Quick answer
A caveat loan on commercial property uses the equity in an office, shop, warehouse, factory or other commercial building as security, with a caveat lodged on its title. Lenders accept a wide range of commercial property but value it more cautiously than houses, looking at location, lease terms, tenant quality, zoning and how easily it would sell. Specialised or remote properties are harder and may support less.
Key points
- Shops, offices, warehouses and industrial units are commonly accepted.
- Leases matter: strong tenants and longer terms support value.
- Specialised buildings and remote locations are valued more cautiously.
- Commercial valuations can take longer than residential ones — start early.
- Your own business premises can secure a loan for the business that occupies them.
- Commonly accepted
- Retail, office, industrial
- Harder
- Specialised, remote, vacant land
- Key valuation input
- Leases and location
- Loan range
- $20k – $5m
Commercial property is often the quiet powerhouse of a business balance sheet. Owners who bought their premises years ago may be sitting on substantial equity with a small or no mortgage. That equity can secure a caveat loan just as a house can, with a few extra wrinkles in how it’s valued.
Which commercial properties work?
| Asset | Lender appetite | What drives it |
|---|---|---|
| Shop or retail strip, main street or neighbourhood centre | Strong to good | Location, foot traffic, lease |
| Office, stand-alone or strata | Good | Location, vacancy in the area, fit-out |
| Warehouse or industrial unit | Strong to good | Access, clearance, estate quality |
| Factory or workshop | Good to moderate | Size, zoning, specialised features |
| Mixed-use (shop with residence above) | Good | Both components valued |
| Specialised (childcare, service station, hotel, medical) | Case by case | Business-dependent value, fewer buyers |
| Vacant commercial or industrial land | Limited | No income, development risk |
| Rural or farm property | Case by case | Location, land use, size |
How is commercial property valued?
A residential valuation leans heavily on comparable sales. A commercial valuation adds income:
- The lease. Rent, term remaining, options, rent reviews and who pays outgoings.
- The tenant. A long-established tenant on a multi-year lease supports value more than a new tenant on a short term.
- Vacancy risk. How easily the property would re-let if the tenant left.
- Zoning and permitted use. What else the property could be used for.
- Building condition. Roof, services, compliance issues.
For owner-occupied premises, the valuer typically looks at what the property would be worth let at market rent and with vacant possession.
Commercial valuations can take a little longer than residential ones. If your deadline is tight, send leases, floor areas and outgoings with the enquiry so the valuer isn’t waiting on them.
How much can commercial property support?
Each lender sets its own limits, and commercial property is usually treated more conservatively than a house in an established suburb. The combined LVR formula is the same — every secured debt after the new loan divided by value — but the comfortable range is typically lower. Our borrowing capacity page explains the arithmetic.
If the commercial property alone is tight, pairing it with residential security can bring the combined position into a comfortable range.
Want a quick read on your premises? Try the Feasibility Checker with “commercial” selected, or get a specialist’s view.
What are commercial caveat loans used for?
- Buying new premises before the old ones sell — see caveat bridging finance.
- Paying a deposit on premises you currently lease — our guide to buying your business premises covers this.
- Funding fit-out, stock or equipment for expansion while bank finance is arranged.
- Clearing tax debt secured against the premises rather than the family home.
- Buying out a partner in a property-owning trust or company.
What if the property is owned by a trust or SMSF?
Many commercial properties sit in a family trust or a company. That’s workable, with the trustee or company giving the security. See trust or company property.
Premises held in a self-managed super fund are a separate conversation. Super has its own strict rules, so check with your SMSF adviser before assuming the property can be offered, and expect us to look at other property for security first.
An illustrative example
Illustrative only.
A Ballarat printing business owns its strata industrial unit, worth about $900,000, with a $250,000 loan. It needs $300,000 to buy a new press ahead of a large contract. A caveat loan of $320,000 including costs brings the combined LVR on the unit to 63%. The exit is equipment finance on the new press once it’s delivered and installed, plus contract income. The owners choose a caveat because the supplier needs payment before equipment finance can be put in place.
What helps a commercial valuation move quickly?
Commercial valuers work from information as much as from the site visit. Send these with your enquiry if you can:
- Leases — the full lease, not just a summary, including options and rent reviews.
- Rent and outgoings — who pays council rates, land tax, insurance and strata levies.
- Floor and land areas, and any building plans you have.
- Zoning and permitted use, especially if the property is specialised.
- Recent capital works — a new roof, fire services upgrade or major repairs.
- Tenant contact for access, if the property is leased.
With those in hand, a valuer can often complete the report without chasing, which is frequently the difference between a same-week and a next-week loan on commercial security.
What about land tax and other holding costs?
Commercial property carries holding costs that residential owners sometimes overlook, including land tax in most states and council rates. They don’t usually stop a loan, but they affect the cash a business needs while the loan runs. Make sure your forecast includes them, particularly if the exit is business cash flow.
Put your premises to work
If your commercial property has equity and you have a dated reason to use it, let’s look at the numbers.
The form takes about 60 seconds and involves no credit check. Your details stay with one team — not a queue of lenders — and a specialist calls you after reading them. Include the lease details and a realistic value if you can; they make the valuation faster.
Frequently asked questions
Can I use my own business premises as security?
Yes. Owner-occupied premises are common security. The valuer will consider what the property would be worth with a market lease in place, as well as vacant possession.
Do tenants need to know about the caveat loan?
Generally tenants aren't party to the loan. The valuer may need access to inspect, and the lender will usually want a copy of the lease.
Is strata commercial property acceptable?
Yes. Strata offices, shops and industrial units are widely accepted. Very small units and some specialised strata schemes are harder.
What about vacant commercial land?
It's possible but limited, because there's no income and fewer buyers. Expect lower borrowing capacity and a stronger focus on the exit.
Do commercial valuations take longer?
Often, yes, especially for larger or specialised properties. Providing leases, outgoings and floor areas upfront helps the valuer move quickly.