You've outgrown your lease and the rent keeps climbing. Commercial lending isn't a bigger version of a home loan - it's a different game, with different rules and options most borrowers never hear about until it's too late.
You've outgrown your lease. The rent keeps climbing. Every year you write a bigger cheque to a landlord who's building wealth off your hard work. So you start thinking: why not buy?
Most business owners get commercial property finance wrong by treating it like a home loan: bigger deposit, same process, different building. It isn't. Commercial lending is a different game, with different rules, different risks, and opportunities most borrowers never hear about until after they've signed the wrong deal.
A home loan is about you: your income, your credit score, your ability to make repayments. A commercial loan is about the property: what it earns, who leases it, how long the lease runs, and what happens if the tenant leaves. The lender is underwriting the asset as much as the borrower.
That changes how much you can borrow, the interest rate you'll pay, and how the lender structures the loan. It also opens up options that don't exist in residential lending, like buying your business premises through your super fund, or structuring the purchase so your business pays rent to an entity you control.
For business owners buying premises to operate from - your accounting firm buying its office, your trades business buying a workshop, your medical practice buying its clinic. Because you control both the business and the property, lenders often view you as lower risk than a pure investor, which can mean better rates and higher borrowing limits. Best for established businesses (typically 2+ years trading). Typical terms: LVR up to 70-80%, rates from 6% to 8% p.a., loan terms of 15 to 25 years.
You're buying commercial property to lease to tenants and earn rental income. The lender's primary concern shifts to the property's income stream: who's the tenant, how long is the lease, what's the rental yield. A five-year lease to a solid tenant with annual rent reviews can be more predictable to a bank than a business's own revenue, which means competitive rates if the fundamentals are right. Typical terms: LVR 65-75%, rates from 6% to 8.5% p.a., terms of 15 to 25 years.
If you have a Self-Managed Super Fund, you can use it to buy commercial property, and lease that property back to your own business at market rent. Your business pays rent, but instead of going to a landlord, it goes into your super fund. The fund borrows through a Limited Recourse Borrowing Arrangement (LRBA), with the property held in a bare trust until the loan is repaid. If the loan defaults, the lender can only claim the property, not the other assets in your fund. Best for business owners with an established SMSF and a balance of $200k+ after deposit and costs. Typical terms: LVR of 60-70%, rates from 6.5% to 8.5% p.a. The rules around this structure are strict, covered in the traps section below.
A short-term loan bridging the gap between buying a new property and selling an existing one, or between securing a deal and arranging long-term finance. Fast, flexible, and expensive - a tool for timing problems, not a long-term solution. A closed bridging loan means you've already exchanged contracts on your existing property's sale. An open bridging loan means you haven't sold yet, which costs more because the lender carries more risk. Typical terms: 1 to 12 months, rates from 7% to 12% p.a., plus an arrangement fee of 1-2%.
Rates and terms are indicative and vary by lender, property type, and borrower profile.
| Option | Best for | Typical LVR | Typical rate |
|---|---|---|---|
| Owner-Occupied | Buying premises your business operates from | 70-80% | 6% to 8% p.a. |
| Investment | Buying tenanted property for rental income and growth | 65-75% | 6% to 8.5% p.a. |
| SMSF | Buying through super, leasing back to your own business | 60-70% | 6.5% to 8.5% p.a. |
| Bridging | Timing gap between buying and selling | Up to 70-80% of combined value | 7% to 12% p.a. |
Commercial property finance can build serious wealth, and it can create serious problems. The difference almost always comes down to what the borrower didn't know, or didn't ask, before signing.
Almost every commercial property loan requires a personal guarantee from the directors or borrowers. The property might be commercial, but the risk is personal. Ask exactly what the guarantee covers, some are capped and some are unlimited, and get legal advice before you sign.
The property must be used wholly and exclusively for business, and the lease to your own business must be at genuine market rent, properly documented, and reviewed regularly. If the ATO decides the arrangement breaches the sole purpose test, the fund can be made non-complying, meaning tax on the entire balance at the top marginal rate. Get specialist SMSF advice before you commit, not after.
For investment property, the lease is everything. A property with 8 years left on a lease to a national tenant gets funded easily at good rates. The same property with 6 months left on the lease may get significantly higher rates and lower LVR, or no funding at all. Understand the remaining term, options, rent review mechanisms, make-good clauses, and the tenant's financial strength before you buy.
Commercial valuations are driven mainly by the rental income the property generates, not comparable sales. If the rent is below market or the lease is weak, the valuation can come in well below the purchase price, meaning you need a bigger deposit or lose the deal. Get an indicative valuation early, before you go unconditional.
Fixing your rate feels safe, but commercial fixed rates typically sit 0.3% to 0.8% above variable and come with break costs if you exit early. If there's any chance you'll sell, refinance or restructure within the fixed period, those break costs can run into tens of thousands.
A rate of 6.5% from one lender and 7.2% from another looks like an easy choice. But if the 6.5% loan has a 1% establishment fee, annual review fees, and a personal guarantee over all your assets, while the 7.2% loan has none of that, the cheaper loan might actually cost more and carry higher personal risk. Compare the total cost over the loan's expected life, not just the rate.
Most lenders are trying to answer two questions: can this borrower reliably service the debt, and if they can't, what's the property worth?
Not just the interest rate. Include establishment fees, ongoing fees, valuation costs, legal fees and any annual review charges, then compare that total across your options. It's the only honest way to compare loans.
Ask whether it's limited to the loan amount or extends to all your facilities with that lender, and whether it's joint and several if there are multiple guarantors. Get it in writing and have your solicitor review it before you sign.
Most commercial loans have a review period, typically every three to five years, even if the loan term is longer. At review the lender can change the terms, reduce the limit, or call in the loan. Understand what triggers a review and what your options are if terms change.
If you sell, refinance, or pay down the loan early, fixed-rate break costs can be substantial and some lenders charge exit fees even on variable loans. Know the full picture before you commit.
Lenders commission their own valuations, which can vary significantly from the purchase price. Ask what methodology the valuer will use, whether they'll factor in lease income, and what happens if the valuation comes in low.
We work with over 40 lenders across the market, not just one. Book a 15-minute call and we'll walk through your options together. No jargon, no pressure.
Schedule a callThis guide is general information only and does not constitute financial advice. Always consult your accountant, solicitor or financial adviser before making decisions about commercial property finance. Thriver Finance Pty Ltd, Australian Credit Licence 389087.