How Much Deposit Do You Need for a Commercial Property Loan?

How much deposit for a commercial property loan?

A practical starting point is to allow for a commercial property loan deposit or equity contribution of approximately 20% to 40% of the lender-assessed property value. That means an indicative commercial property LVR of around 60% to 80%.

This is a guide, not a universal lending rule. Current public lender information shows how wide the market can be. Westpac's general business finance guide says it will generally lend up to 65% of a commercial property value, CommBank's current Lease Doc product publishes an LVR of up to 65%, La Trobe Financial publishes selected commercial products up to 75%, and Thinktank advertises commercial lending up to 80% subject to its criteria. The available limit depends on the product and the complete transaction.

The cash required at settlement is rarely limited to the deposit. A buyer may also need to fund transfer duty, GST, legal advice, conveyancing, lender and valuation fees, building and environmental due diligence, fit-out expenses and working capital. A lender valuation below the agreed purchase price can create a further shortfall.

The contract deposit is also not necessarily the same as the borrower's total contribution. A contract might require an initial deposit when contracts are exchanged, while the balance of the equity contribution and costs is paid at settlement.

Commercial Property Deposit at a Glance

• 80% LVR: The lender provides up to 80% of the accepted value and the borrower contributes at least 20% toward the price.
• 70% LVR: The lender provides up to 70% and the borrower contributes about 30%.
• 60% LVR: The lender provides up to 60% and the borrower contributes about 40%.
• Purchase and finance costs: These are normally allowed for separately from the property contribution.
• Final approval: Depends on the borrower, servicing, security, valuation, purpose, structure and lender policy, not only the deposit.

How commercial property LVR works

Loan-to-Value Ratio, or LVR, compares the proposed loan with the value the lender accepts for its security.

LVR formula:

Loan amount ÷ lender-assessed property value × 100

For example:

• Accepted property value: $1,000,000
• Proposed loan: $700,000
• Calculation: $700,000 ÷ $1,000,000 × 100
• Result: 70% LVR
• Borrower contribution toward the $1,000,000 property price: $300,000
• Additional purchase and finance costs: funded separately unless the lender approves another structure

Lenders generally arrange or approve their own valuation because the property is security for the debt. ANZ's commercial valuation guidance notes that banks commonly require a commercial property valuation to help assess the security and risk. Australian Property Institute guidance says valuation evidence may include comparable sales, rental evidence and capitalisation-rate evidence where relevant.

The value used for lending may not be the contract price. Depending on the lender and transaction, credit policy may use the lower of the purchase price, the lender-accepted valuation or another policy-adjusted amount. A lender may also treat related-party purchases, non-arm's-length transactions, incentives, GST-inclusive prices or unusual contract terms differently.

This is why a buyer should avoid calculating the deposit solely as a percentage of the advertised price. The more useful calculation is:

Purchase price minus proposed loan, plus all costs, plus a contingency for any valuation shortfall.

Typical commercial property deposit ranges

The following table is an indicative guide only. It is not a promise that a particular lender will approve the stated LVR.

• Indicative LVR: Up to 80%. Indicative borrower contribution: From 20%. Strong borrower, acceptable non-specialised property and suitable higher-LVR lender or product
• Indicative LVR: Around 70%. Indicative borrower contribution: Around 30%. Common commercial investment, full-doc or lease-supported territory with acceptable security
• Indicative LVR: Around 60% to 65%. Indicative borrower contribution: Around 35% to 40%. More conservative bank position or higher-risk, specialised, regional, vacant or unusual property
• Indicative LVR: Above 80%. Indicative borrower contribution: Less than 20%. Restricted higher-LVR product, additional security or strongly supported transaction, with tighter eligibility and potentially different pricing or fees

Public lender pages illustrate the variation. CommBank currently publishes up to 65% LVR for its Lease Doc loan. La Trobe Financial publishes selected full-doc and lease-doc commercial options up to 75%. Thinktank advertises commercial loans up to 80%. These are examples of individual product settings, not a universal definition of commercial loan deposit requirements. Product limits, pricing and criteria can change.

A commercial property finance deposit may come from:

• cash savings
• equity released from a residential property
• equity in another commercial property
• sale proceeds from another asset
• a combination of cash and equity
• additional security acceptable to the lender

Using equity does not remove the contribution. It changes how the contribution is funded. For example, a borrower may raise $300,000 against another property and use that money toward the purchase. The new commercial facility may still be limited to 70% of the acquired property's accepted value.

There are three figures to separate:

Contract deposit: The amount payable under the contract, often when the contract becomes binding.

Total borrower contribution: The total cash or equity required to complete the purchase, including the balance of the price not funded by the lender.

Lender equity requirement: The lender's required buffer between its loan and the value of the security.

These figures can differ. A buyer may pay a 10% contract deposit but ultimately need a 30% property contribution plus costs to complete a 70% LVR loan.

What determines the required deposit?

Commercial property lending criteria are broader than a single maximum LVR. Commercial credit teams generally assess the borrower, the property, the income supporting the debt, the transaction purpose and the proposed structure together.

Borrower strength

For an owner-occupied business property loan, a lender may review:

• the business's trading history
• recent and historical profitability
• cash flow and debt servicing capacity
• existing loans, leases, guarantees and credit limits
• credit history and repayment conduct
• tax liabilities and payment arrangements
• management experience
• customer, supplier and industry concentration
• the borrower's liquidity after settlement

A profitable business with stable cash flow, clean conduct, manageable debt and cash remaining after settlement generally presents less risk than a business that is highly leveraged or using all available cash to complete the purchase.

A new business is not automatically excluded, but it may have less evidence of sustainable earnings. The lender may then place more weight on industry experience, contracts, forecasts, guarantor strength, additional security or a larger equity contribution.

Property quality

The lender also asks how readily the property could be sold or leased if the loan did not perform. Relevant factors can include:

• property type and permitted use
• metropolitan, regional or rural location
• physical condition and remaining economic life
• local demand and vacancy
• building configuration and alternative uses
• access, parking, services and zoning
• environmental contamination or hazardous materials
• required repairs, compliance work or capital expenditure
• whether part of the value relates to plant, equipment or the operating business

A modern general-purpose warehouse in an established industrial precinct may have broader buyer and tenant demand than a purpose-built facility in a single-industry town. That difference can affect the lender's accepted value, maximum LVR, pricing and approval conditions.

Investment income and lease quality

For a commercial investment property loan, the lease is central to the risk assessment. Lenders may examine the current rent, market rent, remaining lease term, options, rent reviews, tenant quality, arrears, outgoings and vacancy history.

They may also test interest cover or debt service coverage. CommBank's current Lease Doc product, for example, publishes a minimum interest coverage ratio of 1.5 times and requires an active arm's-length lease. That is one product example only, but it shows why a property with strong rent can still fail a lease-doc assessment if the rent does not provide enough cover under the lender's calculation.

A lease expiry that is close to settlement or loan maturity can increase risk. The lender may shorten the facility, require a lease extension, reduce the LVR, seek additional servicing evidence or assess the property on a vacant-possession basis.

Loan purpose and structure

Lender appetite may differ for:

• an owner-occupied commercial property loan
• a commercial investment property loan
• refinancing an established facility
• equity release for working capital or another purchase
• construction or property development
• vacant commercial land
• land banking
• related-party transactions
• purchases through companies, trusts or an SMSF

Development and vacant land are usually assessed differently from a completed, income-producing property. Construction lending may be limited by both the end value and total development cost, with progress payments, quantity-surveyor reporting, presales or other conditions.

The key point is that commercial credit decisions are transaction-specific. Two buyers purchasing identical warehouses can receive different deposit requirements because their income, debts, entity structures, lease arrangements and overall risk differ.

How the security type affects the deposit

Not every property described as commercial is treated the same. Each lender applies its own security classifications, location rules and valuation approach.

Standard or non-specialised property

Properties with broad business use and active resale or leasing markets may receive more favourable commercial property LVR treatment. Examples can include:

• general-purpose warehouses
• strata industrial units
• standard suburban offices
• conventional retail premises
• light-industrial property

A standard property can usually be occupied by more than one type of business without major structural changes. That flexibility may support saleability and reduce the lender's loss risk.

Even within these categories, quality matters. A warehouse with poor access, extensive deferred maintenance or an oversupply of competing space may not receive the same treatment as a newer property in a strong logistics precinct.

Specialised property

Specialised security may include pubs, hotels, motels, service stations, childcare centres, places of worship, purpose-built medical facilities, quarries, abattoirs, caravan parks and function centres.

These properties may have fewer buyers, fewer alternative uses and more complex valuation requirements. Their value can also be closely connected to licences, environmental conditions, operator performance, occupancy, goodwill or specialised improvements.

A lender may therefore reduce the maximum LVR, require a specialist valuation, shorten the loan term, impose covenants or request additional security. Classifications differ. A medical suite may be treated as standard office property by one lender and specialised by another, depending on fit-out, location and alternative use.

Vacant property

Vacancy removes or reduces lease income and creates uncertainty about the time and cost required to secure a tenant. The lender may consider incentives, fit-out contributions, leasing commissions, outgoings during vacancy and whether the proposed borrower can service the loan without rent.

For an owner-occupier buying with vacant possession, vacancy may be intentional because the business will move in. The assessment then depends heavily on business cash flow and the costs of relocating and fitting out the premises.

For an investor, a vacant office or retail property may require a larger deposit, stronger external income or evidence of a realistic leasing strategy. It can also attract a more conservative valuation than a comparable property with a secure lease.

Regional and rural property

Regional commercial property is not automatically unacceptable, but lenders may examine local population, economic diversity, industry concentration, time on market and the depth of buyer and tenant demand.

A warehouse in a major regional centre with diverse industries may be treated differently from a specialised facility in a town dependent on one employer or commodity. Westpac's public guide distinguishes general maximums for residential, commercial and rural property, which confirms that security category can influence available leverage.

Agribusiness operators should also distinguish an ordinary commercial shed, office or depot from a working farm. Rural land with agricultural production, water rights, livestock infrastructure or specialised improvements may be assessed under agribusiness policy rather than standard warehouse finance or industrial property loan policy.

Owner-occupied, investment, lease-doc and alt-doc lending

Owner-occupied commercial property

An owner-occupied commercial property is used by the borrower's operating business. The lender may assess both the property's value and the business's capacity to repay the debt.

This type of transaction can include a trade business buying a warehouse, a professional practice buying an office, or a manufacturer buying an industrial property. The assessment may use full financial statements and tax returns, current management figures, business account conduct and details of the operating entity.

The property-owning entity and trading entity may be different. For example, a trust may own the premises and lease them to a related operating company. The lender will consider the complete group structure, related-party rent and guarantees rather than treating the lease as independent investment income.

Commercial investment property

A commercial investment property is primarily held to produce rent. The lender may focus on the lease, tenant, property expenses and the amount by which rental income covers interest or total debt commitments.

A long lease does not guarantee approval. The lender may still discount rent, allow for vacancy and outgoings, assess the tenant's strength and compare the passing rent with market evidence.

Lease-doc lending

Lease-doc lending uses the property's rental income and lease information as a primary part of servicing. It is not no-document lending.

CommBank's published Lease Doc requirements include an active arm's-length lease, property and tenancy information, ATO account statements, the contract of sale for a purchase and a minimum interest coverage ratio. Its current product is limited to a tenanted commercial investment property held in a standalone non-trading special-purpose vehicle. Other lenders use different requirements and calculations.

Alt-doc commercial lending

Alt-doc commercial finance can help eligible self-employed borrowers who cannot provide the standard set of final financial statements and tax returns required by a full-doc application.

Depending on the lender, alternative verification may include accountant declarations, BAS information, business bank statements or other lender-approved evidence. A public Liberty product page, for example, describes flexible income verification for self-employed borrowers, while La Trobe's commercial products publish different verification requirements across full-doc and lease-doc options. These examples show that alt-doc is still an evidence-based assessment, not an absence of income verification.

Commercial property loan terms and repayment structures

Commercial property loan terms vary widely. Some facilities are approved for a short contractual term and reviewed or refinanced at expiry. Others may be available with longer terms and residential-style repayments for eligible borrowers and acceptable security.

ANZ currently publishes business loan terms of up to 30 years for eligible loans below $5 million secured by suitable residential or commercial property. CommBank's Lease Doc product, by contrast, publishes a term of up to five years or lease expiry, whichever is shorter. These two current examples show why borrowers should not assume that every commercial property loan runs for 25 or 30 years.

Common structures include:

• Principal and interest: Each repayment includes interest and reduces principal.
• Interest only: The borrower pays interest for an approved period without reducing principal. Total interest may be higher because the balance does not amortise during that period.
• Variable rate: The rate can change under the facility terms.
• Fixed rate: The rate is fixed for an agreed period, with potential break costs if the facility is repaid or changed early.
• Bank bill or market-linked facility: Pricing may be expressed as a reference rate plus a margin, with reset periods and line fees.
• Balloon or residual debt: Repayments may be calculated over a longer amortisation period than the contractual facility term, leaving debt due at expiry.

Four periods should be separated:

Loan term: The legal period before the facility matures.

Amortisation period: The period used to calculate principal repayments.

Interest-only period: The period during which scheduled principal reduction is not required.

Fixed-rate period: The period for which the interest rate is fixed.

A five-year facility could, for example, use repayments calculated over 20 years and still have a substantial balance due at year five. Commercial facilities may also include annual reviews, review fees, financial reporting obligations, valuation requirements and covenants such as a maximum LVR or minimum interest cover. The exact conditions depend on the lender and transaction.

Costs you need beyond the deposit

The property contribution is only one part of the cash required. A commercial purchase budget should identify every amount payable before, at and after settlement.

GST on commercial property

Australia's GST rate is 10%. Commercial property may be advertised as inclusive of GST, plus GST, or subject to another GST treatment. The contract wording affects the amount required at settlement.

A GST-registered buyer may be able to claim a GST credit for GST included in eligible business purchases where the legal requirements are met. Eligibility, documentation and timing must be confirmed for the buyer's circumstances.

A future GST credit does not necessarily remove the need to fund GST at settlement. If the contract requires payment at completion, the buyer may need cash or approved short-term funding before claiming the credit through the relevant GST reporting period.

A qualifying sale of a going concern can be GST-free, but a leased property is not automatically a going concern. ATO guidance states that the statutory conditions must be met and that a property sale by itself is not enough. Buyers should have an accountant and commercial property lawyer review the GST clause before signing.

Stamp duty or transfer duty

Stamp duty, transfer duty or duty is imposed by state and territory governments. Business.gov.au states that the amount depends on the transaction type and value, while concessions and exemptions vary by jurisdiction.

Buyers should use the current calculator from the relevant revenue office and have the amount confirmed by their conveyancer or lawyer. Duty normally needs to be budgeted in addition to the property contribution.

Victoria requires extra care because commercial and industrial property tax reforms are progressively replacing land transfer and landholder duty for qualifying properties. Whether a property has entered the reform and how a transaction is treated must be checked against current State Revenue Office guidance.

Commercial property valuation

Commercial valuations may analyse comparable sales, market rent, lease terms, capitalisation rates, property condition, location, alternative use and specialised improvements. Australian Property Institute guidance identifies sales, rental and capitalisation-rate evidence as relevant inputs, while ANZ confirms that banks commonly require commercial valuations to assess security.

There is no universal valuation fee. Cost depends on property value, complexity, location, report type and lender requirements. The borrower may remain liable for the fee even if the loan does not settle.

Legal and conveyancing costs

Commercial legal work may include contract and title review, planning and zoning checks, lease review, entity and trust documents, guarantees, lender security documents, independent legal advice and settlement work.

Costs can increase for going-concern clauses, related-party leases, SMSF structures, multiple securities or negotiated lender documents. Buyers should confirm that the lawyer's scope includes the commercial, lease, GST and finance issues relevant to the purchase.

Building, pest and environmental due diligence

Due diligence may include building and pest inspections, engineering reports, contamination searches, planning and zoning review, essential safety measures, fire compliance, occupancy permits, services, easements, asbestos and hazardous-material checks.

The scope should match the property. A service station, workshop, dry cleaner or industrial site may require environmental investigations that would not be expected for a standard office.

Lender and finance costs

Possible finance costs include application, establishment, settlement, legal and valuation fees, annual review or line fees, account fees, discharge fees and early repayment or fixed-rate break costs.

The exact fees depend on the lender, product, loan size and structure. Commercial offers should therefore be compared on total cost, reviews, covenants and flexibility, not only the interest rate.

Working capital and post-settlement reserves

A buyer should avoid using every available dollar at settlement. Reserves may be needed for fit-out, approvals, repairs, equipment, moving, vacancy, leasing incentives, insurance, rates, owners corporation charges, land-related taxes and ordinary cash flow fluctuations.

Owning the premises may replace rent, but it introduces debt repayments, ownership costs and capital expenditure. The budget should include a realistic contingency and enough liquidity for the business to keep operating.

Worked commercial property deposit examples

These examples are simplified and exclude jurisdiction-specific duty calculations. They demonstrate the relationship between accepted value, LVR and the borrower's contribution.

Example One: 80% LVR owner-occupied warehouse

Assumptions:

• Purchase price: $1,000,000
• Lender-accepted value: $1,000,000
• Approved LVR: 80%

Maximum loan calculation:

$1,000,000 × 80% = $800,000

Property contribution calculation:

$1,000,000 purchase price − $800,000 loan = $200,000

The borrower contributes $200,000 toward the property price. This represents 20% of the accepted value.

The buyer must also allow for duty, legal work, valuation and lender fees, due diligence and any fit-out or moving costs. An 80% LVR is not available to every borrower or property. Current specialist lender pages show that up to 80% can be available under selected commercial products, subject to criteria.

Example Two: 70% LVR commercial investment

Assumptions:

• Property value excluding GST: $1,000,000
• Lender-accepted value: $1,000,000
• Approved loan: $700,000

LVR calculation:

$700,000 ÷ $1,000,000 × 100 = 70%

Property contribution calculation:

$1,000,000 − $700,000 = $300,000

Potential GST amount:

$1,000,000 × 10% = $100,000

The borrower needs a $300,000 contribution toward the GST-exclusive price. Depending on the contract and GST treatment, the $100,000 GST may also need to be funded or otherwise addressed at settlement. Duty, legal costs, valuation fees and lender costs remain separate.

GST treatment must be confirmed by the buyer's accountant and lawyer before the contract is signed. A going-concern treatment should never be assumed merely because a tenant occupies the property.

Example Three: specialised property at 60% LVR

Assumptions:

• Purchase price: $1,500,000
• Lender-accepted value: $1,500,000
• Maximum approved LVR: 60%

Maximum loan calculation:

$1,500,000 × 60% = $900,000

Property contribution calculation:

$1,500,000 − $900,000 = $600,000

The borrower contributes $600,000 toward the price, equal to 40% of the accepted value. Additional purchase and finance costs are funded separately.

A lender might require the larger contribution because the property has a limited buyer pool, specialised improvements, operator dependence, environmental risk or fewer alternative uses. This does not mean every specialised property is limited to 60%. The final position depends on the lender's classification, valuation and credit assessment.

Example Four: valuation shortfall

Assumptions:

• Contract price: $1,000,000
• Lender valuation: $950,000
• Approved LVR: 70%

Maximum loan calculation:

$950,000 × 70% = $665,000

Contribution toward the contract price:

$1,000,000 − $665,000 = $335,000

The buyer needs $335,000 toward the price, not the $300,000 they may have expected from simply taking 30% of the contract price.

Additional shortfall caused by the valuation:

Expected loan at 70% of $1,000,000 = $700,000

Actual loan at 70% of $950,000 = $665,000

$700,000 − $665,000 = $35,000 additional contribution

Purchase and finance costs are still separate. This example shows why a finance clause, realistic valuation expectations and a cash buffer can matter.

How to improve the strength of an application

A larger deposit can reduce risk, but it does not fix every weakness. A well-prepared application helps a lender understand the transaction and may create more lender and structure options.

Seek guidance before signing an unconditional contract

Commercial valuations and credit assessment can take time. Finance should be discussed before the buyer commits to a settlement date or waives conditions. A pre-approval may still depend on the lender accepting the specific property, lease and valuation.

Prepare complete financial information

For a full-doc commercial loan, this may include current financial statements, business and personal tax returns, interim management accounts, bank statements, existing debt schedules and details of tax liabilities.

Information should be consistent. Large one-off expenses, related-party transactions, recent changes in ownership or unusual income should be explained rather than left for the credit assessor to interpret.

Provide the lease and property documents early

For an investment purchase, provide the executed lease, variations, options, rent schedule, outgoings, arrears information and tenant details. For vacant or owner-occupied property, provide a clear occupation, fit-out and business plan.

Preserve liquidity

Show that the business will retain enough working capital after settlement. Include realistic allowances for GST timing, duty, legal costs, fit-out, moving, repairs and cost overruns.

Address credit and tax issues early

A credit impairment, tax debt or payment arrangement does not always prevent approval, but it should be disclosed and explained. The lender may request evidence of compliance, repayment history or a plan to clear the liability.

Compare lenders and structures

One bank's security classification or servicing method may not match another's. A commercial finance broker can compare full-doc, lease-doc, alt-doc, bank and specialist options, but the comparison should cover fees, reviews, covenants, security and exit risk as well as LVR and rate.

Use additional security carefully

Another property can sometimes support the contribution or improve the overall security position. It can also expose that asset to the commercial debt and create cross-collateralisation.

Cross-collateralisation can make future sales, refinancing and partial releases more complicated because the lender controls multiple securities for one borrowing group. Borrowers should obtain finance, legal and tax advice before offering a home, investment property or other business asset as additional security.

Commercial property finance process

A typical commercial property finance process is:

1. Initial strategy discussion: Clarify the purchase, contribution, entity structure, timing and objectives.
2. Financial review: Assess business performance, personal position, existing debts and available liquidity.
3. Indicative lender assessment: Compare likely lender appetite, LVR, servicing method, term and costs.
4. Property and lease review: Examine the property type, location, use, lease and contract terms.
5. Application submission: Provide the financial, identity, entity and transaction documents.
6. Commercial valuation: The lender orders or approves a valuation.
7. Formal credit assessment: Credit reviews servicing, security and conditions.
8. Loan and legal documents: The borrower and advisers review and sign the facility and security documents.
9. Conditions satisfied: Insurance, guarantees, searches, equity evidence and other conditions are completed.
10. Settlement: The lender advances funds and the buyer contributes the required balance and costs.

An indicative approval is not final approval of an unidentified property. Even where the borrower is acceptable, the lender may decline or change terms if the property, lease or valuation falls outside policy.

Frequently asked questions

1. Can I buy commercial property with a 10% deposit?

It may be possible in a restricted higher-LVR transaction, but a 10% deposit is not standard commercial lending. The lender may require a strong borrower, acceptable property, additional security or a specific product. Many buyers should plan around a 20% to 40% contribution plus costs until the transaction is assessed.

2. Is a 20% deposit enough for commercial property?

It can be where the borrower and property qualify for an 80% LVR product. Current specialist lender information shows selected commercial products up to 80%, but bank and lease-doc limits may be lower. Costs and any valuation shortfall usually remain additional.

3. Why do commercial property loans need larger deposits?

Commercial properties may have fewer buyers, longer selling periods, specialised uses and income that depends on tenants and lease terms. A larger equity buffer reduces the lender's exposure if rent falls or the property must be sold.

4. Can I use home equity as the commercial property deposit?

Yes, subject to serviceability, available equity and lender approval. This increases total debt and may expose the home to commercial risk or create cross-collateralisation, so finance and legal advice is important.

5. Does the bank lend against the purchase price or valuation?

The lender uses the value accepted under its credit policy, often considering the contract price and its valuation. If the valuation is lower, the loan may reduce and the buyer's contribution may rise. Lenders commonly require their own valuation.

6. Do I need to pay GST when buying commercial property?

It depends on the seller, property and transaction. A taxable sale may include GST, while a transaction satisfying all going-concern requirements may be GST-free. A leased property does not automatically qualify. Obtain accounting and legal advice before signing.

7. Can GST be included in a commercial property loan?

Some lenders may consider funding GST or a short-term GST facility, while others require the buyer to fund it. Approval depends on policy, liquidity, GST registration, expected credit timing and the overall transaction.

8. How much is stamp duty on commercial property?

There is no single Australian amount. Duty varies by state or territory and can depend on value, location, use, buyer and structure. Use the relevant revenue office calculator and obtain legal confirmation. Victorian buyers should also check the commercial and industrial property tax transition.

9. How long can a commercial property loan run?

Terms range from short facilities to up to 30 years for eligible products. ANZ publishes up to 30 years for certain qualifying business loans, while CommBank's Lease Doc product publishes up to five years or lease expiry.

10. Can a new business obtain a commercial property loan?

Potentially, but limited trading history can make assessment harder. The lender may consider industry experience, forecasts, contracts, external income, guarantor strength, property quality and a larger contribution.

11. Is the deposit different for owner-occupied and investment property?

It can be. Owner-occupied lending may rely more on business cash flow, while investment lending may focus on rent, lease strength and tenant risk. Neither category automatically receives a better LVR.

12. Do lenders charge for commercial property valuations?

Often, but not always. The fee may be charged directly or included within another finance fee. Cost varies with property value, complexity, location, report type and lender requirements.

13. Can an SMSF buy commercial property?

An SMSF can buy commercial property, and borrowing may be possible through a compliant limited recourse borrowing arrangement. Strict rules apply. Trustees should obtain licensed financial advice and independent legal and tax advice before proceeding.

14. What happens if the lender valuation is below the purchase price?

The lender may reduce the loan, require more equity, change terms or decline the property. At 70% LVR, a $950,000 valuation supports $665,000, even if the contract price is $1,000,000. The buyer must cover the resulting shortfall plus costs.

Conclusion

When asking how much deposit for a commercial property loan, a sensible initial estimate is approximately 20% to 40% of the lender-assessed property value, plus acquisition and finance costs. The correct figure depends on the borrower, property, lease, loan purpose, valuation and lender.

GST, transfer duty, commercial legal work, valuation fees, due diligence and post-settlement working capital can sit outside the deposit. A valuation below the contract price can also increase the cash contribution immediately.

Early planning is the best way to reduce the risk of a settlement shortfall. Arrange a commercial property finance discussion before signing an unconditional contract so the likely LVR, servicing method, structure, costs and timeframes can be assessed against the specific transaction.

Sources and further reading

• Australian Taxation Office: GST and commercial property
• Australian Taxation Office: Claiming GST credits
• Australian Taxation Office: Selling a going concern
• Business.gov.au: Stamp duty
• State Revenue Office Victoria: Commercial and industrial property tax
• Moneysmart: SMSFs and property
• CommBank: Lease Doc loan
• ANZ: Business loans
• ANZ: Commercial property valuation guidance
• Westpac: Business loans and finance guide