Loan-to-value requirements and how valuation is done.
• Review dates and covenants, such as minimum rent cover.
• Fixed or variable pricing and break costs.
• Whether other property is being taken as security.

Read our guarantees and security page before offering extra security.

Talk through your property plans

Whether you’re buying premises, refinancing or releasing equity, a short conversation helps you see the options side by side. Asking us doesn’t affect your credit file; a check only comes up once you choose to go ahead. We don’t send your enquiry to every lender in town. A real person looks at the building, the lease and the business, then compares the structures with you.

Please be accurate on the form about the property’s value and any existing loans. Start your enquiry, or rank the loan types first using the comparison tool and then check your options.