Commercial loans sit outside the consumer credit rules that protect home loan borrowers. That puts more weight on you, and on the broker beside you, to get the loan purpose and documents right before you sign.
AXTON Finance works with Prahran business owners and investors who want a commercial finance structure that holds up under scrutiny. Compliance on these loans is mostly about being accurate: what the money is for, who the borrower is, and what the contract says.
Are Commercial Loans Regulated Like Home Loans?
No. Credit provided predominantly for business purposes falls outside the National Consumer Credit Protection Act, so responsible lending obligations and the Best Interests Duty do not apply.
The test is the purpose of the loan, not the type of security. A loan secured against property but extended for genuine business purposes falls outside the Code's application. A commercial property loan, an office purchase or a business facility secured by a residential property can all sit in this category, provided the purpose is genuinely business.
The trade-off is fewer statutory protections. Commercial lenders apply their own credit policies, and the consumer safeguards you may know from a home loan are not automatically there. Our commercial loans work starts with that point, so you know what you are signing.
What Is a Business Purpose Declaration?
A business purpose declaration is a document stating the credit is wholly or predominantly for business purposes. Lenders can ask the borrower to sign one.
Signing it has consequences. If a borrower signs a declaration stating the loan is for business purposes, they may lose the protections of the Act. That is why the declaration must be true.
It is also not a formality. ASIC and the court have emphasised that business purpose declarations cannot be used as a box-ticking exercise. Lenders and brokers are expected to make reasonable inquiries into what the money will actually be used for, and we ask those questions early.
How to Document Loan Purpose Before You Apply
Write down what each dollar of the loan will fund, and keep the evidence. Contracts, quotes and invoices tell a lender, and later a reviewer, what the facility was for.
Consider a Prahran practice owner who wants to buy a small commercial suite through a company and also borrow extra to fit it out. The owner wonders whether the fit-out portion could be used to pay down personal debt, since the lender will take the same property as security. In a scenario like this, we map every part of the loan to a purpose first. The purchase and the builder's quotes are clearly business. The personal debt is not, so it is kept out of the commercial facility and addressed separately.
The outcome is a file where the declaration matches the paperwork. The loan can proceed as a business facility, and the borrower is not relying on a signature that a closer look would contradict. The cost of this approach is a smaller commercial loan amount and a separate conversation about the personal debt. It is the more defensible path.
If you want to see how a purchase of this type is structured, our commercial property loans page explains the facility types we arrange.
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Book a chat with a Mortgage Broker at AXTON Finance today.
Does a Mortgage Broker Owe a Best Interests Duty on Commercial Loans?
Generally no. Best Interests Duty attaches to regulated credit assistance, and business-purpose lending generally sits outside that regime.
That does not remove professional standards. Our approach on commercial files is to explain how the facility behaves, compare lenders on the terms that matter to you, and record our reasoning. Mixed-purpose files need extra care. The boundary can be finer than it looks on mixed-purpose or part-business files. For that reason we confirm the position file by file rather than assuming.
If you are buying through a company or want to hold a property in a business structure, our page on investment loans in a company name covers the structuring side. Tax treatment depends on your circumstances, so speak with your accountant before choosing a structure.
Why Unfair Contract Terms Matter for Small Business Loans
Small business loan contracts can contain terms that are one-sided, and ASIC has looked at this directly. ASIC published Report 565, Unfair contract terms and small business loans, detailing changes the four major banks made to their small business loan contracts.
Whether a particular term is unfair is a legal question. Before you sign, have your solicitor read the loan documents and ask us to explain how covenants, default triggers and security requirements would work in practice. Terms and pricing vary between lenders, so they should be compared carefully.
Reviewing a Commercial Loan After Settlement
A commercial loan should be reviewed when your business or property changes, because the conditions you accepted may no longer suit you. A new tenant, an expansion or a change in ownership can all affect your position.
Our loan health check reviews whether your current facility still fits. If you are weighing a repayment on a new facility, our loan repayment calculator gives you a starting figure, and we can model your structure with a lender's actual terms. Refinancing can carry exit fees and new establishment costs, so those are weighed against any saving.
Prahran borrowers can also read about our local broking and how we work with owners near Prahran Market and the surrounding precinct.
Call one of our team or book an appointment at a time that works for you. We will talk through your loan purpose, your structure and your documents, so your commercial finance is set up properly from the start.
Frequently Asked Questions
Are commercial loans covered by responsible lending laws?
Generally no. Credit provided predominantly for business purposes falls outside the National Consumer Credit Protection Act, so responsible lending obligations do not apply. Mixed-purpose loans need careful review.
What is a business purpose declaration?
It is a document stating the credit is wholly or predominantly for business purposes. Signing it may mean you lose consumer protections, so it must reflect the true use of the funds.
Does a mortgage broker owe a Best Interests Duty on a commercial loan?
Best Interests Duty generally attaches to regulated credit assistance, and business-purpose lending usually sits outside it. We still explain the facility, compare lenders and confirm the position on each file.
Should I get legal advice before signing a commercial loan?
Yes. Whether a contract term is unfair is a legal question, so have a solicitor review the documents. Speak with your accountant about any tax questions.
