Commercial finance
How much deposit do I need for a commercial property loan?
Why commercial-property deposit requirements vary by asset, borrower and lender.
Short answer
Commercial property commonly requires a larger deposit than a standard home loan. A 30% deposit may support a 70% loan-to-value ratio, but some properties or borrowers need more. Stronger applications can sometimes access a higher LVR, subject to lender policy.
What affects the required contribution
The lender considers the property's type, location, marketability, condition, lease and use. It also assesses the borrower or business, repayment source, experience and available security.
- Specialised properties usually attract lower maximum LVRs.
- Owner-occupied and investment applications can be assessed differently.
- Short or weak leases can reduce acceptable leverage.
- GST, stamp duty, valuation and legal costs need separate funding.
Work from the lender's valuation
The maximum loan is usually based on the lender's accepted valuation, not necessarily the contract price. If the valuation is lower, the cash contribution can increase. Keep a contingency for costs and valuation differences.
Owner-occupied and investment properties
For owner-occupied premises, the lender assesses the operating business as the main repayment source and considers whether the property suits that business and remains saleable. For an investment property, lease income, tenant quality and lease expiry can carry more weight. Some lease-doc products focus primarily on rent, but they have specific eligibility rules. The available LVR can differ even when two properties have the same price because their uses and secondary markets are different.
Why specialised property needs more equity
A standard warehouse or office suite may have a broad buyer and tenant market. A childcare centre, service station, hotel, farm or purpose-built medical property may be harder to sell or reuse. Lenders can respond with a lower LVR, shorter term, stronger guarantees or additional conditions. Environmental, zoning and building issues can also matter. Describe the asset accurately at the start so the proposed lender and valuation type suit the real security.
Include every acquisition cost
Commercial purchases can involve GST, duty, legal review, valuation, building reports, environmental checks and lender fees. GST treatment and the margin scheme can affect settlement cash flow, so obtain tax advice before signing. If the purchase is through a company, trust or SMSF, structure costs and guarantees may also apply. Calculate the deposit from the lower of price and accepted value where required, then add costs and a post-settlement working-capital buffer.
Questions to ask before you proceed
- What maximum LVR and valuation method apply to this particular commercial property?
- Will servicing rely on business cash flow, lease income or a combination of both?
- What loan term, amortisation, review conditions, guarantees and security documents are required?
Key takeaway
Treat 30% as a useful planning starting point, then obtain an asset-specific assessment before committing.
Official guidance: Westpac Introducers: Commercial loans
This is general information, not personal financial, tax or legal advice. Lending criteria, fees and eligibility vary.
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