Commercial Loan Rates in Australia: How to Secure Sharper Property & Business Finance Deals
27 Jan 2026
Wondering if you’re overpaying on your commercial loan? Learn how Australian banks actually price commercial property and business finance, what drives your rate up or down, and practical steps to negotiate a sharper deal using smarter structures and better preparation.
Key Takeaways
- Understand how commercial lenders price loans using a reference rate plus a risk margin, and why rates are generally higher and more variable than home loans.
- Know the key levers that move your commercial rate up or down, including loan-to-value ratio (LVR), lease quality, tenant profile, asset type and the strength of your financials.
- Choose the right mix of variable, fixed and non-bank options to balance cost, flexibility and risk management for your business or investment strategy.
- Prepare a clean, bank-ready application package and consider working with an experienced commercial mortgage broker to present a stronger, more “bankable” proposal.
Understanding Commercial Loan Rates in Australia for Property and Business Finance
Commercial loan rates are simply the interest you pay on money borrowed for business or commercial property purposes. Unlike a standard home loan, a commercial loan can be used to:
- Buy or refinance offices, warehouses, retail shops or industrial property
- Fund working capital and cash flow support
- Pay for fit‑outs, vehicles, machinery or other business equipment
In practice, your bank or lender charges a percentage of the loan amount as interest, usually calculated daily and charged monthly. That percentage is your commercial loan rate.
Example: A business borrows $800,000 at 8% p.a. to buy a small warehouse. The 8% is the commercial loan rate, and it determines how much interest the business pays each year on top of repaying the principal.
Commercial loan rates are typically higher and more variable than owner‑occupied home loan rates because the risk to the lender is different:
- Income depends on business performance or tenant reliability, which can fluctuate.
- Commercial properties are often specialised (for example, medical suites or workshops), making them harder to sell quickly if the lender needs to recover funds.
Instead of hunting for a single “best rate”, it’s more realistic to think in rate ranges that move up or down based on your specific deal.
| Factor influencing rate | Impact on your commercial loan rate |
|---|---|
| Business financial strength | Stronger, more stable performance can mean lower rates and better terms |
| Security quality & property type | Prime, flexible‑use property usually prices more keenly than specialised assets |
| Loan structure & LVR | Lower loan-to-value ratios and solid structure often reduce pricing |
To see how this plays out in practice, it helps to understand how lenders look at the broader commercial property market. For more detail on typical property types, lease profiles and structures, see our guide to commercial property finance in Australia.
Key takeaway: focus on understanding why a lender prices your loan at a certain level and what you can change—such as improving financials or adjusting the loan structure—to negotiate a sharper commercial rate.
How Different Commercial Loan Types Are Priced in Australia
Different commercial loan products are not priced the same way, and understanding this can save a business thousands over the life of a facility. Commercial property loans, business term loans, overdrafts, equipment finance and non‑bank facilities each use a core pricing approach: a reference rate (such as the lender’s commercial indicator rate or the RBA cash rate) plus a risk margin.
| Commercial Loan Type | Typical Pricing Basis |
|---|---|
| Commercial property loan | Reference rate plus margin based on LVR, lease profile and asset quality |
| Business term loan | Reference rate plus margin based on cash flow strength and security |
| Overdraft or line of credit | Reference rate plus margin for flexibility and ongoing risk |
| Equipment finance | Base rate plus margin for asset type, age and resale value |
| Non‑bank or private lending | Higher base rate plus premium risk margin for speed and flexibility |
This structure means two borrowers can start from the same reference rate but pay very different all‑in interest costs depending on how the lender assesses risk.
At the lower‑cost end, prime commercial property loans secured by well‑located, standard properties with strong leases can sit only a few percent above the cash rate. For example, a fully leased suburban office with a long‑term, AAA tenant and conservative loan‑to‑value ratio (LVR) might attract a much sharper margin than a specialised asset like a childcare centre or cold‑storage facility.
In contrast, specialised securities or private/non‑bank lending can be many percentage points higher. Lenders price in:
- Higher perceived risk (specialised or single‑use properties, short leases, or weaker tenants)
- Limited documentation (low‑doc or alt‑doc applications)
- Higher LVRs (more leverage means more risk for the lender)
To understand how your own gearing level affects pricing, it is worth reviewing how loan-to-value ratio (LVR) impacts your interest rate across both residential and commercial lending.
Key takeaway: the margin you pay is heavily influenced by factors such as LVR, lease profile, asset type and documentation level. Structuring your loan to improve these variables – for example, lowering LVR, strengthening lease terms or providing fuller financials – can move you into a lower pricing band.
Key Factors That Drive Your Commercial Loan Rate in Australia
When banks assess a commercial property loan, they’re really pricing one thing: risk. The safer you look on paper, the sharper your interest rate is likely to be.
Here are the core risk drivers most Australian commercial lenders assess:
- Loan-to-value ratio (LVR): how much you’re borrowing compared with the property value.
- Borrower financial strength: cash flow, profit, liquidity, and existing debts.
- Security quality: location, asset type (for example, office, industrial, retail), building condition.
- Tenant profile: lease term, tenant strength, vacancy risk.
- Loan size: very small or highly specialised loans can attract higher margins.
- Documentation standard: full financials usually price better than low-doc or alt-doc deals.
The lower the risk across these areas, the more negotiating power you have on rate and fees.
For Australian businesses and investors, understanding these levers is the first step to moving from expensive, niche lenders towards more competitive major bank commercial loan rates. Your personal and business credit history also plays a part here. If you suspect this may be holding you back, take time to work on improvements using our guide to improving your credit score in Australia.
In practice, two borrowers can own similar properties yet pay very different interest rates. The difference often comes down to structure, gearing and presentation.
Example scenario – same property, different rate
- Property value: $2,000,000 metro industrial unit in Sydney or Melbourne
- Borrower A LVR: 80% ($1.6m loan), weaker cash flow, older leases
- Borrower B LVR: 60% ($1.2m loan), strong financials, quality tenant on long lease
Borrower B might secure a rate that’s 0.50%–1.50% p.a. lower simply because the overall risk profile is stronger.
You can actively improve your position by:
- Managing equity levels
Reducing LVR (for example, by contributing extra cash or additional security) often leads to immediate rate improvements. - Strengthening leases and tenant mix
Longer lease terms, better covenant tenants and reduced vacancy make the asset more “bankable”. - Improving financial presentation
Clean, up-to-date financials, clear explanations of any one-offs, and well-prepared forecasts build lender confidence.
By lifting these fundamentals, many borrowers can shift from borderline, highly leveraged deals with premium pricing into mainstream bank options with more attractive rates and terms.
Choosing Between Variable, Fixed and Non‑Bank Commercial Loan Options
When you’re comparing variable, fixed and non‑bank commercial loan options in Australia, it helps to understand how each one behaves over time.
| Option type | How pricing works | Main benefit | Main drawback |
|---|---|---|---|
| Variable rate | Moves with the RBA cash rate and lender funding costs | Flexibility and potential savings if rates fall | Less budget certainty for your business |
| Fixed rate | Priced off wholesale swap markets for a set term | Predictable repayments and easier budgeting | Less flexibility and potential break costs if repaid early |
| Non‑bank | Higher base rates and fees using alternative funding models | Faster approvals and more flexible credit appetite | Usually a higher overall cost of funds |
Variable commercial rates track the RBA cash rate and the bank’s own funding costs. When rates fall, your repayments can reduce; when they rise, your cash flow tightens. Fixed commercial rates, on the other hand, are largely set off swap markets, giving you stable repayments for a set term. This stability can be valuable for businesses locking in major commitments like a fit‑out, equipment purchase or new premises.
Non‑bank and private commercial lenders generally sit outside the big bank model. They often charge higher interest rates and fees, but:
- Can approve loans faster – useful when you’re up against a contract deadline.
- Are more open to complex or alternative documentation (for example, self‑employed borrowers or recent restructures).
- May fund deals a bank would decline, such as credit blemishes or unusual securities.
Think of fixing your rate as risk management, not as a bet on where interest rates are heading.
Locking in part or all of your commercial debt can smooth cash flow and protect you from sharp rate rises, even if you give up some upside if rates fall. Likewise, see non‑bank funding as a strategic tool for speed or short‑term bridging – not necessarily your default long‑term home for the loan.
If you operate through a company, trust or partnership and rely on self‑employed income, it is particularly important to supply clear and consistent information. You can improve your chances of approval – and better pricing – by following these top tips for self‑employed applicants looking for a loan.
Prepare a Bank‑Ready Package to Secure Better Commercial Loan Rates
Lenders reward preparation. When you’re applying for a commercial loan in Australia, a clean, bank‑ready package can be the difference between a sharp interest rate and a deal that’s priced as “high risk”.
Use the checklist below to see how ready your application really is:
- Up‑to‑date financials: at least the last two years’ financial statements plus current year‑to‑date figures.
- Clear explanations of one‑off items: any abnormal expenses, COVID impacts or large write‑offs clearly documented.
- Realistic forecasts: cash flow projections that match current trading conditions and industry norms.
- Evidence of repayment capacity: showing that net income comfortably covers proposed repayments and other commitments.
Example: A Brisbane café owner applied for a commercial property loan with old financials and no explanation for a one‑off loss. The bank priced the deal cautiously. After updating figures, adding a 12‑month cash flow forecast and a short memo explaining the one‑off renovation expense, the lender reassessed the risk and reduced the margin, saving thousands over the life of the loan.
To make your commercial loan application as compelling as possible, focus on what credit teams look for every day:
- Quality financial statements
Ensure your accountant prepares clear, reconciled financials. Lenders want to see stable or improving revenue, sustainable profit margins and sensible drawings or dividends. - Strong serviceability story
Don’t just hand over numbers. Add a brief summary explaining how your business will meet repayments – for example, existing surplus cash flow, upcoming contracts, or cost‑saving measures already in place. - Support documents ready to go
Typical items include:- ATO portals up to date (no undisclosed tax arrears)
- Business activity statements (BAS)
- Lease agreements if purchasing or refinancing a tenanted property
- Personal asset and liability statements
Key insight: The clearer your package, the less “uncertainty loading” a bank needs to price into your commercial loan rate.
For further reading, check out our overview of the finance options available for Australian businesses. Discover more about how leverage affects your pricing in our detailed guide to loan-to-value ratios and their impact on interest rates.
By understanding how commercial loan rates are set, improving your risk profile and preparing a bank‑ready application, you put yourself in a much stronger position to negotiate sharper margins with Australian lenders and to match the right finance structure to your business or investment strategy.
Disclaimer:
All information on this website is general in nature and not intended as financial, investment, legal, or tax advice. It may not suit your personal circumstances. You should seek independent professional advice before acting on any content. We accept no liability for actions taken based on this information.
