Finance question
How much deposit do I need to buy a commercial property for my business?
Plan on 20% to 30% of the price, plus stamp duty and costs on top. Banks usually lend up to about 70% of the lender's valuation, and non-banks go to 75% or 80%, so the deposit is the other 20% to 30%, subject to lender assessment.
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The short answer
The deposit is only part of the cash you need
Lenders publish a maximum loan to value ratio, and your deposit is whatever is left. Macquarie caps commercial property at 70%. La Trobe lends to 75%. Liberty goes to 80%. A deposit worked out from those limits is 30%, 25% or 20% of the lender's valuation. Note that the lender uses its own valuer's figure, not your contract price, so a property valued under what you agreed to pay means more cash from you (commercial property loan guide).
The type of property and lease move the limit. Warehouses and standard industrial buildings are among the easier assets. Specialised buildings such as childcare, medical or hospitality premises get lower limits and fewer lenders. Where a tenant is in place, Macquarie ties its 5 year term to a weighted average lease expiry of 2 years or more, and short or expiring leases cut the LVR or push the loan to a non-bank. Documentation matters as well: a low doc loan is usually available, but from a non-bank, so plan around the 75% to 80% end of the range.
Then add the costs. Transfer duty is the biggest single cost, it differs by state, and the guide shows Victoria 29% higher than New South Wales on the same price. Legal, valuation and due diligence come on top, and lenders charge establishment or application fees. Equity in another property you own can count toward the deposit, which is how many owners avoid tying up trading cash. Ventas is a broker across 40+ lenders, paid by the lender on settlement.
Do you qualify?
What a lender looks at on a commercial property purchase.
The valuation
The lender lends on its own valuer's figure, not the contract price.
Deposit and costs
Cash or equity for the gap plus stamp duty, legals and fees.
Income evidence
Full doc financials, or an accountant's letter or BAS for low doc.
Lease and property type
Lease length and building type set the LVR and the lender.
Why the deposit can be smaller than you fear
Non-banks lend higher
Some lenders go to 75% or 80% where banks stop at 70%.
Equity can be the deposit
Equity in a property you already own can cover the gap.
Business income can carry it
Owner occupiers use the trading business as the income.
A worked example
A $1.5m warehouse in Victoria. At a 70% bank LVR the loan is $1,050,000 and the deposit is $450,000. Add Victorian duty of $82,500 and $12,000 for legal and valuation, and the cash needed is $544,500. At an 80% non-bank LVR the loan is $1,200,000, the deposit $300,000, and the cash needed $394,500. The deposits are worked from the LVRs. Illustrative only.
Common questions
Frequently asked questions
What is the typical deposit for a commercial property?
Most banks lend up to about 70% of the lender's valuation, so plan on a 30% deposit plus costs. Non-banks go to 75% or 80%, which leaves a deposit of 20% to 25%.
Is stamp duty included in the deposit?
No. Transfer duty is paid on top. On $1.5m it is $63,787 in New South Wales and $82,500 in Victoria.
Can equity in another property be my deposit?
Often yes. Security over a property you already own can cover the gap, but it puts that property at risk, so weigh it carefully.
Does a short lease change how much I can borrow?
It can. Short or expiring leases cut the LVR or push the loan to a non-bank lender, so lease length is worth checking before you commit to a deposit.