Quick answer
Buying business premises usually needs cash on three dates: the deposit when contracts are signed, transfer duty and costs around settlement, and the balance at settlement. Banks commonly lend part of the price against the premises, leaving the rest to come from savings or equity elsewhere. A caveat loan over property you already own can fund the deposit or a settlement gap quickly, with a refinance or later bank top-up as the exit.
Key points
- Plan for three cash dates: deposit, duty and costs, and settlement balance.
- Transfer (stamp) duty is set and collected by each state's revenue office.
- Get the main lender's approval in motion before you sign, not after.
- Equity in your home or another property can fund the deposit while the bank finishes its assessment.
- Ask your accountant about GST and ownership structure before you exchange.
There’s a moment many established business owners reach: the rent cheque goes out, again, and it feels like paying off someone else’s asset. Buying your premises can bring certainty of tenure, control over fit-out, and a property asset that grows alongside the business. It also brings a funding puzzle with some very fixed dates in it.
Why buy rather than lease?
The case for buying usually rests on some mix of:
- Security of tenure. No landlord deciding not to renew just after you’ve spent on a fit-out.
- Control. Freedom to modify, extend or sublease as the business changes.
- Building an asset. Repayments build equity rather than paying rent.
- Future borrowing power. Equity in premises can support future growth — including fast, caveat-secured funding when you need it.
The case for leasing is flexibility and keeping cash in the business. There’s no universally right answer; it depends on your stage, cash reserves and plans. Talk it through with your accountant.
What cash do you need, and when?
Buying premises usually means money on three separate dates:
| When | What’s due | Typical source |
|---|---|---|
| Exchange of contracts | Deposit | Savings, equity in other property |
| Around settlement | Transfer (stamp) duty, legal and lender costs | Savings, equity, business cash |
| Settlement | Balance of the price | Main lender’s loan plus your contribution |
Transfer duty is set and collected by each state’s revenue office — for example, Revenue NSW or Victoria’s State Revenue Office — and the amount, concessions and timing rules vary. Your conveyancer will confirm what applies to your purchase.
GST can also apply to commercial property purchases, depending on how the sale is structured. That’s one for your accountant before you sign.
How much will the main lender fund?
Business premises are usually funded by a bank or non-bank lender taking a first mortgage over the property being bought. Lenders typically advance a smaller share of value on commercial property than on a home, and they’ll want to see the business’s financials to confirm it can service the loan. business.gov.au notes lenders may ask for identification, financial reports, cash-flow statements, forecasts, lease agreements and personal financial information.
The gap between the price (plus costs) and what the main lender will advance is your contribution. For many owners, the contribution is the hardest part — not because they lack wealth, but because it’s tied up in their home or another property.
Where does a caveat loan fit?
A caveat loan secured over property you already own can unlock that tied-up equity quickly, in three common situations:
1. Securing the premises before the bank is ready
The vendor wants a signed contract and deposit this week; the bank needs three weeks to approve. A caveat loan over your home funds the deposit, you exchange, and the bank completes its assessment in the background.
2. A shortfall at settlement
The bank’s valuation comes in lower than the price and it reduces its approval, or costs are higher than expected. A caveat loan fills the gap so settlement happens on time. See settlement deadlines.
3. Buying before you sell
You’re moving from owned premises to larger ones and the old ones haven’t sold. See caveat bridging finance.
In every case, the exit matters: the main lender’s settlement, a later refinance or top-up once the business’s figures support it, or the sale of other property. The exit strategy page explains how to test it.
Sketching out your purchase? The Feasibility Checker will show how much equity your existing property could offer — or start an enquiry and we’ll map the three cash dates with you.
What should you sort out before signing?
- Ownership structure. Will the trading business, a separate company or a family trust own the premises? It affects tax, asset protection and future borrowing. See trust or company property.
- Main lender pre-assessment. Get the lender looking at your financials before you’re under contract.
- Due diligence on the building. Zoning, permitted use, building condition, strata records if applicable, and any existing leases.
- The cash timetable. Put the three dates in your calendar with amounts beside them.
- Your backstop. Know how you’ll cover a shortfall if one appears. Having your equity position checked in advance means a caveat loan can move fast if you need it.
An illustrative example
Illustrative only.
A Geelong physiotherapy clinic has leased the same ground-floor premises for eight years. The landlord offers to sell for $980,000 but wants a signed contract and deposit within ten days. The clinic’s bank indicates it will lend against the premises once it has reviewed two years of financials, which will take about three weeks. The owners’ home is worth about $1.3m with $520,000 owing.
They take a $160,000 caveat loan over the home — enough for the deposit, duty and costs — exchange within the week and settle five weeks later with the bank’s loan. Three months after settlement, once the clinic’s first year of owning the premises is clearly on track, they refinance the caveat loan into a longer-term facility. The home’s combined LVR during the caveat loan was about 52%.
Common mistakes to avoid
- Signing before the lender has seen the financials. A contract without a realistic funding path is a gamble with your deposit.
- Forgetting duty and costs. They’re due whether or not the bank’s loan covers them.
- Assuming the valuation will match the price. Plan for a gap.
- Choosing the ownership structure afterwards. Changing it later can be expensive.
- No exit for the bridging funds. A caveat loan needs a clear end.
Buying from your landlord: what’s different?
Many owners buy the premises they already occupy, often because the landlord offers first. It has real advantages — you know the building, there’s no relocation, and the fit-out is already paid for — and a few traps:
- Price. A landlord selling to a sitting tenant may pitch the price on the assumption you’ll pay a premium to stay. Get an independent valuation or appraisal.
- Your own lease. When you buy, your lease effectively ends up on both sides of the deal. Your accountant and lawyer should decide whether the trading business will keep leasing from the new owning entity, and on what terms.
- Condition. Familiarity can hide defects. Still do a building inspection.
- Speed. Landlords sometimes set a short deadline to keep you from shopping around. That’s exactly when having your equity position already worked out pays off — see our 30-minute equity check.
What if the premises are strata?
Many small offices, consulting suites and industrial units are strata lots. Check the scheme’s levies, any planned major works and the by-laws on permitted use before you commit. Our guide to strata property as loan security covers what lenders look for, and the same points matter to you as a buyer.
Ready to move from rent to ownership?
If you’ve found the premises and the timing is tight, we can help you secure them while the longer-term funding catches up.
It takes about a minute to enquire, with no credit check. We don’t circulate your details to a list of lenders — a specialist reviews the purchase and your equity and gives you a call. Please include the purchase price, the dates and what the main lender has indicated; accurate details make the plan work.
Frequently asked questions
How much deposit do I need to buy commercial premises?
It depends on the contract and on how much the main lender will advance against the premises. Commercial lenders often lend a smaller share of value than home lenders do, so buyers commonly need to fund a larger contribution from savings or other equity.
Can I use a caveat loan for the deposit?
Yes. A caveat loan secured over property you already own can pay the deposit quickly, so you can secure the premises while the main lender completes its assessment. The exit is usually the main settlement or a later refinance.
Who sets transfer duty on business premises?
Each state and territory's revenue office — Revenue NSW, the State Revenue Office in Victoria and so on. Rates, thresholds and payment timing vary by state, so check with your conveyancer or the revenue office.
Should the business or a separate entity own the premises?
Many owners hold premises in a separate trust or company and lease them to the trading business. It's a structuring and tax decision to make with your accountant before you sign, because changing it later can trigger duty and tax.
What if the bank's valuation comes in below the price?
The bank may lend less than expected, leaving a shortfall at settlement. That's a common reason owners use a short caveat loan over another property to complete on time.