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How Do Commercial Property Loans Work?

How Do Commercial Property Loans Work?

Commercial properties are one of the most lucrative assets any investor can hold in their portfolio, with high rental income potential, tax benefits, and appreciation being just a few of the biggest benefits. However, getting into the commercial property investment game requires a large initial payment, which many investors may need a loan to acquire.

Today, we’re going to look into the world of commercial property loans, offering you a comprehensive overview of commercial loan structures, interest rates, how to apply, and everything else you could ever need to know.

What Do You Need to Know About Commercial Property Loans in Australia?

Research and planning are key when it comes to any investment, and there are a few things you need to know about commercial property loans before you decide whether this is the best next step for your investment portfolio. These include:

Commercial Loan Structures

Commercial property loans typically offer various loan structures that are tailored to your specific needs, including traditional mortgages, commercial lines of credit, and construction loans. You can find a little more information on these loan structures below.

Traditional Mortgages

With a traditional mortgage, you’ll receive a lump sum upfront, which is payable over a fixed term with interest. Your options will include variable or fixed-rate terms, and the repayable period ranges from 5 to 25 years.

Commercial Lines of Credit

Commercial lines of credit are essentially revolving credit facilities that can be used for ongoing financing needs, allowing you to draw funds, repay, and redraw as necessary while only paying interest on the amount borrowed.

Construction Loans

As their name suggests, construction loans are short-term loans that can be used to cover the construction costs of property development projects. This type of loan usually converts to permanent financing once the project is completed, and there will be a structured repayment plan.

SMSF Commercial Property Loans

Self-Managed Superannuation Funds (SMSF) are specifically designed for those looking to invest in commercial property, and they have unique eligibility criteria and structures that are tailored to comply with certain SMSF regulations.

Development Finance

This is financing for development projects, including land acquisitions, construction, and subdivision. Development finance loans typically have higher risk profiles and may require detailed project feasibility assessments to obtain.

Loan-to-Value Ratio (LVR)

Another important thing you need to know about commercial property loans is the Loan-to-Value Ratio (LVR), which commercial lenders use to calculate a percentage of the property’s value.

In Australia, commercial property loans often have a lower maximum Loan-to-Value Ratio compared to residential loans, usually ranging from 60%-80%.

Common Commercial Loan Terms

All loans come with certain terms, but commercial property loan terms typically have shorter loan terms compared to residential mortgages. This, of course, depends on the loan structure, but certain terms may include balloon payments, principal and interest repayments, or interest-only periods.

Interest Rates

Commercial property loan interest rates can be fixed or variable, depending on the structure, and may be higher than those on residential loans due to the higher risk factors associated with commercial properties.

Interest rates may also vary depending on your credit profile, the terms of the loan, and prevailing market conditions.

How to Apply for a Commercial Property Loan?

Now you know some of the factors you need to keep in mind when looking at commercial property loans. But how do you go about applying for one?

As with any type of loan, there are certain steps you’ll need to follow and certain criteria you’ll need to meet.

Eligibility Criteria

Let’s start by taking a look at the eligibility criteria needed in order to apply for your commercial property loan.

Credit History

This is the most important thing when it comes to meeting a lender’s criteria, and you must have a satisfactory credit history and demonstrate your ability to repay the loan.

Property Type

The property being financed must be eligible for commercial lending purposes, such as office buildings or retail spaces.

Loan Purpose

You must also specify the purpose of the loan, stating whether it’s for property acquisition, refinancing existing debt, property development, or any other approved commercial process.

Loan Amount and LVR

In order to be eligible for a commercial property loan, you must also be able to meet the lender’s minimum and maximum loan amount requirements and satisfy their Loan-to-Value Ratio.

Income and Cash Flow

You’ll need to be able to demonstrate that you have sufficient income and cash flow to support your loan repayments. Otherwise, it’s unlikely you’ll qualify for a commercial property loan.


Many lenders will also require additional security before considering you for a loan, such as personal guarantees, business assets, or cross-collateralisation with other properties. This isn’t always needed and will depend on your risk profile and the loan amount.

Required Documentation

As well as meeting all of the eligibility criteria, there are documents you’ll also need to provide to obtain a commercial property loan.

Loan Application

The first thing you’ll need is your completed loan application form, which should provide the lender with your personal details, information about the property, loan amount, and loan purpose.


You’ll also need to supply identification alongside your loan application, such as your passport or drivers license.

Financial Statements

Both your personal and business financial statements covering the past three years will need to be included with your application, including income statements, balance sheets, and tax returns. You’ll also need to include details of any existing debts, loans, or financial obligations.

Property Information

Detailed information about the property should also be supplied with your application, including the address, legal description, valuation report, title deeds, insurance information, and survey plans.

Application Process

Once you have gathered the relevant documentation, you can start the application process. This can seem like a complex thing, so to help make it clearer, we’ve broken the steps down into simple terms.


The first thing you need to do is apply for the loan. Complete the application form provided by your chosen lender and ensure that all of the information included is 100% accurate.

Submit Documents

Alongside your application, submit the documents required. This will likely include most of the documents we’ve outlined above, but certain lenders may also require additional documentation in order to process your loan application.

Loan Approval Process

Should your loan application meet the lender’s criteria and be approved, they will issue a formal loan offer outlining the terms and conditions.


Take your time to review the loan offer carefully, and if you’re happy with everything, sign the loan contract. Following this, the lender will release the funds to you or directly to the seller or settlement agent, and the loan agreement becomes officially effective.

Our Tips for Securing the Best Loan Rates

Securing the best commercial property loan rates requires careful preparation and strategy! Here are our top tips for getting the best possible rates on commercial loans:
  • Maintain a strong credit score by paying bills on time, reducing your outstanding debt, and correcting any errors on your credit report.
  • Compare loan rates and terms from multiple lenders to identify competitive offers.
  • Don’t be afraid to negotiate with lenders in order to secure a better loan term.
  • Use any existing lender relationships you have to see if you can get discounted rates or special offers.
  • Provide clear, transparent documentation when applying to facilitate faster loan approval and potentially better rates.

How Can We Help Guide You Through the Commercial Loan Application Process?

At Revolve Commercial, we have decades of experience in dealing with commercial loans and everything that goes with them.

Contact us today to book a no-obligation 15-minute call, and we’ll discuss your potential options, answer any questions you may have, and help make things as clear as possible.

Need Help With Your Commercial Property? Book a Free Call with an Experienced Commercial Buyer Agent

Applying for commercial loans can be a stressful process, so let us do all of the hard work for you! Contact us today to speak with an experienced member of our team, and you’ll soon be on the way to securing the finance needed for your commercial property investments!