Comparing commercial finance isn't like comparing home loans. The interest rate matters, but it's just one piece of a much larger puzzle that includes loan structure, security requirements, and how the repayment terms fit your business cash flow.
When you're looking at finance for an office building, warehouse, or retail space, you're dealing with products that can be shaped around your circumstances in ways residential loans simply can't. That flexibility makes comparison harder, but it also means the right structure can save you money and give your business room to grow. Getting this decision right starts with knowing what to compare beyond the headline rate.
What Makes Commercial Property Finance Different to Residential
Commercial property loans are assessed on the income potential of the property and the financial strength of your business, not just your personal income. Lenders look at rental yield, lease agreements, and whether the tenant profile is stable. A warehouse with a long-term lease to a national tenant will be treated very differently to a small retail unit with short-term occupancy.
Consider a buyer acquiring an industrial property in Brendale leased to a logistics company on a five-year term. The lender assessed the loan primarily on the lease income and the tenant's credit profile, not the buyer's personal tax returns. The loan was structured with interest-only repayments for the first three years to match the lease term and preserve cash flow for other business needs. That kind of tailored approach doesn't exist in the residential space.
Interest Rates and How They're Structured
Commercial interest rates sit higher than residential rates, typically between 1% and 3% above standard home loan rates depending on the property type, loan amount, and your business financials. You'll see both variable and fixed rate options, but fixed terms rarely extend beyond five years.
Variable interest rates give you flexibility to make extra repayments without penalty and access features like redraw if the loan allows it. Fixed rates lock in certainty, which can help with budgeting if your business operates on tight margins. Some lenders also offer split structures where part of the loan is fixed and part is variable, giving you a middle ground.
The rate itself is just the starting point. Application fees, valuation costs, legal fees, and ongoing account-keeping charges all add up. A loan with a slightly higher rate but lower upfront costs might work out better over the life of the loan, especially if you're planning to refinance or sell within a few years.
Loan Structure and Repayment Flexibility
Flexible loan terms are where commercial loans really differ from residential. You might structure the loan as interest-only for a set period, principal and interest from day one, or even negotiate a tailored schedule that aligns with your business income cycle.
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Interest-only repayments reduce your monthly outgoings and free up capital for equipment, staff, or stock. Principal and interest repayments build equity faster and reduce your overall interest cost. The right choice depends on whether you're prioritising cash flow now or ownership over time.
Some lenders also offer progressive drawdown for commercial construction projects or revolving lines of credit secured against commercial property. These structures suit businesses that need access to funds over time rather than a lump sum upfront. If you're buying land with plans to develop later, or acquiring a property that needs fitout, these options can be worth exploring.
Security and LVR Requirements
Most commercial property loans require the property itself as collateral, but lenders may also ask for additional security depending on the loan amount and property type. That might include a second property, business assets, or a personal guarantee from the directors.
The loan-to-value ratio for commercial property typically maxes out at 70%, meaning you'll need at least a 30% deposit. Some lenders go to 80% for very strong applications, but that's less common. If you're buying strata title commercial property or a specialised asset like a medical centre, expect the LVR to be lower.
Unsecured commercial loans exist, but they're usually capped at smaller amounts and come with higher rates and shorter terms. They're more common for equipment finance or working capital rather than property acquisition.
Comparing Lenders and What They Actually Offer
Not every lender writes commercial property finance, and those that do often specialise in certain property types or industries. The big four banks offer commercial loans, but so do regional banks, credit unions, and non-bank lenders. Each has different appetite for risk, different serviceability calculations, and different willingness to negotiate on terms.
A manufacturing business buying an industrial property in Yatala approached several lenders for finance. One bank offered a lower rate but required a 35% deposit and wouldn't budge on principal and interest repayments. A non-bank lender came in slightly higher on rate but accepted a 30% deposit, offered interest-only for two years, and allowed quarterly repayments to match the business's income cycle. The second option cost a bit more in interest but gave the business the flexibility it needed to manage cash flow during the first two years of operation.
When you're comparing offers, look at the loan structure, the fees, the flexibility around early repayment, and the lender's willingness to work with your circumstances. A commercial Finance & Mortgage Broker can access commercial loan options from banks and lenders across Australia and present them side by side, which saves you weeks of back and forth.
When Refinancing or Restructuring Makes Sense
Commercial refinance isn't just about chasing a lower rate. You might refinance to access equity for expansion, to switch from interest-only to principal and interest as your business stabilises, or to consolidate multiple loans into one facility.
If your business has grown since you first took out the loan, your serviceability might now support better terms. If property values have increased, you might be sitting on equity that can be used for buying new equipment, upgrading existing equipment, or acquiring another property.
Refinancing does come with costs though. Discharge fees from your current lender, application and valuation fees with the new lender, and potentially legal costs if you're restructuring security. Run the numbers before you commit. If you're only saving a fraction of a percent on the rate and you're planning to hold the property for less than three years, the upfront costs might outweigh the benefit.
What to Bring When You're Ready to Compare
Lenders will want to see your business financials, tax returns, a copy of any lease agreements, and details of the property you're buying. If you're refinancing, they'll also want a payout figure from your current lender and a recent property valuation.
The more prepared you are, the faster the comparison process moves. A lender can give you an indicative rate and structure within a few days if they have the right information upfront. If you're missing key documents or the property details are vague, it drags out and you lose momentum.
Working with a broker who understands business loans and commercial property means someone else is chasing the paperwork, following up with lenders, and making sure nothing falls through the cracks. It's not just about access to more lenders, it's about having someone in your corner who knows what questions to ask and what terms are worth pushing back on.
Call one of our team or book an appointment at a time that works for you. We'll walk through your options, compare the lenders that actually suit your situation, and help you structure a commercial loan that fits your business and your plans.
Frequently Asked Questions
How do commercial property loan rates compare to residential rates?
Commercial interest rates typically sit 1% to 3% higher than residential home loan rates. The exact rate depends on property type, loan amount, your business financials, and the lender's assessment of the property's income potential and tenant quality.
What deposit do I need for a commercial property loan?
Most lenders require at least a 30% deposit, meaning the maximum loan-to-value ratio is usually 70%. Some lenders may go to 80% for strong applications, but specialised properties like strata title commercial or niche assets often require a larger deposit.
Can I get interest-only repayments on a commercial loan?
Yes, interest-only repayments are common on commercial property loans and can usually be arranged for a set period of one to five years. This option reduces monthly outgoings and preserves cash flow for other business needs, but doesn't build equity as quickly.
What's the difference between secured and unsecured commercial loans?
A secured commercial loan uses property or business assets as collateral, typically offers higher loan amounts and lower rates. An unsecured commercial loan doesn't require collateral but comes with higher rates, smaller loan limits, and shorter terms, and is more common for equipment or working capital.
When should I consider refinancing a commercial property loan?
Refinancing makes sense when you can access equity for expansion, switch to better terms as your business grows, consolidate multiple loans, or secure a lower rate that offsets the refinancing costs. Always weigh upfront fees against long-term savings before proceeding.
