Commercial Loans

More than residential, and how much more depends on the property type and the tenant. Most lenders sit around 65 to 70 per cent of the property value for standard commercial security, meaning a deposit of 30 to 35 per cent, though owner-occupiers with strong trading figures can sometimes reach 75 or occasionally 80 per cent. Specialised properties such as service stations, childcare centres, hotels and single-purpose buildings attract lower ratios again, sometimes 50 to 60 per cent, because the lender is thinking about how easily the asset could be resold. There is no equivalent of lenders mortgage insurance in commercial, so the deposit requirement is firm rather than negotiable with an insurance premium. Many clients use equity in a residential property to bridge the gap, which we can structure without cross-securing everything.

A commercial loan is finance secured against a property used for business rather than residential purposes, such as a warehouse, factory, shop, office or medical suite. Four things differ from a home loan. The loan-to-value ratio is lower, commonly 65 to 70 per cent rather than 80 to 95 per cent. The term is shorter, typically 15 to 20 years and sometimes with a review or balloon at three to five years, rather than a straight 30. Servicing is often assessed on the lease and the business's trading figures rather than a payslip. And pricing is negotiated per deal rather than taken from a rate sheet, so two borrowers can receive quite different terms on similar properties. That last point is why comparing lenders matters far more in commercial than in residential.

Commercial is where a broker fee-for-service genuinely applies, and we disclose it in writing before starting. Depending on the complexity and size of the facility, that fee is commonly in the range of $1,500 to $5,000, or a percentage of the facility on larger or more complex transactions, and it is always agreed with you in advance. The lender's costs are separate and larger: an establishment fee commonly running from around 0.25 per cent up to 1.0 per cent or more of the facility amount, a commercial valuation typically $1,000 to $3,000 and considerably more on larger or specialised assets, and legal and documentation fees usually $1,500 to $3,000 because commercial security documents are prepared by the lender's solicitors. Annual line or review fees are also common. These are indicative market ranges rather than a quote.

Longer than residential, and the range is wide. A straightforward owner-occupied purchase with clean financials through a major bank commonly runs six to ten weeks from application to settlement. More complex transactions, unusual security, or a private funder can be faster or slower depending on which constraint is binding. The parts that take time are the commercial valuation, which is a full inspection and detailed report rather than an automated estimate, the lender's credit assessment which is manual rather than automated, and the preparation and signing of security documents by the lender's solicitors. If you are buying at auction or under a tight settlement, tell us the date at the outset, because it changes which lenders are realistic.

It comes down to which constraint matters most for your deal. A major bank generally offers the sharpest pricing and the longest terms, but wants the strongest financials, the most conventional security and the most time. A second-tier or non-bank lender takes a more flexible view of trading history, lease profile and property type, moves faster, and prices somewhat above the banks. A private funder is fastest and most flexible of all, will consider security and situations the others will not, and is materially more expensive, so it suits short-term or transitional situations rather than long-term holds. We will usually present two options from different tiers with the real cost difference laid out, rather than pushing a single answer.

This is the risk lenders think about most on an investment commercial deal and it is worth understanding before you buy. If servicing is assessed on the lease, a lease expiring inside the loan review period weakens the file, and lenders will look closely at the remaining term, the options to renew, the tenant's covenant strength and how easily the space could be re-let. A property with two years left on a lease and no options is a very different proposition to one with five years plus two five-year options. If the lease does expire and the property sits vacant, you carry the repayments from your own resources, and at review the lender may reassess the facility. We factor lease expiry into the structure at the outset, including matching the review period sensibly against the lease term.