Commercial real estate loans for buyers and owners

What is a commercial real estate loan?

A commercial real estate loan is a mortgage over property that is not a normal home. The lender takes the real estate as security and lends against it for a purchase, a refinance, an equity release or an improvement project. The asset might be a corner shop, a block of industrial units, a medical centre or a suburban office floor.

Because the asset is also an income engine or a working base for a business, commercial lenders ask more about the asset than a home lender would. They want to understand who occupies it, how long they are committed for, how broad the buyer pool would be and what the building would be worth if circumstances changed.

Which asset classes can be financed?

Asset class	What lenders tend to focus on
Office	Location, tenant mix, lease terms, vacancy history
Retail	Foot traffic, anchor tenants, lease structure, surrounding competition
Industrial	Access, clearance heights, zoning, tenant covenant, flexibility of use
Medical and childcare	Specialist fit-out, licensing, operator strength
Hospitality and leisure	Trading history, licence conditions, operator experience
Mixed-use	Split between commercial and residential income, strata or title structure

Specialty assets are where a broker earns their keep. A lender who finances warehouses all day may not touch a hotel, and a lender comfortable with childcare may not want a retail strip. The right match often decides the outcome.

Who is this page for?

You may be reading because you are:

• An investor who wants to add a tenanted commercial asset to your portfolio.
• A business owner ready to own the premises you currently lease.
• A property owner whose current loan has expired, been called in or simply stopped suiting you.
• A developer holding commercial stock who needs funding while you lease up or sell.
• Someone whose application was turned down and who wants a second opinion.

What do lenders look at before approving?

Think of three buckets. First, the real estate: location, building condition, zoning and saleability. Second, the income: contracted rent from tenants, or trading income if you occupy it. Third, you: experience, other debts, credit conduct and how the borrowing entity is structured.

A weakness in one bucket can sometimes be offset by strength in another. A first-time commercial buyer buying a well-let building in a strong location may be viewed more positively than an experienced investor buying a poorly located, vacant one. How the lender balances these is where policies diverge, and where our experience helps.

How does Ownright approach it?

Ownright Custom Finance was built to find solutions where the standard answer is no. Trevor Scott and the team have decades of experience across bank, non-bank and private lending, and we use it to work out which door to knock on first. For clean commercial deals that might be a mainstream-style lender. For deals with credit blemishes, complex structures, short timeframes or unusual assets, it may be a specialist or private lender.

We take the time to understand the plan before approaching anyone, because the story told to a lender matters. A property that looks risky on paper can look sensible once the lease pipeline, the borrower’s track record and the exit are laid out clearly. If you want us to look at your deal, tell us about it here.

What about duty, GST and other purchase costs?

Commercial purchases come with costs that can surprise first-time buyers. Transfer duty is set by each state and territory and is calculated on dutiable value, so the State Revenue Office Victoria, Revenue NSW and equivalents publish the rules. GST may apply to the sale, or the sale may be GST-free as a going concern or run under the margin scheme, as explained by the ATO. These treatments affect the funds needed on settlement day. Lenders also charge for valuations and legal work. Your accountant and solicitor should confirm the details for your purchase.

An illustrative example

Illustrative only, no real client. An investor wants to buy a small strip of shops where one tenant has just left. The seller needs a quick settlement. A standard lender hesitates because of the vacancy. We would look at whether a lender focused on the underlying asset can fund the purchase, with a clear plan to re-let and later refinance onto longer-term terms. Whether that works depends on the lender, the security and the borrower’s position.

Common mistakes

• Choosing a lender by name rather than by fit with the asset.
• Presenting incomplete lease information.
• Ignoring how vacancy periods will be funded.
• Assuming the valuation will match the contract price.
• Forgetting to confirm the borrowing entity before contracts are exchanged.

Documents to have ready

• Contract of sale or property details
• Lease agreements and rent roll
• Recent financials for the borrower or the business occupying the property
• Statement of assets and liabilities
• Entity documents such as trust deed or company details

How do commercial real estate cycles affect lending?

Lender appetite is not fixed. When a particular sector is under pressure, such as office space in some locations or discretionary retail, lenders may tighten their policies, ask for more equity or step back from certain asset types. When a sector is strong, appetite widens. Borrowers sometimes assume a decline reflects their own weakness, when in fact the lender has simply changed its view of the sector.

That is one reason we do not treat any single lender as the answer. A lender that was cautious about a building type last year may be keen this year, and the reverse is just as true. Staying in touch with the market, and knowing which lenders are currently active in which sectors, is a practical part of the job.

What about properties that are hard to value?

Some commercial real estate does not have many comparable sales: a purpose-built facility, a property in a thin regional market or an asset with an unusual mix of uses. Valuers can be cautious in these cases, and the valuation can come in lower than the contract price. That does not mean the deal is dead. We help clients prepare for it by discussing realistic valuation ranges early, supplying leasing and trading evidence that supports value, and having a fallback plan for extra equity or a different lender.

Can I refinance or release equity from commercial real estate I already own?

Yes, and owners often overlook it. If the property has grown in value or the loan has reduced, there may be equity available for another purchase, a business need or a tax obligation. Lenders will look at the purpose, the property and your capacity to carry the new debt. Our commercial loan refinance page covers the process in more detail.

Next step

If you own commercial real estate, want to buy some or need to move a loan that is not working, talk to us about your situation. We will give you a clear view on the options before you commit to anything. Our guide to commercial LVR and valuations is useful background reading as well.