How Commercial Loans Work — And How to Get Approved

In Queensland, the commercial property market is showing steady strength, with the Gold Coast standing out thanks to strong population growth, tourism, and demand for retail and industrial spaces. Vacancy rates remain low, and rental yields are outperforming many metro areas. 

For business owners and investors, this means opportunity, whether it’s buying a warehouse, fitting out a shopfront, or funding a new project. That’s where commercial loans come in. These loans are a practical way to support business growth or property investment when cash flow or capital alone isn’t enough. 

With the right structure, they offer flexibility, access to larger amounts, and terms suited to business needs.

Let’s break down how commercial loans work and what you need to know before applying.

Buying Commercial Property? Let’s Build the Right Strategy

LM Edge brokers help you understand your borrowing power, structure the commercial loan properly, and prepare a good application for long-term growth. Talk to our trusted Gold Coast mortgage brokers now at 07 4721 4772 or visit www.lmedge.com.au.

What Is a Commercial Loan?

A commercial loan is money borrowed by a business or investor to help cover costs related to business activities. It’s designed for things like buying a shop, expanding into a second location, or purchasing machinery or vehicles for your operation.

Put simply, if the purpose of the loan is tied to a business or income-producing property, it’s likely a commercial loan.

How It Differs From Other Loans

Unlike a residential loan, which is for buying or refinancing a home, a commercial loan is tied to business use. And it’s quite different from a personal loan, which is usually unsecured and based only on your individual income.

With a commercial loan:

• The application looks at your business income and assets.
  
  
• The loan size is usually larger.
  
  
• The structure is more flexible to suit different business needs.
  
  
• The risk is often higher for lenders, so the approval process is stricter.
  
  

Common Uses of Commercial Loans

Commercial loans can be used for a wide range of purposes:

• Buying or building commercial properties (like a warehouse or office).
  
  
• Fitting out a new business space or upgrading your existing one.
  
  
• Buying equipment, anything from a coffee machine to heavy machinery.
  
  
• Covering operational costs or bridging a gap in cash flow.
  
  
• Managing unpaid invoices or taking advantage of a new business opportunity.
  
  

Whether you're running a local café or investing in a medical suite, commercial loans help you take that next step.

How Do Commercial Loans Work?

It’s important to understand how the structure behind commercial loans actually work. Knowing what lenders expect helps you plan ahead and avoid surprises down the track.

Loan Terms and Repayment Structures

Commercial loans are flexible. Loan terms usually range from 1 to 30 years, depending on the loan type and what it’s being used for. Repayments can be principal and interest (paying down both the loan and interest at the same time), or interest-only for a period of time, often used to manage cash flow in the early stages of growth.

Repayment schedules are typically monthly, but some lenders offer weekly or fortnightly options too.

Interest Rates: Fixed vs Variable

You’ll usually choose between:

• Fixed rates – Stay the same for a set period, giving you certainty with budgeting.
  
  
• Variable rates – Move with market changes, which can either lower or increase your repayments.

Some lenders also offer split loans, giving you the benefit of both.

Security / Collateral Requirements

Most commercial loans are secured loans. This means the lender takes an asset as collateral, often the commercial property you’re buying or another business asset like equipment or vehicles.

In some cases, lenders may also request a director’s guarantee or use personal finances as part of the security. Unsecured loans do exist but generally come with higher interest rates, lower borrowing amounts, and stricter eligibility criteria.

Typical Loan Amounts and LVRs

Loan sizes can range from $100,000 to $10 million+, depending on your income, equity, and business purpose. Loan-to-Value Ratios (LVRs) usually max out at 70–80% for commercial property purchases. For riskier loans or those without full docs, LVRs can drop to 50–65%.

Balloon Payments (If Applicable)

Some equipment or vehicle loans include a balloon payment, a larger lump sum due at the end of the loan term. This lowers your regular repayments during the term, but you’ll need to plan ahead for that final amount.

Understanding these core features makes it easier to compare your loan options and choose a structure that supports your goals. 

Expert Guidance That Saves You Time and Money

Commercial loans come with complex structures, our Gold Coast mortgage brokers break it down, compare lenders, and negotiate terms tailored to your business. Call LM Edge at 07 4721 4772 or visit www.lmedge.com.au.

Types of Commercial Loans (Broker-Assisted)

In Queensland, business finance isn’t one-size-fits-all. Depending on your goals, whether it's expanding, upgrading or investing, there’s a commercial loan structure built to fit.

Here are the most common types of commercial loans available to business owners and investors:

Term Loans

A lump sum loan repaid over a set period, typically 1 to 20 years. Ideal for larger investments like buying land, vehicles, or completing renovations.

Commercial Property Loans

Used to purchase or develop income-generating commercial properties such as warehouses, factories, or retail stores. These loans often come with longer terms and require property as collateral.

Business Lines of Credit

A revolving credit facility that lets you draw and repay funds as needed. Useful for managing cash flow fluctuations or covering unexpected expenses during slow periods.

Equipment Finance

Helps fund equipment purchases like tools, machinery, or vehicles. The asset usually acts as the loan security, making it easier to access without heavy upfront capital.

Low Doc and Lease Doc Loans

Designed for self-employed borrowers or businesses without up-to-date financial documentation. Lenders assess affordability based on bank statements or lease income instead of tax returns.

SMSF Loans

Allow a Self-Managed Super Fund to borrow for purchasing commercial real estate, often leased back to the member's own business. These loans are tightly regulated and require a specific structure.

Each of these loan types can be tailored by brokers to match your business stage, industry, and financial strength.

 

What Do Lenders Look For?

Lenders evaluate your ability to repay, the risk involved, and the purpose of the loan. They’ll review both personal and business information to get the full picture.

Here’s what they’ll typically request:

ABN or ACN Registration

You must show you’re operating legally in Australia. Most lenders require a valid:

• ABN (Australian Business Number), or
  
  
• ACN (Australian Company Number) for companies
  
  

Business Financials

To show financial health and performance:

• Profit & Loss statements
  
  
• Balance sheet
  
  
• Cash flow statement
  
  
• Cash flow forecast or projections
  
  
• Business Activity Statements (BAS)
  
  

Tax Returns

Your last two years of tax returns (business and personal) help prove consistent income and financial history.

Lease Agreements or Contracts of Sale

If you're purchasing a property or leasing one:

• Include the contract of sale for purchases
  
  
• Or a lease agreement for rental income projections
  
  

Asset and Liability Statement

This shows your current net position by listing:

• Owned assets (property, vehicles, equipment)
  
  
• Existing debts (credit card, business loans, mortgages)
  
  

Personal Identification

Standard ID checks apply:

• Driver’s licence
  
  
• Passport
  
  
• Medicare card
  
  

Credit History

Your personal and business credit scores are checked. Lenders will look at defaults, credit usage, and repayment history.

All of this helps the lender decide on your loan amount, repayment terms, and whether they can offer favourable terms or need added conditions like a guarantor loan.

How to Apply and Get Approved for a Commercial Loan

Applying for a commercial loan doesn’t need to be confusing. If you're buying property, upgrading business equipment, or easing cash flow pressures, understanding each step will help you make informed decisions and improve your chances of success.

Here’s how to go from enquiry to approval smoothly and with fewer headaches.

1. Identify the Right Type of Loan

Figure out what your business really needs. For example, use an equipment loan to buy machinery or a secured business loan if you're offering property as collateral. Businesses seeking funding for unpaid invoices might consider invoice financing.

Tip: Matching the loan to your goal is key. Don’t apply for a short-term option if you're buying a commercial property investment.

2. Gather Your Financial Documents

Lenders want proof your business can handle the loan. You'll need two years of financial statements, business and personal tax returns, a cash flow forecast, and a balance sheet. If you own a residential property, include those details too, it can strengthen your application.

Tip: Make sure everything is up to date and clearly labelled before submission.

3. Work With a Mortgage Broker

A mortgage broker helps you choose the right lender and avoids the guesswork. They’ll guide you on which type of loan fits, review your documents, and prevent mistakes that might delay your approval. Brokers also compare variable interest rates, fees, and conditions across lenders.

Tip: Many brokers are paid by the lender, so there’s often no upfront cost to you.

4. Complete the Loan Application

Once the paperwork’s ready, your broker submits the loan application. This will include your business purpose, the loan amount, income, liabilities, and security details.

Tip: Always double-check your figures. Errors can delay things or result in rejections.

5. Valuation and Credit Checks

If you're buying property, the lender will order a formal valuation to confirm the market value. They’ll also review your credit history, income strength, and your ability to make loan repayments comfortably.

Tip: Keep your personal and business credit healthy. Defaults or unpaid bills will raise red flags.

6. Understand the Fees and Costs Involved

Here’s what to expect cost-wise:

• Application fee: Usually between $500 and $1,500, paid when your application is lodged.
  
  
• Establishment fee: Often 0.5% to 1.5% of the loan amount. On a $500,000 loan, this could mean $2,500–$7,500.
  
  
• Valuation fee: Around $400 to $1,200 depending on the property type and location.
  
  
• Legal fees: Can range from $1,000 to $2,500 for preparing loan documents, especially with more complex setups like trusts or SMSFs.
  
  
• Ongoing fees: These are monthly admin fees, usually between $10 and $50.
  
  
• Exit or discharge fee: If you pay out early, expect a $300 to $1,000 charge. Fixed-rate loans may also have break costs.

Tip: Ask for a breakdown before signing. This helps you see the true cost of borrowing.

7. Approval and Loan Offer

Approval times vary. If your documents are complete and the lender is satisfied, you could be approved in as little as 5 business days. Larger loans or more complex deals may take up to 4 weeks.

You’ll receive an official loan offer with the terms, fees, and repayment structure clearly outlined.

Tip: Compare your loan offer against other quotes, even slight changes in fees or variable interest rates can make a big difference over time.

8. Accept and Set Up Repayments

Once you accept the offer, you’ll pay any upfront fees, and the lender will release funds to your account or solicitor. Your loan repayments will start shortly after, usually weekly, fortnightly, or monthly.

Tip: Set reminders or automate payments to avoid late payment penalties.

With the right planning, documents, and guidance, getting a commercial loan can be straightforward.

Need a Loan That Works for Your Business?

Our brokers don’t just submit paperwork. We assess your financials, match you with the right lender, and support you until settlement. Speak with LM Edge’s expert Gold Coast mortgage brokers today by calling 07 4721 4772 or visit our website www.lmedge.com.au.

Frequently Asked Questions (FAQs)

How does commercial finance work?

Commercial finance provides financing solutions for business-related needs, like purchasing commercial spaces, funding equipment, or managing cash flow. Lenders assess your financial position, business performance, and the purpose of the loan during the application process.

How much deposit do I need for a commercial loan?

You typically need a deposit of 20% to 30% of the property value, depending on the lender and market conditions. A stronger financial profile may help reduce the deposit or unlock better rate terms and flexible terms.

What is the difference between a bank loan and a commercial loan?

A bank loan often refers to general lending, including home or personal loans. A commercial loan is a finance option specifically for business use, offering tailored structures and options for businesses focused on long-term growth.

How much can you borrow on a commercial loan?

Loan sizes range from $100,000 to several million. The amount depends on your income, assets, and financial position, as well as property value. Lenders also consider your ability to manage monthly repayments, and whether you can make additional repayments or extra repayments without stress.

What are the 5 C’s of commercial lending?

The 5 C’s are: Character, Capacity, Capital, Collateral, and Conditions. Together, they help lenders assess your risk, ability to repay, available security, and how external market conditions may affect your business.

Wrapping It Up

Commercial loans in 2025 can open real doors, whether you're a business owner expanding into new premises, or an investor eyeing your next property opportunity. With so many loan types, lender policies, and rate terms to consider, it helps to have someone in your corner who actually knows how it all works.

That’s where mortgage brokers come in. At LM Edge, our Gold Coast mortgage brokers (also servicing Townsville and wider Queensland) work directly with you to understand your needs, explain your options clearly, and manage the entire process from start to finish. 

Book your free consultation today. Call us at 07 4721 4772 or visit www.lmedge.com.au.