Accessing commercial property debt
Accessing commercial property debt
This article was originally published July 2021 and updated May 2025.
Accessing debt for the purchase or refinancing of commercial property has never been easier.
This applies to office, industrial, warehouse, retail, bulky goods and medical buildings where the debt requirement is for the acquisition/refinance, rather than development of the property. Funding for property development or other property acquisitions (e.g. farmland, entertainment assets, marinas, etc.) can also be considered, but is likely to require different information requirements.
What has changed?
Many financiers have streamlined processes in place to access debt to purchase or refinance commercial property. However, the approach to funding depends on the likely end-user of the property.
Where a property is leased (or will be after the acquisition) and the income from the lease is sufficient to meet the loan servicing requirements, a loan will be considered against the income of the property, the term of the lease(s) and the security value of the property. Common loan terms are up to five years and the loan to value ratio will depend on the type of security, but tends to be between 50 to 65 per cent (or higher with some specialist lenders).
Where a property is already used by your business, or will be after acquisition, financiers can often take more comfort based on the financial strength of your business. The loan will be considered against the ability of your business to meet the loan payments. Loans for owner-occupied commercial property can look and feel like home loans. Terms can be up to 15 to 30 years, with principal and interest payments. No covenants or reviews are likely (where the loan size is below a certain threshold).
While pricing for commercial property loans is likely to be higher than the best home loans, this type of lending is attractive for financiers and they will compete for it, ensuring you can find sharply priced loans. Even for more unique assets or higher loan to value ratios, the financiers still benefit from the mortgage cover over the land and can provide reasonably attractive pricing.
What information does the financier require?
Where properties are to be leased out as an investment, financiers require the following information:
- Tenancy schedule
- Copy of the lease(s)
- Clear Australian Taxation Office (ATO) tax portals of the entity making the purchase
- Valuations - in most cases
- Bank statements (if refinancing).
For businesses intending to occupy their commercial property acquisition, the focus will be on your business, and so the following information forms the core requirements:
- Financial statements for your business
- Bank statements and clear ATO portals
- Tax returns for the business.
Where the loan servicing and security is strong, financiers can assess the loans without needing security from the owners, although this will depend on each situation.
There are a large number of financiers that are interested in commercial property funding. There are options available for just about every type of property, leverage requirement and repayment profile. Even where properties require repositioning, letting up, capital expenditure or other considerations, many financiers will be willing to provide a loan.
The cost of the debt (interest rates and fees) will depend on the risks associated with the property and its cashflow potential.
How BDO can help
Please contact a member of our finance solutions team if you would like assistance in getting that loan to purchase or refinance a commercial property. We can assist in an advisory capacity, or as an accredited finance broker.