Commercial property as security: using your premises to fund the business

For many owners, the biggest asset in the business is the building it operates from. A freehold shop on a main street, a small warehouse, a suite of offices, an industrial unit with a roller door and a loading bay. When funding is needed, the question arises: can we use that?

Can commercial property be security for a business loan?

Yes. Property-secured business loans run from $20,000 to $5,000,000 and can be backed by residential or commercial property. Commercial property brings its own set of questions, because its value depends on more than bricks and location. It depends on who uses it, how, and on what terms.

What do lenders look at in commercial property?

• Type and use. A shop, an office, a warehouse and an industrial unit are valued differently.
• Location. Foot traffic, access, zoning and the strength of the local market all matter.
• Condition. Age, maintenance and any needed repairs.
• Tenancy. If part of the property is leased, the lease terms, rent and tenant reliability count.
• Title and ownership. Individual, joint, company or trust structures change the paperwork.
• Existing debt. A first mortgage already in place affects how much equity is available.

Each of these shapes the amount a lender is willing to offer and the structure that fits, whether a first mortgage or a second mortgage.

What if I operate from the property myself?

This is the most delicate case. If you pledge the building your business trades from, a failure to repay does not just risk a loan; it puts at risk the premises the business depends on. A business that loses its base can lose its customers, its staff and its income in one blow.

That does not rule it out, but it asks for extra care:

1. Stress-test the repayments against a bad quarter, not just a typical one.
2. Plan a second exit, in case the first one fails.
3. Get independent advice from a solicitor and an accountant, together.
4. Be clear on purpose. Borrowing to grow a profitable business is different from borrowing to cover ongoing losses.

Business.gov.au points owners in difficulty to free help, including the Small Business Debt Helpline on 1800 413 828 and advisers through its adviser finder.

How much equity might I have?

Equity is the property’s value minus what is owed. A rough picture helps frame the conversation.

An illustration with no real property. A freehold warehouse worth around $1,800,000 has a $600,000 mortgage. Equity is about $1,200,000. A lender will not lend against all of it, but that figure sets the scale of what might be possible. If the business wants $400,000 for a fit-out and stock, the question is whether the equity, the property and the plan support it.

The What can I borrow against? quiz estimates equity from your numbers and shows which funding routes may suit.

What do commercial property owners typically fund?

Purpose	Notes
Fit-out or upgrade of the property	See shop fit-out funding
Working capital in a lean year	Property can support larger facilities than turnover alone
A second site	See second location funding
A tax debt	See tax bill funding
Equipment or stock for a big contract	See big order funding

All funding here is for business purposes only.

Are there tax and ownership issues?

Property ownership brings tax questions: land tax, capital gains, GST on commercial property and stamp duty on transactions. Business.gov.au has a page on taxes on your property and another on stamp duty, which states and territories administer through their revenue offices. These are not reasons to avoid funding, but they are reasons to talk to an accountant first, especially if the property is held in a company or trust.

What should I prepare?

• Title details and the address.
• Any lease agreements and rent schedules.
• Mortgage statements.
• Identification for owners and directors.
• Recent business bank statements and your ABN or ACN.
• A clear statement of the purpose, the amount and the exit.

What are common mistakes with commercial security?

A few tend to cause trouble. Owners sometimes assume that a high valuation guarantees a high loan, forgetting that existing debt, tenancy and the plan all count. Others forget that a property held in a trust or company needs the right people to sign. Some overlook that a lease about to expire changes the picture materially. And some pledge the premises for a purpose that the business could have funded in a lighter way.

A short checklist avoids most of these: confirm who owns the property and in what name, collect the lease documents, get the mortgage statements, write down the exact purpose, and ask your accountant and solicitor to read the plan before you commit.

Next step

If you own the premises and the business needs more than turnover alone supports, tell us about it. Share the property type and location, the tenancy, what is owed, the amount and the purpose. A lending specialist reads it and rings you. There is no credit check just to ask, and your details are not sprayed over a list of lenders.

Accurate details about the property and the plan mean the first conversation can go straight to the right structure. See if you qualify.