Commercial Property Finance: What Lenders Actually Look For

Commercial property is assessed differently to residential. A house is valued against comparable sales; a commercial building is valued largely against the income it produces. That single difference explains most of what lenders ask for, and most of the reasons a deal is priced conservatively.

The lease is half the security

For a tenanted asset, the lease drives value. Lenders look at the passing rent against market rent, the remaining term, the option structure, the quality of the tenant, the outgoings recovery, and how the rent reviews are written. A five-year lease with three years to run and a solid covenant supports a materially better outcome than a monthly holdover arrangement at an above-market rent.

Two questions matter more than any others: what happens if this tenant leaves, and how long would it take to re-lease at a realistic rent?

Asset class and saleability

Industrial and warehousing has been the most liquid segment in most Australian markets. Office varies sharply by location, floorplate and fit-out age. Retail depends on catchment and tenant mix. Mixed-use assets can be strong but need clean title and strata arrangements. Specialised buildings — a purpose-built facility with one plausible occupier — attract the most conservative treatment, because the exit depends on a thin buyer pool.

Structures and borrowers

Commercial deals frequently sit inside companies, trusts, SMSF-adjacent structures or joint ventures. That is normal, but it adds documents: constitutions and trust deeds, director and guarantor details, and clarity on who signs and who guarantees. Getting the structure documents to the lender early removes a week from settlement.

Why private lending suits parts of this market

Banks apply servicing tests and lease covenant requirements that many good commercial deals cannot satisfy on paper — an asset mid-repositioning, a vacancy being resolved, a purchase with a short settlement, or a borrower whose financials are not yet lodged. Asset-first underwriting looks at the value and the exit, so those deals remain fundable while the longer-term solution is arranged.

Common purposes

• Acquisition of an office, retail, industrial or mixed-use asset, including short settlements.
• Refinance of an expiring or called facility.
• Redevelopment or repositioning ahead of a re-lease or sale.
• Capital expenditure — fit-out, services upgrades, compliance works.
• Industrial and warehousing purchases where speed wins the asset.

How to present the deal

A tight submission answers the lender questions before they are asked. Include the property address and asset type, contract or current valuation, a lease schedule with tenants, rents, terms and options, outgoings, the loan amount and purpose, the ownership structure, and the exit with a date. Add photographs and a short paragraph on the local market if the asset is unusual.

Costs to budget for

Commercial valuations cost more and take longer than residential ones, particularly for specialised assets. Budget for valuation, legal and establishment costs, and expect to fund them within the facility. Ask for every figure in writing before settlement — all costs disclosed up front is the standard you should hold any lender to.

Send us the asset, the lease position, the amount and the exit, and we will come back with an indicative rate, LVR and timeline.