Understanding the Basics of Warehouse Financing

Warehouse financing differs from residential lending in structure, assessment criteria, and loan terms.

Most lenders assess warehouse purchases on commercial viability rather than personal income alone. The property's income potential, your business cashflow, and the loan to value ratio determine what you can borrow and at what rate. Security, loan amount, and intended use all shape the loan structure a lender will offer.

How Lenders Assess Warehouse Purchase Applications

Lenders evaluate warehouse purchases using the property's capacity to generate income or support business operations, combined with your business financials. A warehouse occupied by your own business is assessed on your company's ability to service the debt. A warehouse purchased as an investment is assessed on rental income and tenant quality.

Consider a manufacturing business in Hawthorn looking to purchase a 600-square-metre warehouse in Burnley for $1.8 million. The business has been leasing for five years and needs more control over its premises. The lender reviewed three years of business financials, current lease obligations, and projected savings from ownership versus rental. With strong cashflow and a 30% deposit, the business secured a commercial property loan at a variable interest rate with principal and interest repayments over 15 years. The loan structure included a redraw facility to access prepaid amounts if needed for equipment or working capital.

Commercial LVR and Deposit Requirements for Warehouse Purchases

Most lenders require a deposit of at least 30% for warehouse purchases, meaning the maximum loan to value ratio is typically 70%. Some lenders may go to 80% LVR for established businesses with strong financials, but this usually comes with higher rates and stricter serviceability requirements.

The deposit can be funded through business savings, director guarantees backed by residential property, or equity release from existing assets. Lenders treat strata title commercial warehouses differently to freehold industrial properties. Strata warehouses may attract lower LVRs due to perceived liquidity risk, particularly in areas with limited buyer demand.

Fixed Versus Variable Interest Rates on Warehouse Loans

You can choose between fixed interest rates, variable interest rates, or a split structure. Fixed rates lock in your repayment amount for a set period, typically one to five years. Variable rates fluctuate with market conditions but often include features like redraw and the ability to make additional repayments without penalty.

A split structure lets you fix a portion of the loan while keeping the rest variable. In our experience, businesses that anticipate lumpy cashflow or plan to sell the warehouse within a few years often prefer variable or split structures to maintain repayment flexibility without incurring break costs.

Loan Structure and Repayment Options for Business Property Finance

Commercial property loans are typically structured with loan terms between 10 and 30 years, though 15 to 20 years is common for warehouse purchases. Repayment options include principal and interest, interest only for an initial period, or a revolving line of credit structure for businesses that need ongoing access to funds.

Interest only repayments reduce monthly commitments in the early years, allowing businesses to allocate capital to fitout, equipment, or operations. However, the loan amount does not reduce during the interest only period, and repayments increase when principal and interest payments begin. A revolving line of credit can work for businesses purchasing warehouse space as part of a broader expansion strategy, but it requires strong financials and is less common for single asset purchases.

What Documentation Lenders Require for Warehouse Financing

Lenders typically request business financials for the past two to three years, including profit and loss statements, balance sheets, and tax returns. If the warehouse will be owner occupied, lenders want to see evidence that your business can service the debt. If it will be leased, they assess rental income, tenant lease terms, and property condition.

You will also need a commercial property valuation, which the lender arranges. Valuers assess the property based on comparable sales, income potential, and location. In areas like Hawthorn and nearby Burnley or Cremorne, industrial property values vary depending on access, zoning, and building quality. Lenders rely heavily on the valuation to determine LVR and loan amount.

How Hawthorn Businesses Can Access Warehouse Financing

Businesses in Hawthorn often purchase warehouses in nearby industrial precincts such as Burnley, Cremorne, and Abbotsford due to proximity and transport links. These areas offer a mix of freehold and strata title commercial properties, with strong demand from businesses expanding operations or consolidating logistics.

Working with a commercial finance and mortgage broker gives you access to commercial loan options from banks and lenders across Australia, not just the major banks. Some lenders specialise in industrial property loans or offer more flexible loan terms for owner occupied warehouses. A broker structures the application to highlight your business strengths and matches you with lenders whose criteria align with your situation.

Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions