Quick answer
Commercial property equity release lets a business borrow against premises it or its owners already hold, such as a factory, warehouse, shop or office, using a first or second mortgage or a caveat. Specialist lenders can do this when a bank won't because of the credit file, tax debt or trading history. Valuation, property type and location matter a lot, and lenders lend a more conservative share of value than for a typical home.
Key points
- Owner-occupied or investment commercial property can secure business lending from $20,000 to $5,000,000.
- Valuers look at lease status, use, condition and location, so values can surprise you.
- Lenders usually lend a more conservative share of value on commercial than on residential.
- Leases, tenants and zoning can all affect the deal; have the paperwork ready.
- Security
- Factories, warehouses, shops, offices, mixed use
- Positions
- First mortgage, second mortgage or caveat
- Loan size
- $20,000 to $5,000,000
- Watch
- Valuation, lease status and specialised use
Owning your premises is one of the strongest positions a small business can be in. It can also feel strangely useless when the bank declines a loan anyway, because of a tax debt, a default or a thin year. Specialist lenders treat the premises differently: as the main reason to lend, rather than a box ticked after the credit score.
How does commercial equity release work?
The lender values the property, subtracts any existing mortgage, and lends against part of the remaining equity. The loan can be:
- a first mortgage, if the property is unencumbered or the existing loan is being refinanced;
- a second mortgage behind an existing commercial loan you want to keep;
- a caveat for a short, defined need.
The money goes to business purposes: clearing tax debt, paying out short-term lenders, funding stock or equipment, or giving the business working capital.
What makes commercial security different?
| Factor | Why it matters |
|---|---|
| Property type | Standard warehouses and shops have more buyers than highly specialised buildings |
| Location | Metropolitan and major regional centres are viewed more favourably than small towns |
| Lease status | A long lease to a solid tenant supports value; vacancy or a short lease weakens it |
| Condition and compliance | Building issues or unapproved works can reduce value |
| Zoning and use | Unusual zoning or a single-purpose fit-out can narrow the market |
Lenders typically lend a more conservative share of value against commercial than residential property, and less again for specialised or regional security. If your valuation surprises you, read low valuation options.
Who does this suit?
- Owner-occupiers who hold their premises personally, in a company, or in a family trust.
- Owners of commercial investment property who need funds for a separate trading business.
- Files where the credit history or tax position, not the property, caused the bank decline.
Want to know what your premises could support? Share the property type, location and existing debt, and a specialist will give you a realistic view.
An illustrative example
With invented details: a printing business owns its warehouse through a family trust. The warehouse has a small existing loan. The business has a $260,000 tax debt and has fallen behind on two equipment loans after losing a major client. The bank declines because of the tax debt and the arrears.
A specialist lender orders a valuation, which comes in a little below what the owners expected because the building has a specialised fit-out. Even so, after the existing loan there’s enough equity for a second mortgage to pay out the ATO and bring the equipment loans up to date. The trust deed is checked to confirm the trustee can borrow and give security for the business’s benefit. The exit written into the file: twelve months of clean conduct and two lodged years, then a bank refinance of both mortgages into one facility.
The building didn’t change. What changed was which lender was asked, and what that lender was asked to rely on.
Questions to settle before you apply
- Who exactly owns the property: you, a company, a trust, or several people? Each owner signs.
- Is there a written lease to the business, and is it current?
- Are there any unapproved works, defects or compliance issues a valuer will notice?
- How much do you need, and how much do you want to have secured against the premises?
- How will the loan end, and roughly when?
What will the lender need?
- Title, rates notice and property description, including use and size.
- Lease documents, if the property is tenanted, including related-party leases.
- Statements for any existing mortgage.
- Business bank statements and a short explanation of any credit issues.
- Purpose and payout list.
- The exit: refinance, sale or repayment from trading.
If the property is held in a trust, the lender will also want the trust deed and confirmation that the trustee can borrow and give security.
Owner-occupied or investment: does it change the answer?
It can. When the business trades from the property, the lender is relying on one enterprise twice: the business pays the loan, and the building that secures it is the business’s own home. Lenders handle that by looking closely at both. With an investment property leased to an unrelated tenant, the rent provides a second income stream and the lease supports value. Neither is better in every case, but it’s worth knowing which story your file tells.
What are the risks?
Your premises are on the line. Default could mean losing the building you trade from, which affects both the property and the business. Think carefully about how much to borrow.
Valuation risk. Commercial values move with leases, vacancy and market conditions. A conservative loan size leaves room for movement.
Lease complications. Leasing to your own business is common, but the lender may want the lease formalised. Sort that out before applying.
Cost. Specialist lending costs more than a bank. Each loan is priced on its own facts, so we don’t publish rates; weigh total cost against the problem it solves.
How does a commercial equity release end?
The usual exits are refinance to a bank once the file is clean, sale of the property (sometimes a sale-and-lease-back of the premises to an investor), or repayment from trading. Our asset sale exit page covers timing a sale so the loan settles cleanly.
Are your premises the answer to the bank’s no?
If the property has real equity and the business needs a fresh start on its debts or growth, they may well be. Enquiring doesn’t involve a credit check, your file isn’t blasted out to a list of lenders, and a specialist calls to talk through value, structure and exit. Please give accurate details on the form, especially property type, location, any tenant and the existing loan balance, so our first view of your equity is a reliable one. See if you qualify.
Frequently asked questions
Can I borrow against my commercial property with bad credit?
Often, yes. A specialist lender focuses on the property's value, the existing debt and the exit. Credit issues are discussed but tend to matter less when the equity is solid.
Why do lenders lend less against commercial property?
Commercial property can take longer to sell, has a smaller pool of buyers and its value depends heavily on leases and use. Lenders allow for that by lending a more conservative share of value.
Does it matter if the property is leased to my own business?
Lenders will ask. A lease to a related business is common and fine, but the valuer may treat it differently from an arm's-length lease to an independent tenant. Have the lease documents ready.
What if the valuation comes in low?
You can ask for the basis of the valuation, provide missing information, reduce the amount, add other security or change the structure. Our guide to low valuations covers each option.
Can a self-managed super fund's property be used?
Property held in a self-managed super fund sits under its own strict set of rules, so don't assume it can secure a business loan. Raise it with your accountant or the fund's adviser first, and tell us how the property is held when you enquire.