A Guide To The Commercial Property Loan Application Process
Sometimes, securing a commercial property loan can feel a bit like being dropped into the middle of a maze with no map. At Mortgage Providers, we’ve seen firsthand how even seasoned business owners can get tripped up by the shifting requirements, unexpected valuations, and endless paperwork.
Some feel that the loan process can feel more stressful than buying the building itself, which is understandable. After all, you’ve got a big investment on the line, and there are plenty of things that can delay or derail the deal (see our article on “7 Commercial Property Loan Mistakes to Avoid in Australia” for more on this).
That’s why having a clear, step-by-step breakdown can be super helpful.
Here is a practical guide to the commercial property loan application process in Australia—from first enquiry to final settlement.
Step 1: Make The Initial Inquiry And Understand Your Options
Before you even start filling in the forms, you need to understand what kind of financing will suit your goals. Are you buying a warehouse for your own business? Investing in a retail strip to lease out? Depending on your intentions, different lenders and loan types might apply.
At this stage, a chat with a trusted mortgage broker can be helpful so you can make better sense of the landscape. Through this, you’ll get a better idea of the deposit required (usually around 20% to 30%), how the loan will be assessed, and what lenders will be looking for in terms of income and risk profile.
Step 2: Choose Your Lender Wisely
Essentially, you’ve got three broad options in Australia: the big banks, smaller non-bank lenders, or working through a mortgage broker who can compare options on your behalf.
Banks are often stricter, with lower interest rates but tougher approval processes. Non-bank lenders tend to be more flexible, especially for complex or time-sensitive deals, but the interest rates might be less favourable (see our informative article on “How Interest Rates & Terms Affect Commercial Property Loans” for more insight on this aspect).
Ultimately, choosing the right lender depends on your situation, including your financials, the property type, and how fast you need to move. Brokers can give you access to deals and lenders you wouldn’t necessarily be able to find on your own and they can help you avoid wasting time applying where you won’t get approved.
Step 3: Prepare Your Documentation
This step is crucial, as it’s where many applications fall apart. Commercial lenders want to see a clear picture of your financial health and how the property will fit into your broader business strategy.
Typically, lenders want to see the following documentation:
- Business and personal tax returns for the past two years
- Profit and loss statements
- Lease agreements if property is tenanted
- Business plan and cash flow forecasts
- Details of the property (contract of sale, zoning, usage, etc.)
The more organised you are upfront, the smoother things will go.
Step 4: Get Pre-Approval And Lodge The Formal Application
Pre-approval gives you a good idea of how much you can borrow and puts you in a stronger position to negotiate on the property. While it’s not a guarantee that you’ll be approved, it can be a useful checkpoint.
Once your application form is lodged formally, the lender will begin their assessment. They’ll check your financials, look at your credit record, evaluate your ability to service the loan, and begin doing due diligence on the property itself.
Step 5: Property Valuation And Lender Due Diligence
This is the phase where your lender will send out a valuer to inspect the property. They will want to ensure that it’s worth what you’re paying and that it aligns with their lending criteria. If the valuation comes in lower than expected, you may need to renegotiate the purchase price or find more funds to cover the gap.
Meanwhile, the lender will also check for any red flags with the property’s title, zoning, or condition.
Step 6: Approval, Settlement, And What Happens Next
If everything stacks up, you’ll receive formal approval. This will be followed by the loan offer, which outlines the terms and conditions. Once you accept, your solicitor will coordinate with the lender to settle the deal. Thereafter, the funds will be released, the property will be transferred, and it will officially become yours.
After the settlement, you now have the responsibility of keeping up with repayments and keeping an eye on the loan’s performance. Many commercial loans come with review clauses or variable terms, so it’s smart to check in with your broker regularly to make sure your deal still works for your business.
How Long Does It All Take?
In general, the whole process, from the initial inquiry to the loan settlement, can take anywhere from four to eight weeks. The timeline will vary depending on the lender, how quickly you provide documents, the complexity of the deal, and how long the valuation and legal checks take.
Do you need guidance through the commercial property loan maze? Contact the team at Mortgage Providers and get expert support through every step of your application.