Comparing commercial loans properly means looking beyond advertised interest rates to how the loan structure, security position, and repayment terms align with your business cash flow and property use.
Businesses in Kooyong purchasing office space, warehouses, or retail premises along Glenferrie Road or surrounding precincts typically need between 30% and 40% deposit, with loan amounts structured around rental income, business turnover, or a combination of both. A commercial property loan approval depends on serviceability evidence that differs substantially from residential lending, and lenders assess this evidence in different ways.
What Drives Commercial Interest Rate Differences Between Lenders
Commercial interest rates vary based on property type, loan amount, loan-to-value ratio, and the strength of your business financials. A secured commercial loan for an office building with established tenants will typically carry a lower rate than an unsecured commercial loan or a loan for a vacant industrial property awaiting development.
Variable interest rates on commercial property finance currently sit above residential rates, but the gap narrows when you factor in offset accounts, flexible repayment options, and the ability to structure loans around business cash flow cycles. Fixed interest rate terms are available for one to five years, though longer fixed periods often come with reduced flexibility on early repayment or refinancing.
Secured Commercial Loan Versus Unsecured Commercial Loan
A secured commercial loan uses the commercial property itself as collateral, which allows lenders to offer higher loan amounts and longer terms. Most Kooyong businesses buying commercial property will use this structure, particularly when acquiring strata title commercial units in mixed-use developments near Kooyong Village or Tooronga Road.
An unsecured commercial loan relies on business assets, director guarantees, or residential property as security instead of the commercial asset being purchased. This structure suits businesses buying equipment or funding fit-outs where the asset has limited resale value. Loan amounts are typically lower, and interest rates higher, because the lender's security position is weaker.
Consider a professional services firm purchasing a 120-square-metre office suite in a renovated building near the Kooyong Tennis Club. With a 35% deposit and strong business financials showing three years of consistent turnover, they secured a variable rate loan with offset facilities and quarterly interest-only periods to manage cash flow around client billing cycles. The loan was structured as a secured commercial loan using the office suite as collateral, with a 15-year term and the option to switch between principal-and-interest and interest-only repayments every 12 months. The outcome was a repayment structure that aligned with their cash flow patterns, rather than the rigid monthly principal-and-interest schedule offered by their initial lender.
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How Loan Structure Affects Long-Term Flexibility
Loan structure determines how you can use the borrowed funds, when you repay them, and what happens if your business needs change. A revolving line of credit gives you access to approved funds as needed, which suits businesses with fluctuating working capital requirements or those managing multiple properties. A progressive drawdown structure works for commercial construction loans or staged fit-outs, where funds are released as work is completed and invoiced.
Some lenders offer redraw facilities on commercial loans, allowing you to access additional repayments you've made above the minimum. This differs from an offset account, which reduces interest calculated on your loan balance without locking funds into the loan itself. Not all commercial lenders provide both options, and comparing this feature matters if your business maintains cash reserves for expansion or equipment purchases.
Commercial LVR and How It Changes Your Loan Terms
Commercial LVR, or loan-to-value ratio, is calculated as the loan amount divided by the commercial property valuation. Most lenders cap commercial LVR at 70% for standard commercial property finance, though some will extend to 80% if the property is owner-occupied, located in a core metropolitan area like Kooyong, and your business shows strong serviceability.
Lower LVR typically unlocks lower interest rates and reduces the lender's risk, which can also mean more flexible loan terms. A business purchasing an industrial property with a 50% LVR will often negotiate better rates and fewer restrictions than one borrowing at 75% LVR, even if both properties are in the same precinct.
Comparing Commercial Refinance Options
Commercial refinance allows you to replace an existing commercial loan with a new one, either to reduce your interest rate, access equity for expansion, or shift to a lender with more suitable loan terms. Kooyong businesses we work with regularly refinance to consolidate multiple business loans, release equity for asset finance or equipment finance, or move from interest-only to principal-and-interest repayment as their business matures.
Refinancing costs include commercial property valuation fees, legal fees, and potential break costs if you're exiting a fixed interest rate loan early. These costs need to be weighed against the long-term savings or strategic benefit of the new loan structure. Some lenders will cover valuation or legal costs if the loan amount is substantial or you're bringing multiple properties across.
What a Commercial Finance & Mortgage Broker Adds to the Comparison Process
A commercial finance and mortgage broker accesses commercial loan options from banks and lenders across Australia, including those that don't accept direct applications or advertise publicly. This access matters because commercial lending is relationship-driven, and many lenders reserve their most flexible terms for deals introduced by brokers they trust.
Brokers also structure loan submissions to align with how each lender assesses serviceability, security, and risk. A logistics business buying a warehouse in an adjoining suburb might be declined by one lender due to property location, but approved by another that specialises in industrial property loans and values the tenant profile over the postcode. Presenting the same application to both without adjusting the structure wastes time and can weaken your position with future lenders.
When to Consider Mezzanine Financing or Commercial Bridging Finance
Mezzanine financing sits between senior debt and equity, used when a business needs to bridge a funding gap but doesn't want to dilute ownership or can't meet LVR requirements for traditional commercial property finance. It's typically more expensive than a standard commercial loan but provides flexibility when timing or structure matters more than cost.
Commercial bridging finance is a short-term loan used to purchase a property before selling an existing one, or to secure an opportunity while arranging longer-term funding. It's common in scenarios where a Kooyong business finds a commercial premises that fits their needs but hasn't yet settled the sale of their current property or finalised their business loan approval. Rates are higher, terms are shorter, and lenders typically cap commercial bridging finance at 65% LVR with clear exit strategies required upfront.
Call one of our team or book an appointment at a time that works for you. We'll compare loan structures, lender terms, and repayment options across the full commercial finance market to find the loan that fits your business and property goals.
Frequently Asked Questions
What is the difference between a secured and unsecured commercial loan?
A secured commercial loan uses the commercial property itself as collateral, allowing higher loan amounts and longer terms. An unsecured commercial loan relies on other business assets, director guarantees, or residential property as security, typically with lower loan amounts and higher interest rates.
How does commercial LVR affect my loan terms?
Commercial LVR is the loan amount divided by the property valuation, usually capped at 70% to 80%. Lower LVR typically results in lower interest rates and more flexible loan terms because the lender's risk is reduced.
When should a business consider commercial bridging finance?
Commercial bridging finance suits businesses purchasing a property before selling their current one, or securing an opportunity while arranging longer-term funding. It's a short-term solution with higher rates, typically capped at 65% LVR with clear exit strategies required.
What does a commercial finance broker do that I can't do directly?
A commercial finance broker accesses loan options from banks and lenders across Australia, including those that don't accept direct applications. They also structure submissions to align with how each lender assesses serviceability and risk, improving approval chances.
What costs are involved in commercial refinance?
Commercial refinance costs include property valuation fees, legal fees, and potential break costs if exiting a fixed rate loan early. Some lenders will cover valuation or legal costs for larger loan amounts or multiple properties.
