Commercial property loan eligibility comes down to four interlocking factors: the property itself, any lease in place, the strength of the borrower business, and the loan-to-value ratio (LVR) the lender will accept. Different lenders weight these differently, which is why the same deal can get a yes from one and a no from another. This article walks through what lenders actually look for and how to present a deal so the application has the best chance. For context on deposits, see how much deposit do you need for a commercial property loan.
Factor 1: the property
Property type drives appetite more than anything else. Lenders sort commercial property into broad categories with different risk profiles.
Standard industrial: large units in established industrial estates, used by trades, manufacturing, logistics. The easiest commercial property to finance because resale is straightforward.
Standard retail: shopfronts in established strips, shopping-centre tenancies with stable foot traffic. Easier to finance than specialist retail; harder than industrial.
Standard office: small to medium office suites in metro or established suburban locations. Lender appetite tightened post-2020 as office demand shifted but well-located deals still finance fine.
Specialist commercial: medical, dental, childcare, hospitality, service stations, automotive. Specialised use limits the resale market, so lenders price for it. Some lenders have specialist programs for specific specialised categories.
Mixed-use: retail with apartments above, office with ground-floor cafe. Lender appetite varies sharply by the mix percentage and the residential component.
Development sites and rural property: narrowest lender pool, deepest specialist requirement.
Factor 2: the lease (where there is one)
For investment property, the lease in place often matters as much as the property itself. Lenders look at:
Tenant strength. A national tenant on a 10-year lease is the strongest position; a one-person business on a 1-year lease is the weakest. Most lender appetite sits in between.
Lease length remaining. Short remaining lease terms (under 2 years) often trigger tighter loan terms or LVR reductions because the lender is exposed to re-letting risk.
Rent vs market. A property leased above market rent looks great on paper today but reads as risky to lenders who anticipate the rent reverting to market on review.
Rent reviews. Fixed-percentage annual increases sit better than CPI-linked or market-review provisions in the current rate environment.
For owner-occupier deals, lease in place is not relevant, but lenders look at how the property serves the business operationally.
Factor 3: business strength
Commercial property lending is partly cashflow lending. Lenders assess whether your business can service the loan, particularly under stress scenarios:
Two years of company financials. Profit & loss and balance sheet, ideally accountant-prepared.
Trading consistency. Growing or stable revenue reads better than volatile. Reasons for any volatility need to be explained.
Profitability. Lenders want to see comfortable serviceability with margin to spare. Most apply interest-rate buffers of 2 to 3 per cent above the actual rate when stress-testing.
Existing borrowings. The aggregate debt-to-equity and debt-to-EBITDA picture matters, not just the new loan.
Director profile. Personal financial position, credit history, and other business interests of the directors and guarantors.
Factor 4: loan-to-value ratio
LVR is the loan amount divided by the property value. The deposit is the inverse of LVR.
Lender LVR caps by property type:
Owner-occupier standard commercial: typically 70 to 80 per cent LVR (20 to 30 per cent deposit).
Investment standard commercial: typically 65 to 70 per cent LVR.
Specialised commercial: typically 60 to 65 per cent LVR.
Development or land: 50 to 65 per cent LVR depending on stage and specifics.
Higher LVR usually means tighter loan terms, higher rates, or shorter loan terms. The trade-off between deposit and rate is real and worth modelling for your specific deal.
How to present a commercial property deal
A well-packaged commercial property application improves your chances and pricing meaningfully. The components:
Property summary: type, location, size, vacant or leased, condition.
Lease summary (if relevant): tenant name and credit profile, remaining term, rent, review mechanism, options to renew.
Purchase price and proposed LVR, with deposit source documented.
Two years of financials presented cleanly, with a one-page narrative explaining trading direction.
Cashflow forecast showing serviceability at the proposed rate, plus stress-tested at +3 per cent.
Director resumes and personal balance-sheet summaries.
Use of funds: clear on whether the property is owner-occupied, leased to a related entity, or held for third-party investment.
Why lender shortlisting matters
The biggest single mistake we see on commercial property deals is going to one lender (often the borrower's existing business banker) without a shortlist. The same deal can get vastly different terms from different lenders depending on their current appetite for the property type, location and structure.
For commercial property, the difference between the best and worst lender quote on the same deal is often 0.5 to 1.5 percentage points on the rate, plus structural differences (LVR, term length, fee structure) that compound the effect. Across a 5 to 10 year term on a $1M+ loan, the gap is meaningful real dollars.
Where to from here
We compare commercial property finance across our whole lender panel, package the deal for each lender's appetite, and present a comparison once approvals come back. No fees to clients; the lender pays us when finance settles. Book a 20-minute brief to talk through your deal.
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