Two very different credit assessments
If you've only ever borrowed for residential property, commercial lending will feel like a different world. The assessment process, the documentation requirements, the LVR thresholds and the lender appetite all work differently. Understanding these differences is the first step to preparing a strong application.
LVR: Lower in commercial
Residential lenders will commonly lend up to 80% (and above with LMI) of a property's value. Commercial lenders are more conservative — typically 65–70% for established commercial properties, and potentially lower for specialised assets or development sites. This means you'll generally need a larger deposit or more equity for commercial lending.
Income assessment: The property matters too
In residential lending, serviceability is primarily assessed on the borrower's income. In commercial lending, the property's income — its rental yield, lease terms and tenant quality — plays a much larger role. A well-leased commercial property with a long-term tenant and annual rent reviews will attract better lending terms than a vacant property, even with the same borrower.
Property type affects appetite
Not all commercial property is viewed equally. Retail premises in high-traffic locations, industrial assets and well-located office buildings typically attract strong lender appetite. Specialised assets — petrol stations, child care centres, hotels — may require specific lenders who understand those asset classes.
The documentation requirement is heavier
Commercial applications typically require two to three years of business financials, the current lease documentation, a valuation by a commercial valuer (not residential), and often additional information about the borrower's business and industry. Preparing this thoroughly upfront is the difference between a smooth process and a frustrating one.
Choose your broker carefully
Many residential brokers dabble in commercial lending without the depth of experience it requires. A specialist commercial broker will know which lenders have genuine appetite for your asset type and borrower profile, how to structure the application to address the lender's concerns, and how to manage the longer and more complex settlement process.