How to Purchase a Warehouse with Commercial Finance

Richmond's industrial precincts continue to attract businesses looking to secure warehouse space within striking distance of the Melbourne CBD.

Purchasing a warehouse through commercial property finance differs from residential lending in several fundamental ways. Lenders assess the income-producing capacity of the property and the strength of your business rather than relying primarily on personal income. The loan amount, interest rate structure, and repayment terms reflect the commercial risk profile and the property's ability to support debt servicing through lease income or operational use.

Commercial LVR and Deposit Requirements for Warehouse Purchases

Most lenders will finance 60% to 70% of the purchase price for warehouse acquisitions, meaning you'll need a deposit of 30% to 40% of the property value. This commercial LVR is more conservative than residential lending because lenders account for the longer sales cycle and narrower buyer pool if they need to recover the asset.

Consider a manufacturing business purchasing a 600-square-metre warehouse in Richmond's Gleadell Street precinct for $1.8 million. With a 65% LVR, the lender would provide $1.17 million, requiring the buyer to contribute $630,000 as deposit plus transaction costs including stamp duty, legal fees, and commercial property valuation. Some lenders will accept commercial property you already own as collateral to reduce the cash deposit required, though this introduces cross-collateralisation between assets.

The deposit size directly influences your interest rate. A lower LVR typically results in more favourable pricing because the lender's risk is reduced. When evaluating commercial property loans, expect the assessment to focus on rental yield, lease covenants, and tenant quality if the warehouse is tenanted, or on your business cash flow if you're purchasing for owner-occupation.

Fixed vs Variable Interest Rates for Warehouse Financing

Commercial property finance offers both variable interest rate and fixed interest rate options, though the terms differ from residential products. Fixed rates on commercial lending typically lock for one to five years, while variable interest rate loans provide flexibility for early repayment without break costs.

A distribution business acquiring a warehouse for operational use might choose a variable rate to preserve the ability to make progressive drawdown payments as they complete fit-out works, or to repay the loan early if they sell another property. By contrast, an investor purchasing a tenanted warehouse with a five-year lease might prefer a fixed interest rate that matches the lease term, creating certainty around debt servicing costs while rental income remains stable.

Variable rate facilities often include redraw or flexible repayment options that allow you to access surplus payments when you need working capital. This structure suits businesses experiencing seasonal cash flow variation or planning future equipment purchases.

What Lenders Assess Beyond Property Value

Secured commercial loan applications require more than just a commercial property valuation. Lenders examine your business financial statements, tax returns, and cash flow projections to determine whether the business can service the debt. If you're purchasing an owner-occupied warehouse, they'll assess your business turnover, profit margins, and existing commitments to establish a clear picture of debt servicing capacity.

In a scenario where a logistics company is buying a warehouse in Richmond's industrial zone near the Burnley Street area, the lender would review the company's trading history, existing lease commitments at other sites, and whether the new property will reduce occupancy costs or enable business expansion. They'll also consider the lease documentation if the business intends to sublet part of the warehouse, as rental income provides additional servicing support.

For businesses with limited trading history or complex structures, some lenders offer low-doc or alternative documentation pathways, though these typically attract higher interest rates and lower LVR limits. AXTON Finance can access commercial loan options from banks and lenders across Australia, including those willing to consider non-standard scenarios that major banks decline.

Loan Structure and Repayment Flexibility

Commercial finance structures vary depending on how you'll use the property. Interest-only periods of one to five years are common for investment warehouses, reducing initial repayment obligations while the property generates rental income. Principal and interest repayments apply after the interest-only term expires, or you can structure the entire loan with principal reduction from the outset.

For owner-occupied warehouses, some lenders provide flexible loan terms that allow interest-only payments during periods when you're investing heavily in business expansion or equipment upgrades. This approach preserves working capital while still servicing the debt. Others offer a revolving line of credit secured against the warehouse, giving you access to equity as your business grows and the property appreciates.

Businesses purchasing warehouse space in Richmond benefit from the suburb's proximity to major arterials and the evolving mix of creative, tech, and traditional industrial tenants. The area's transition has created opportunities for strata title commercial warehouses, particularly in converted buildings where individual units appeal to smaller operators. Financing strata industrial property follows similar principles to freestanding warehouses, though lenders scrutinise the owners' corporation structure and any restrictions on permitted use.

Pre-Settlement Finance and Land Acquisition

Some warehouse purchases require pre-settlement finance if you've exchanged contracts but need to settle quickly or if you're bridging between selling one property and acquiring another. Commercial bridging finance covers the gap between settlement dates, typically for three to twelve months, with higher interest rates reflecting the short-term nature and elevated risk.

Businesses acquiring vacant industrial land for future warehouse construction use land acquisition loans as the first stage of a development strategy. These loans may transition into commercial development finance once construction begins, with progressive drawdown releasing funds as building milestones are reached. The initial land acquisition loan is typically structured as interest-only with a short term, refinanced once development approval is secured.

Working with a commercial finance and mortgage broker gives you access to lenders who understand industrial property in inner Melbourne and can structure facilities that align with your business plans. AXTON Finance regularly assists Richmond-based businesses with warehouse purchases, whether you're consolidating operations, expanding capacity, or securing property as a business asset.

Call one of our team or book an appointment at a time that works for you. We'll review your business position, the property you're considering, and connect you with lenders whose appetite and terms match your requirements.

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