A commercial loan can be used to fund essential business purchases.

Commercial loans come in many forms — learn about how they work and what they can be used for before you decide on a loan and lender.

What is a commercial loan?

Businesses use commercial loans to make purchases for property, equipment, vehicles, or even acquire other businesses. The purchased asset (property or equipment) to used secure the loan.

With a commercial loan, businesses borrow money from a lender and pay the borrowed amount back over time with interest.

Examples of business assets that are purchased and used to secure a commercial loan include:

  • 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 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 commercial loan, applicants will need to be a registered business or company in Australia with a valid ABN or ACN. Individuals, sole-proprietors, partners or businesses can all apply for a commercial loan as long as they have registered businesses.
  • Purchasing commercial vehicles – trucks, trains, boats, planes, delivery vans, cars
  • Acquiring a new site to expand business operations – warehouses, office spaces, shops, hotels, farms
  • Obtaining specialist equipment – medical equipment, engravers, 3D printers, machinery, construction equipment

Different types of commercial loans

Various types of commercial loans are available in Australia.

  • Residentially secured loans – Businesses may access better loan terms by securing a residential property against the commercial loan.
  • Full-doc loan – Businesses must have the required documents for a loan, such as financial statements and future forecasts.
  • Low-doc loan – Suited for businesses who may not have all the required documentation for a full-doc loan. Ideal for self-employed people and small businesses.
  • No-doc loan – No-docs have fewer document requirements than a low-doc loan at the cost of higher interest rates and lower borrowing amounts. Business will still need to provide bank statements and records of expenses.
  • Equipment loan – Designed specifically for businesses to purchase specialised equipment. Typically, the lender requires the borrower to secure the equipment against the loan.

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

These two terms are often used interchangeably by some lenders, which can be confusing for businesses. The main reason for this is that commercial loan is a type of business loan with a slightly more specific use.

Commercial loans are more focused on asset purchases such as property, equipment and vehicles for business use. Business loans cover a wider umbrella of loan types, including business overdrafts, line of credit, merchant advances and invoicing finance.

Applying for a commercial loan — what’s required?

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

To apply for a commercial loan, businesses should gather required documents such as financial statements, credit history, debts, assets, and personal IDs.

Commercial loans may also include additional fees during application, so businesses should consider and calculate the true cost of a loan before applying for one.

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