Commercial Property Loans in Australia: Loan Types, Lenders and How to Get the Best Terms

TL;DR

A commercial property loan in Australia typically funds 65 to 70% of the purchase price, priced above a home loan, and can be structured as principal and interest or interest-only. Banks offer the cheapest rate but the strictest criteria, non-bank lenders trade a higher rate for flexibility on lease length or tenant type, and private lenders are fast and expensive for short-term value-add plays. The same property can attract meaningfully different terms depending on which lender you approach and how the deal is packaged, which is why comparing loan types and lenders before you commit is worth more than chasing the headline rate.

Start with the loan structure, not the rate

Most first-time commercial borrowers ask what’s the rate before they ask what’s the right loan structure for this deal. That is the wrong order. The structure, principal and interest versus interest-only, the term, and how the loan is secured all shape your cash flow and your options far more than a small difference in rate. Get the structure right for what you are actually trying to do with the property, then shop the rate.

The loan types available

Principal and interest is the default: you pay down the loan balance over the term, building equity as you go, and it is what most banks prefer for standard investment purchases. Interest-only periods, typically one to five years, keep repayments lower and cash flow higher, and suit investors planning to add value and refinance or sell within that window rather than hold long term. Construction and development finance is a separate category again, with its own drawdown and cost-overrun rules, and sits outside the scope of a standard investment purchase loan.

Bank vs non-bank vs private, from a loan-shopping angle

Banks price the cheapest but apply the strictest lease, tenant and asset criteria, and are the right starting point for a clean deal with a strong lease in place. Non-bank lenders will look past things a bank will not, a shorter lease, a less conventional tenant, a specialised asset, for a rate premium that is usually worth paying if it gets the deal done. Private lenders move fast and cost the most, and make sense as a short-term bridge while you add value and refinance out, not as a long-term hold. The deeper mechanics of what banks assess and why, LVR expectations and fixing debt to the lease term, are covered in commercial property finance in Australia. This article focuses on comparing the loan products and lenders themselves once you understand those fundamentals.

What changes your rate and your LVR

Lease length and tenant covenant do most of the work. A long lease to a strong tenant gets you closer to the top of the 65 to 70% LVR range and a sharper rate. A short lease, a weaker tenant, or a specialised asset pushes the LVR down and the rate up, or pushes you toward a non-bank lender altogether. Interest cover, how comfortably the net rent covers the interest, matters almost as much as the LVR itself. None of this is arbitrary, it is the lender pricing the risk that the income might not hold up.

How to package a deal so lenders compete for it

Knowing how to present a deal to a lender is its own skill, and the same asset can attract genuinely different terms depending on how it is structured and who is presenting it. A clean package, lease summary, tenant financials if available, a clear feasibility, and a realistic valuation expectation, gets a faster and better response than a rushed application. Approaching more than one lender type in parallel, rather than accepting the first offer, is normal practice for anyone doing this seriously, not a sign of bad faith to any one lender.

Refinancing into the value-add cycle

A common pattern: buy with a loan structured for the current lease, add value over six to twelve months (a new lease, a rent review, reduced vacancy), then refinance against the improved income and often a tighter cap rate. The new valuation reflects the better income, which can release equity for the next purchase or simply improve cash flow on the same asset. This is the financing side of the same idea covered in how to make serious money in commercial property: the six-step framework.

Common mistakes

Chasing the lowest advertised rate into a lender that will not actually settle the deal. Choosing interest-only without a real plan for what happens when it ends. Only ever talking to one bank instead of comparing structures across lender types. Ignoring how much the lease itself, not your personal financials, drives the terms on offer. Leaving loan structuring as an afterthought instead of deciding it alongside the purchase strategy.

Where to go from here

Most people start with Cal’s Fortify Your Wealth series, a multi-part video series on the strategies he uses when the market shifts. There are also weekly videos on YouTube.

If you would rather talk it through, book a free intro call with the Investor Code team.

For the full framework, there is the Commercial Property Mastery online course.

Frequently asked questions

What’s a typical interest rate for commercial property loans in Australia?

Commercial rates sit above residential rates because the lender is pricing higher risk. The exact rate depends heavily on the lease, tenant strength and lender type, so it is best compared across banks, non-bank and private lenders for your specific deal rather than treated as a fixed number.

Can I get an interest-only commercial property loan?

Yes, typically for a period of one to five years. It suits investors planning to add value and refinance or sell within that window, and needs a clear plan for what happens to repayments once the interest-only period ends.

Do non-bank lenders cost more than banks?

Generally yes, in exchange for more flexibility on lease length, tenant type or asset class than a bank will accept. The premium is usually worth paying when it is the difference between the deal proceeding or falling over.

Is refinancing common on commercial property?

Yes. A frequent pattern is buying with a loan suited to the property as it stands, adding value over six to twelve months, then refinancing against the improved income once the lease and vacancy position have strengthened.