Commercial Property Purchase Loans
Buying a shop, office, warehouse or factory is a different process from buying a home. Whether you are buying premises for your own business or as an investment, the right loan structure makes a big difference to your cash flow and risk.
This guide explains how commercial property loans work, how much you can usually borrow, the GST traps to watch for, and the steps from first enquiry to settlement.
Owner-occupied or investment?
Buying for your own business: you stop paying rent to a landlord and build equity in your premises instead. Lenders look closely at the strength of your business, because it pays the loan. If the business has strong, steady profits, this can be one of the most straightforward commercial deals.
Buying as an investment: lenders focus on the tenant, the lease and the rental income. A long lease with a reliable tenant generally makes approval easier. A short lease, a weak tenant or a vacant property makes it harder.
Thinking of buying your premises through super? See SMSF commercial property loans.
How much can you borrow?
Commercial lenders commonly lend up to about 60% to 70% of the property value. Some go higher for strong applicants, prime properties or with extra security, such as equity in your home. On top of the deposit, budget for:
- Stamp duty (see our calculators)
- Legal and conveyancing fees
- Valuation and loan establishment fees
- GST, if it applies and you can’t use a going concern exemption
- A cash buffer for vacancies and repairs
Watch the GST
GST is one of the most common surprises with commercial property. As a general rule:
- Many commercial property sales are subject to GST
- If the property is leased when it is sold, the sale may be GST-free as a going concern, if both parties agree in writing and the buyer is registered for GST
- If the seller uses the margin scheme, you as the buyer can’t claim the GST back
The ATO explains this on its commercial premises and GST page. Get your accountant and solicitor to check the GST terms before you sign, because it can change how much cash you need at settlement by tens of thousands of dollars.
What affects approval
- Property type and location (specialised properties, like a car wash or a childcare centre, can be harder)
- The lease: length, tenant quality, rent and who pays outgoings
- Your business or personal income and existing debts
- Your deposit and any other security
- The lender’s valuation
- Your credit history (see our Credit Ready guide)
Steps to buying commercial property
- Talk to us early to understand your borrowing power and deposit
- Get advice from your accountant on the buying structure: your own name, a company, a trust or an SMSF
- Find the property and review the lease, outgoings and building condition
- Get the contract reviewed, including GST terms and any special conditions
- We submit the application and the lender arranges a valuation
- Formal approval, then settlement
Example: a café owner buys her shop
Nina has run a busy café for six years in a rented shop. When the landlord offers to sell, she wants to buy so she can stop paying rent and secure her location. Her business has strong profits and she has equity in her home. A lender agrees to fund the purchase using the shop and part of her home equity as security, so she doesn’t need to use all her cash. Her repayments end up close to what she was paying in rent.
Illustrative example only.
Commercial property loan FAQs
What deposit do I need for a commercial property?
Commonly 30% to 40% of the price plus costs, though some lenders accept less with extra security or a strong application.
Can I buy commercial property in a company or trust?
Yes. Many buyers use a company, trust or SMSF. The right structure depends on tax, asset protection and your plans, so get advice from your accountant first.
Is a vacant property harder to finance?
Usually yes. Without rent coming in, lenders rely on your other income. A signed lease to a good tenant before settlement can help.
How long are commercial loan terms?
It varies by lender. Some offer long terms similar to home loans, while others review the loan every few years.
Albert Waldron is a Credit Representative (407514) of Australian Finance Group Ltd, Australian Credit Licence 389087. This is general information only and does not take into account your personal circumstances. Please seek advice before acting. Commercial and business loans are subject to lender approval, terms and conditions. GST and tax information is general only; speak to your accountant.