Commercial and industrial property as security

Many business owners hold their premises, or an investment building, in their own name, a company or a super-adjacent trust structure. Commercial and industrial property is valuable security, but lenders look at it through a different lens from a house.

How commercial property is valued

A commercial valuer considers what the building would sell for, and that depends heavily on what it earns or could earn.

Factor	What the valuer considers
Use and zoning	How many types of business could use the building
Tenancy	Lease term remaining, rent, outgoings and tenant strength
Location	Exposure, access, parking and, for industrial, truck access
Building	Age, condition, clearances, power and compliance
Market	Recent comparable sales and leasing evidence

Easy and hard to fund

Easier: general-purpose warehouses in established estates, suburban strip shops, small office buildings and strata units in well-run complexes.

Harder: specialised buildings with few potential buyers, properties with environmental or compliance issues, large regional holdings and buildings that are vacant with no clear demand.

Harder doesn’t mean impossible. It usually means a lower LVR and a stronger exit.

LVR expectations

Commercial LVR limits are generally lower than residential. Private lenders weigh the specific building, its location and their position on title. Where commercial property alone doesn’t support the amount needed, lenders often add residential security or take security over more than one property.

Documents that speed things up

• current leases, with any variations and options
• a schedule of outgoings and rent
• recent council rates and land tax notices
• strata records, if it’s a strata unit
• any building reports, compliance certificates or environmental reports

Having these ready can take days off the valuation.

Common uses

• Settling a purchase when the bank is slow (settlement deadlines)
• Refinancing an expired or called-in commercial loan (private first mortgages)
• Releasing equity for working capital, tax debt or expansion
• Completing improvements before a sale or bank refinance

Ownership structures

Commercial property is often owned by a company or trust rather than an individual. That’s normal for private lenders. The owning entity grants the security, and directors or individual trustees usually guarantee the loan. See company or trust property for details.

A worked example: the freehold workshop

A Toowoomba engineering firm owns its workshop outright through a company. The building is a steel portal frame shed on a light industrial lot, leased back to the operating business. A major customer has paid late two months running, and the firm needs $420,000 to cover wages, steel and an ATO instalment while the debt is chased.

A bank wanted twelve months of updated financials and a fresh valuation queue of three weeks. A private lender looked at the same building and asked four things: what’s it worth today, who occupies it, what’s the money for and how will it be repaid?

The answers were straightforward. A desktop valuation came in at around $1.1 million, so the loan sat comfortably under the lender’s limit for that asset class. The occupant was the owner’s own business, which the lender treated as owner-occupied rather than tenanted. The purpose was clearly commercial. The exit was the overdue receivable plus a refinance to a bank once the next year’s accounts were lodged.

The loan settled as a first mortgage over the workshop, with a nine-month term and interest prepaid from the advance so there were no monthly repayments to juggle. When the customer paid, the firm cleared part of the balance early and refinanced the rest.

Specialised buildings take longer

Some commercial assets are harder for any lender to resell, which narrows the pool and can lower the amount offered. Expect closer questions on:

• purpose-built properties such as service stations, abattoirs, cold stores or car washes
• buildings with environmental history, including fuel tanks or chemical storage
• strata industrial units in small schemes with few comparable sales
• properties with a single tenant on a short remaining lease
• sites in towns where commercial sales are infrequent

None of these rule a deal out. They simply mean the valuer and the lender’s solicitor will need more time, so raise anything unusual in your first enquiry.

Tell us about the building

Share the property type, location, any lease details, what’s owed and what you need. We’ll match it to a lender that likes that kind of building. There’s no credit check when you first enquire, and your details aren’t distributed to a long list of funders.

Accurate details on tenancy and outgoings help us get the valuation right first time. See if you qualify, or read about private commercial property loans and then send it through.