What Are Commercial Property Acquisition Loans?

A commercial property acquisition loan is finance used to purchase property for business purposes, whether that's an office, warehouse, retail space, or industrial site.

Most lenders will fund up to 70% of the property's value, though some will stretch to 80% depending on the asset type and your business financials. The loan amount, interest rate, and loan structure depend on the property you're buying, how you'll use it, and the strength of your balance sheet. Unlike residential lending, lenders assess both the property's income potential and your ability to service the debt from business cash flow.

How Lenders Assess Commercial Property Finance

Lenders evaluate two things: the property's quality as collateral and your capacity to repay the loan.

They'll order a commercial property valuation to confirm the asset's worth and rental potential. If you're buying strata title commercial space, they'll also review the body corporate financials and any encumbrances on common property. On your side, they'll want recent business financials, tax returns, and profit and loss statements. Turnover matters, but so does consistency. A business with stable cash flow over two years will have more negotiating power than one with erratic income, even if the peaks are high.

Consider a buyer purchasing a warehouse in Dandenong South to house their distribution business. The property is valued at $1.2 million, and they're seeking 70% LVR, which is $840,000. The lender reviews their last two years of trading, confirms rental income from a tenant occupying part of the building, and approves the loan at a variable interest rate with a 25-year term. The buyer pays the remaining $360,000 from retained earnings and settlement costs from working capital.

What Types of Commercial Properties Can You Finance?

You can use a commercial property loan to buy an office building, retail shopfront, warehouse, or industrial property. Lenders will also fund land acquisition if you're planning to develop or build, though that often requires a commercial construction loan for the build phase.

Some lenders are comfortable with properties that have mixed-use zoning or tenants across multiple leases, while others prefer single-occupier assets with long lease terms. If you're buying a property you'll occupy yourself, the lender will focus more heavily on your business financials. If it's an investment with an existing tenant, they'll assess the lease agreement, tenant creditworthiness, and whether the rent covers the loan repayments with a buffer.

Secured vs Unsecured Commercial Loans

Most commercial property finance is secured against the property you're buying. That's how lenders justify the loan amount and keep the interest rate lower than unsecured products.

Unsecured commercial loans are typically used for working capital, buying new equipment, or short-term needs where you don't want to tie up property. They're faster to arrange but come with higher rates and lower borrowing limits. For property acquisition, a secured commercial loan is the standard approach. The property itself becomes the collateral, and you'll need to provide a deposit, usually between 20% and 30% of the purchase price, depending on the lender and asset type.

Fixed vs Variable Interest Rates on Commercial Finance

You can lock in a fixed interest rate for one to five years, or choose a variable interest rate that moves with the market.

Fixed rates give you certainty over repayments, which helps with budgeting and cash flow forecasting. Variable rates offer flexibility, including features like redraw and the ability to make extra repayments without penalty. Some buyers split the loan between fixed and variable to balance stability with flexibility. If you're planning to pay down the loan quickly or expect business cash flow to vary, a variable structure or a loan with flexible repayment options will give you more room to adjust.

How Loan Structure Affects Repayment and Flexibility

Most commercial loans are structured as principal and interest over 15 to 30 years, though interest-only periods of up to five years are common if you're establishing the business or managing development costs.

A progressive drawdown structure works when you're buying land and building in stages. You draw funds as the project progresses, paying interest only on what's been drawn. A revolving line of credit suits businesses that want ongoing access to funds for working capital or upgrading existing equipment, using the commercial property as security. The loan structure should match how you'll use the property and how your business generates income. If rent from tenants will cover most of the repayment, principal and interest makes sense. If you need cash flow for fitout or stock before the business is fully operational, an interest-only period can provide breathing room.

What Happens During Pre-Settlement and Drawdown?

Once your loan is approved, the lender will issue a formal offer outlining the loan amount, interest rate, term, and conditions.

You'll need to arrange insurance, finalise any lease documentation if there's a tenant, and ensure the property title is clear. Pre-settlement finance can be arranged if you need to cover a deposit or urgent costs before settlement, though it's a short-term product with higher rates. At settlement, the lender releases funds to your solicitor, the title transfers, and you take ownership. If it's a progressive drawdown for a build, funds are released in stages based on a quantity surveyor's report or construction milestones.

When to Consider Commercial Refinance

Refinancing makes sense when rates have dropped, your business has grown, or you need to access equity for expanding business operations.

If your current loan has limited features or you're paying a higher rate than what's available elsewhere, a commercial refinance can reduce your repayments or release capital tied up in the property. Some businesses refinance to consolidate debt, rolling equipment finance or unsecured loans into a single facility backed by commercial real estate. Others refinance to shift from interest-only to principal and interest as cash flow improves, or to restructure ahead of a purchase or development. The process is similar to a new application: the lender will revalue the property, assess your financials, and offer terms based on current market conditions.

How a Commercial Finance & Mortgage Broker Can Help

A broker who works with commercial finance has access to commercial loan options from banks and lenders across Australia, including those that don't deal directly with borrowers.

They'll review your situation, recommend a loan structure that fits your business model, and manage the application from pre-approval through to settlement. That includes coordinating valuations, liaising with your accountant or solicitor, and negotiating terms. If you're buying commercial land, an industrial property, or a retail space with tenants, they'll know which lenders are active in that asset class and what documentation you'll need to provide upfront. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions