Key Takeaways
- Commercial loans in Australia help businesses fund property purchases, equipment, operations, and growth initiatives.
- There are many types of commercial loans, including secured and unsecured loans, property and equipment finance, invoice and trade finance, fitout finance, development finance, tax debt loans, and private lending.
- You can use business loans for many things, such as buying real estate, equipment, paying off tax debt, and improving cash flow.
- Interest rates on commercial loans in Australia depend on things like the type of loan, the security, the business's performance, and the state of the market.
- You don't always need to own property to get business loans. There are both unsecured and other options.
- A finance broker can help you find and compare the best commercial loan options in Australia.
Commercial loans are very important for Australian businesses because they give them the capital they need to grow, run their businesses, and invest. There are many types of commercial loans that can help businesses with different needs, from new businesses that want to grow to established businesses that want to buy commercial property. In this full guide, we’ll explain what commercial loans are, how they work, and the different kinds that are available in Australia.
What Are Commercial Loans in Australia?
Commercial loans are business finance products offered by banks, non bank lenders, and private lenders to help fund business related expenses. You can use them to buy commercial real estate, pay for equipment, manage cash flow, or meet short term operational needs.
In Australia, commercial loans are different from personal loans because they are only for business use. They can be set up in different ways, such as fixed term loans or lines of credit. Depending on the type of loan and the lender’s risk assessment, the loan amount, interest rate, repayment term, and security requirements will be different.
How Do Commercial Loans Work in Australia?
Usually, a business agrees with a lender to borrow a certain amount of money for a certain purpose when they take out a commercial loan. The business pays back the loan over time, with interest that can be either fixed or variable. Lenders may ask for security in the form of property, equipment, or other assets, depending on the type of loan.
You usually have to send in your financials as part of the application process. Some lenders, especially private and non bank lenders, do, however, have simpler approval processes that require less paperwork and take less time.
What Can You Use a Commercial Loan For?
Commercial loans in Australia can be used for a wide range of business purposes, including:
- Purchasing or refinancing commercial property
- Funding business acquisitions
- Buying vehicles, machinery, or equipment
- Covering day-to-day operational expenses
- Financing fitouts or renovations of commercial premises
- Managing seasonal or cyclical cash flow needs
- Investing in growth opportunities such as expansion or marketing
- Paying off or consolidating ATO tax debt
- Importing stock or goods
The flexibility of commercial loans makes them a vital tool for both short-term needs and long-term business investments.
Types of Commercial Loans for Australian Businesses
1. Secured Loans
To get a secured commercial loan, the borrower has to put up an asset as security. This is usually real estate, vehicles, or business equipment. These loans usually have lower interest rates and higher borrowing limits because the lender can take ownership of the asset if the borrower doesn’t pay.
Benefits:
- Lower interest rates
- Larger loan amounts (based on asset value)
- Suitable for large funding needs
2. Unsecured Loans
You don’t need to put up security for an unsecured commercial loan, so you can get one faster. Lenders look at the business’s credit score, financial position, and trading history to figure out whether to approve.
Benefits:
- Faster approval times
- No asset security needed
- Useful for short-term cash flow needs
3. Commercial Property Loans
A commercial property loan, sometimes called a business mortgage in Australia, is used to purchase or refinance property used for commercial purposes, such as offices, warehouses, or retail stores.
Benefits:
- Build long-term equity in property
- Often structured with longer loan terms
- Available with both fixed and variable interest rates
4. Asset Based Finance
Businesses can borrow money against the value of their assets, like cars or equipment, as collateral through asset based finance.
Benefits:
- Unlocks working capital tied up in assets
- Loan amounts can be as high as the asset’s value
- Maintain use of equipment and other assets
5. Business Overdrafts
A business overdraft is a flexible credit facility linked to a business transaction account, allowing businesses to draw more funds than the account balance up to a set limit.
Benefits:
- Pay interest only on what you use
- Easy to access for day-to-day operations
- Ideal for cash flow smoothing
6. Equipment Finance
Equipment finance is used to purchase vehicles, machinery, or tools necessary for business operations. It can be structured as a lease, hire purchase, or chattel mortgage.
Benefits:
- Preserve cash flow by spreading costs over time
- Potential tax deductions
- Equipment can serve as loan security
7. Invoice Finance
Invoice finance (also called debtor finance) lets businesses access funds based on unpaid invoices. This improves cash flow without waiting for clients to pay.
Benefits:
- Immediate access to up to 90% of invoice value
- Helps businesses with long payment terms
- Grows in line with sales
8. Trade and Import Finance
Trade and import finance assist businesses in purchasing material goods, either locally or from overseas.
Benefits:
- Pay suppliers upfront
- Get longer repayment terms
- Can be used to purchase equipment overseas
9. Fitout Finance
Fitout finance is funding that is used to make changes or improvements to the inside of a business, like the layout of an office, the front of a store, or a hotel.
Benefits:
- Cover high upfront fitout costs
- Helps businesses brand their space
- Flexible repayment options available
10. Development Finance
Development finance is for property developers and investors looking to fund construction or development projects.
Benefits:
- Funds large-scale construction
- Funds disbursed in progressive drawdowns
- Can include land acquisition and building costs
11. Industry Loans
Industry specific loans cater to businesses in sectors like medical, transport, hospitality, and construction. These are customised to fit the unique needs of each industry.
Benefits:
- Customised loan features
- May include tailored repayment schedules
- Understanding of industry cash flow patterns
12. Tax Debt Loans
Tax debt loans help businesses pay off outstanding ATO liabilities, consolidate tax debts, or avoid enforcement action like garnishee notices.
Benefits:
- Avoid ATO penalties or legal action
- Improve cash flow by consolidating debts
- Fast access to funds, often within days
13. Private Lending
Private lenders offer commercial loans outside the traditional banking system. These loans are often used when speed, flexibility, or alternative criteria are required.
Benefits:
- Fast approvals and funding
- More flexible terms than banks
- Ideal for complex or time-sensitive transactions
How Are Commercial Loan Interest Rates Calculated in Australia?
Several significant factors usually decide the interest rates on commercial loans in Australia. The type of loan, the level of security offered, the business’s creditworthiness, financial position, the loan’s term and structure, and the lender’s policy are all examples of these.
Because the lender’s risk is lower, secured loans usually have lower interest rates than unsecured loans. Private lenders may charge more because they are more flexible and can approve loans faster.
How to Find the Best Commercial Loan Options in Australia
Working with a commercial finance broker like Dark Horse Financial can help you find the best commercial loan options in Australia and make the application process easier. Brokers can help you find the right loan for your business by connecting you with a large network of lenders. They can also help you find a loan that meets your specific needs and goals. They can also help you fill out your application and negotiate the terms, which will save you time and money and make it more likely that you’ll get approved.
More Questions
What is considered a commercial loan in Australia?
In Australia, a commercial loan is any loan that is used for business purposes instead of personal ones. This includes loans for buying equipment, paying for operations, buying commercial property, or keeping track of cash flow.
Do you need property to get a commercial loan?
Not always. Some business loans are backed by property, but many lenders also offer unsecured business loans that don’t need physical assets. These are typically based on creditworthiness and serviceability.
Is a commercial loan different from a business loan?
In practice, people usually use these terms interchangeably. Commercial and business loans are any loans used by businesses to manage cash flow, make large purchases (like property or equipment), fund growth, and more.
What’s the difference between commercial property loans vs business loans?
A commercial property loan is only for buying or refinancing commercial real estate. A business loan can be used for a number of things, such as buying equipment, getting more money to run the business, or growing the business. A commercial property loan is a type of business or commercial loan.
How much can I borrow with a commercial loan?
Loan amounts and credit limits vary greatly depending on the financial product and the lender. Business loans can go anywhere from $10,000 up to $50 million.
Quick Recap
If you own a business in Australia and want to make smart financial choices, you need to know about commercial loans. There is a loan product that is right for almost every business need, from secured and unsecured loans to specialised finance solutions like fitout, tax debt, or development finance.
If you work with an experienced commercial finance broker like Dark Horse Financial, they can help you find the best type of loan for your situation, compare offers from different lenders, and get the best terms.
If you’re thinking about getting a business loan, get in touch with our team right away to talk about options that are right for your needs.
Disclaimer: Loans and their accompanying benefits are available only to those who qualify for them and have been approved. Though we put a lot of care into writing this article, the information presented within is general and doesn’t consider your unique situation. It is not meant to serve as a substitute for professional advice, and you should not rely on it solely for any major financial decisions. You should always consult with a professional when you’re dealing with finance, tax, and accounting matters.
