How commercial property loans are assessed
Commercial credit runs on coverage, not on a household budget. The question is whether the income covers the interest with room to spare, and everything else on the file adjusts that answer.
A commercial assessment asks three things in order: what is the security worth, what income does it produce, and how comfortably does that income cover the debt. The borrower's own position matters, but it is usually the second line of defence rather than the first.
That is why two identical-looking buildings attract different answers. One has a national tenant with years left on the lease; the other has a month-to-month arrangement with a related party. Same bricks, entirely different credit.
Interest coverage
Net income against the interest commitment, assessed at a buffered rate rather than the contract rate. The primary test on an investment deal, and the reason a rent roll gets scrutinised line by line.
Gearing against value
Debt against the assessed value, not the purchase price. The tolerance moves with asset class and location — industrial in a strong corridor is treated very differently to specialised regional security.
Income quality
Not just how much rent, but how contracted it is: who the tenant is, how long they are committed, whether the rent is at market, and what happens at expiry.
The borrower behind it
On an owner-occupied deal the trading entity's earnings do the work directly. On an investment deal the borrower is tested for the shortfall — what happens if the tenant leaves.
Six factors reliably change the assessment, and most of them are established before a valuation is ordered.
- Asset class and specialisation. A warehouse has many possible tenants. A purpose-built facility has few, and lenders price the difference in gearing rather than in words.
- Lease term remaining against the loan term. Debt that runs past the lease is exposed to a re-letting event, and lenders either shorten the term or reduce the gearing to compensate.
- Tenant covenant. A listed or government tenant, a national franchise operator, a small private company and a related party sit on a spectrum, and the spectrum is priced — see lease covenants and WALE.
- Vacancy and outgoings. Gross rent is not net income. Outgoings, management, vacancy allowance and capital expenditure all come out before coverage is calculated.
- The valuation. Commercial values move on capitalisation rates and comparable evidence, and can land well away from the contract price — see commercial valuations.
- The lender tier. Banks assess to policy, non-banks weight current income and speed, private lenders test the security and the exit. The map is in who lends to Australian businesses.
When the borrower's own business occupies the premises, the assessment reaches into the trading entity: adjusted earnings, conduct on the trading account, existing commitments and the tax position, exactly as in business loan serviceability. The rent becomes an internal transfer rather than income, and a related-party lease at above-market rent gets normalised back.
It also changes what a lender is comfortable with. A business that has traded from the same premises for a decade and is buying them is a different proposition to an investor buying the same building, even at the same price — the occupier has a reason to keep paying that a tenant does not. The split is covered in owner-occupier or investment.
Business property-purchase finance ran to $27.2b, up 18.9% year on year (ABS Lending Indicators), so the volume is there. Business credit overall grew 10.8% year on year to the end of July (RBA Financial Aggregates, July 2026).
The pressure point is refinancing rather than origination. Australia's private credit market sits at roughly $225bn (The Adviser, August 2026), and some Australian real-estate credit funds gated redemptions during July and August 2026 (trade press, August 2026) — a reminder that an incumbent lender's willingness to extend depends on its own funding position as much as on the file.
We do not assess deals or express a view on serviceability. The enquiry captures property type, approximate value and LVR range alongside the amount, purpose, timeframe and the borrower's notes, which tells you whether it fits your panel before you spend a call on it.
Every commercial finance lead is sold once, to one broker, never resold, delivered in real time. Pay per lead, no lock-in contracts, no setup fees, and the lead is an introduction, not a recommendation.