Commercial Loans – Criteria, Types & How it Works

Learn about loans and how they work before you choose a loan and lender. If you're unsure whether you need commercial financing or a business loan, ask an expert broker to guide you.

What is a commercial loan?

Businesses use commercial loans to purchase commercial property, equipment, vehicles, or another business. You must only use this type of loan for commercial purposes.

The borrower then uses the asset (property or equipment) to secure the loan.

Lenders usually require minimum loan amounts, which could be $200,000 or $1,000,000 depending on the loan and the lender. Commercial lenders usually target larger businesses for commercial loans.

Like any loan, you borrow money and pay it back over time with interest.

Your business assets secure a commercial loan. Business assets can be:

  • property such as warehouse or office space
  • equipment such as machinery, medical equipment or IT equipment
  • vehicles such as trucks, utes, vans or cars.

You may need to provide a business case to take out a commercial loan.

You can expect higher interest rates with a commercial property loan compared to a residential property loan. You may also need to pay a higher deposit, around 30%. These details vary between loans and lenders.

To apply for a business loan you will need to be a registered business or company in Australia. You will need to provide the lender with your ABN or ACN.

Individuals, sole-proprietors, partners or businesses can apply for a commercial loan. You will need an asset to secure against the loan.

Commercial loans enable you to purchase assets for your business.

  • Commercial vehicles – trucks, trains, boats, planes, delivery vans, cars
  • Commercial property loans – warehouses, office spaces, shops, hotels, farms
  • Purchasing new site to expand business
  • Specialist equipment – medical equipment, engravers, 3D printers, machinery, construction equipment

Different types of commercial loans

Various types of commercial loans are available in Australia.

  1. Residentially secured loans – You may access better loan terms if you secure a residential property against your commercial loan.
  2. Full-doc loan – You have the required documents for a loan, such as financial statements and future forecast.
  3. Low-doc loan – Low-doc means low document. Suited to people who don't have the required documentation for a full-doc loan. Ideal for self-employed people and small businesses.
  4. No-doc loan – No-doc means no documentation, and is essentially the same as a low-doc loan. You will still need to provide bank statements and records of expenses.
  5. Equipment loan – Designed specifically to purchase equipment for your business. Typically, the lender requires the borrower to secure the equipment against the loan.

Commercial loan vs. business loan – what’s the difference?

A commercial loan is a type of business loan, and the terms are often use interchangeably. The definitions will vary between lenders, which can be confusing. However, there is a slight difference.

Commercial loans are more focused on asset purchase such as property, equipment and vehicles.

Business loans can include commercial loans as well as business overdraft, line of credit, merchant advances and invoicing finance.

Applying for a commercial loan – what you’ll need

To get commercial finance, collect your documents like financial statements, credit history, debts, assets, and personal ID.

You may be able to claim the interest on your loan at tax time. Talk to your accountant before you apply for a loan, so you can calculate the true cost of a loan.

Commercial loans have a longer and more complex application process than other business and residential loans.

Explore Business Loans