If the only property finance you have arranged is a mortgage on somewhere you live, commercial lending is going to feel unfamiliar. Not harder, exactly — but the assumptions you have built up about how lenders think do not carry across.
The single biggest shift is what the lender is actually assessing. A home loan is a judgement about you. A commercial loan is a judgement about you and the property's ability to pay for itself. Almost everything else follows from that.
The deposit is the first surprise
Commercial lending is generally done at a lower loan-to-value ratio than residential, which means a larger deposit for the same purchase price. How much larger depends on the property type, the lease in place and the lender, and the spread between lenders is considerably wider than it is on home loans.
The practical consequence is that the deposit question needs answering before you start looking seriously, not after you find something. People who skip that step routinely find the property they have fallen for needs materially more cash than they had planned for.
The property's income is part of the assessment
On a home loan, the property is essentially security — the lender cares what it is worth, and little else. On a commercial loan, the rent the property produces is part of how the lender decides whether the debt is serviceable.
That brings a set of questions a residential borrower never encounters. How long is the lease? What happens at the end of it? Who is the tenant and how solid are they? Is the rent in line with what comparable space is leasing for, or has it been inflated to make the purchase look better than it is? Is there one tenant or several, and what happens to serviceability if the largest one leaves?
A property with a long lease to a substantial tenant is a straightforward proposition. The same building sitting vacant is a much harder conversation, because the lender is being asked to fund an asset that currently produces nothing.
Lease quality is a credit decision, not a detail
It is worth being blunt about this, because it catches experienced residential investors out: the lease can be the reason a commercial loan is declined.
Two buildings of identical value in the same street can attract quite different appetite from lenders depending on who is in them and on what terms. Reading the lease before you are committed — and understanding how a lender will read it — is part of the due diligence, in the same way a strata report is on an apartment.
Loan terms are shorter, and often reviewed
Residential borrowers are used to a thirty-year term that runs quietly in the background. Commercial facilities are typically written over shorter terms, and many are subject to periodic review, where the lender reassesses the position rather than simply continuing.
That is not a trap, but it does change how you plan. A facility that has to be refinanced or renewed within a few years is a different commitment to one that runs to maturity untouched, and the time to think about the exit is when the loan is being set up.
Buying the premises your own business occupies
This is a common reason business owners look at commercial property at all, and it is assessed differently again, because you are both the borrower and the tenant.
Lenders generally treat owner-occupied commercial more favourably than an investment purchase, since the rent is not dependent on a third party staying. But the assessment then leans on your business's financials rather than a lease, which means the trading history, the structure and the consistency of earnings all come into focus. If you are self-employed, the issues overlap heavily with residential lending — we cover them in our guide for business owners and our guide to self-employed home loans.
“Commercial” covers a wide range
The label hides a lot of variation, and lender appetite differs sharply across it:
- Office and retail are the most conventional and the most widely funded.
- Industrial and warehouse space is generally well understood, though location matters a great deal.
- Specialised property — childcare, medical suites, hospitality, service stations, accommodation — is assessed partly on the business operating from it, which narrows the field of lenders considerably.
- Development and land is a different product again, assessed on a finished value and released in stages.
The more specialised the property, the fewer lenders will look at it, and the more the outcome depends on presenting the application to the right one.
Expect to supply more
Commercial applications carry a heavier documentation load than residential, and the list grows with the complexity of the deal. Typically it includes business and personal financials, the contract, the lease or leases, and details of the borrowing entity — which for commercial purchases is frequently a company or trust rather than an individual.
Valuations also work differently. A commercial valuation is a more involved piece of work than a residential one, it takes longer, and it usually costs more. That matters for your timeline: finance clauses on commercial contracts need to be negotiated with the real process in mind rather than copied from a residential deal.
Where a broker earns their place
On a home loan, the lenders are broadly comparable and the policies are broadly known. Commercial is not like that. Fewer lenders participate, their policies diverge much more, appetite shifts with sector and location, and a lot of the relevant detail is not published anywhere.
That makes two things valuable: knowing which lenders are genuinely interested in a given property type right now, and presenting the application so the assessor can see why the deal works. A commercial file that arrives well put together gets a materially better reception than the same deal sent in raw.
If you are weighing a commercial purchase, our commercial and business finance page sets out how we approach it, or talk to a Sabea broker about the specific property.
General information only. It does not take your objectives, financial situation or needs into account, and it is not credit or financial advice. Lender policy, rates and eligibility change regularly and vary between lenders — talk to us about your own circumstances before acting on anything here.