Purchasing commercial property is one of the most significant financial decisions a small business owner can make. Whether you are buying your own premises to stop paying rent to a landlord, acquiring a warehouse or industrial unit, or investing in a commercial property to lease to others, a commercial property loan is the vehicle that makes it possible.
The process differs from residential lending in a number of important ways. Understanding those differences before you start saves time, avoids surprises and helps you find the right structure from the beginning. At ALIC, we work with small business owners across Australia to secure commercial property finance that suits how their business actually operates.
What Is a Commercial Property Loan?
A commercial property loan is a secured loan used to purchase, refinance or develop property used for business purposes. This includes retail shops, offices, warehouses, industrial units, medical and professional suites and mixed-use properties. The commercial property itself serves as security for the loan.
Unlike residential mortgages, commercial loans are not subject to the same level of consumer protection regulation under the National Consumer Credit Protection Act, because they are classified as business lending. This gives lenders more flexibility in how they structure and price these loans, but it also means terms can vary significantly from lender to lender.
How Commercial Lending Differs from Residential
Deposit and Loan-to-Value Ratios
Most lenders require a minimum 30% deposit for commercial property loans, lending up to 70% of the property’s value. Some specialist lenders may extend to 75-80% LVR depending on property type and application strength, but 70% is the common benchmark. This is notably higher than residential investment lending, so having access to sufficient capital or equity upfront is important.
Loan Terms and Structure
Commercial loans are typically structured over shorter periods than residential mortgages, commonly 15 to 25 years, with interest rate periods of one to five years. Many include a balloon payment at the end of the fixed term, meaning you will need to refinance, renegotiate or pay out the balance. This needs to be factored into your planning from day one.
Interest Rates
Commercial rates sit above residential rates, reflecting higher perceived lender risk. The margin depends on property type, your business financials, loan term and lender. With the RBA cash rate at 3.85% following the February 2026 decision, commercial rates vary meaningfully across the market, which is exactly why accessing a wide lender panel rather than approaching your existing bank alone is worthwhile.
What Lenders Assess
For residential loans, the focus is primarily on your personal income, liabilities and credit history. For commercial lending, lenders want to understand the full picture of your business and the property securing the loan.
Your business financials, including two to three years of tax returns, profit and loss statements and BAS statements, will be assessed closely. Lenders want to see that your business generates sufficient income to service the loan, assessed at a stressed interest rate. Business cash flow strength, tenure and client diversity all factor into the assessment.
The property also matters. Lenders consider the property type, its location, existing lease terms if already tenanted and the likely resale market if they ever needed to realise their security.
The Australian Small Business and Family Enterprise Ombudsman offers useful guidance at asbfeo.gov.au.
Owner-Occupied vs Investment Commercial Property
There is an important distinction between purchasing commercial property to use in your own business versus purchasing it as an investment to lease to others. For owner-occupier commercial purchases, some lenders apply more flexible criteria and may be more accommodating on LVR, because the business occupying the premises provides an additional layer of security and reduces vacancy risk.
For business owners with an SMSF, purchasing your business premises through the fund and leasing it back to your business at market rates is also worth exploring. The rental income flows directly into your retirement savings, and the tax advantages within the SMSF structure can make this one of the most effective wealth-building strategies available to small business owners.
Getting the Right Structure From the Start
One of the most common mistakes business owners make with commercial finance is treating it like a residential loan and approaching their existing bank first. Commercial lending policies vary enormously, and your own bank may not be the most competitive or even the right fit for your specific property type and business structure.
At ALIC, we are accredited with over 40 banks and lenders, including specialist commercial lenders not available directly to the public. That breadth of access means we can match your application to the right lender at the most competitive terms, rather than trying to fit your situation into a single lender’s framework.
Speak with an ALIC commercial lending specialist at alic.com.au to discuss your commercial property finance options.
